Orkin Exterminating Co. v. Massachusetts Bonding & Ins. Co.
| Decision Date | 09 December 1965 |
| Docket Number | No. 14673,14673 |
| Citation | 400 S.W.2d 20 |
| Parties | ORKIN EXTERMINATING COMPANY, Inc., Appellant, v. MASSACHUSETTS BONDING AND INSURANCE COMPANY et al., Appellees. . Houston |
| Court | Texas Court of Appeals |
Robert H. Singleton, Houston, Butler, Binion, Rice, Cook & Knapp, Houston, of counsel, for appellant.
The Kempers, Houston, John D. Richardson, Houston, of counsel, for appellee.
Newton Gresham and Sam W. Cruse, Houston, on motion for rehearing amicus curiae.
By this suit appellant seeks to recover from appellee the amounts paid by appellant to satisfy a judgment previously secured against it by Gulf Coast Rice Mills. The cause of action is based on a comprehensive liability insurance policy. Both parties filed motions for summary judgment based on the pleadings, admissions, depositions and affidavits before the court. The trial court sustained appellees' motion and entered judgment that appellant take nothing.
At the time of the occurrence forming the basis of the liability of appellant to Gulf Coast Rice Mills, appellant carried with appellee a comprehensive liability insurance policy, pertinent provisions of which read:
II. Defense, Settlement, Supplementary Payments. As respects the insurance afforded by the other terms of this policy the company shall:
(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;
(c) pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid, tendered or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon;
(e) reimburse the insured for all reasonable expenses, other than loss of earnings, incurred at the company's request.
The amounts incurred under this insuring agreement, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.
9. Notice of Accident. When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the insured and of available witnesses.
10. Notice of Claim or Suit. If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.
11. Assistance and Cooperation of the Insured. The insured shall cooperate with the company and, upon the company's request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.
This policy of insurance was issued as of January 1, 1955. In August, 1955, appellant's employees, in an attempt to eradicate the pests which were causing damage to milled rice owned by Gulf Coast Rice Mills and stored its warehouse, blew dust containing lindane into the warehouse. This dust settled on and around the sacks containing the rice and small amounts of the lindane sifted through the sacks onto the rice. Soon thereafter an agent of the U.S. Food and Drug Administration inspected the premises and barred shipment of the rice in interstate and foreign commerce. Over a period of months discussions were held by agents of the Rice Company with the agents of the local, state and federal officials concerned, culminating in a decision to re-mill the rice. Thereafter, appellant was presented with a statement of the loss sustained by the rice mill, which was reported to the home office of appellant on May 24, 1956. On June 28, 1956, notice of the claim for damages was first given to representatives of the insurance company. Appellee's insurance adjuster immediately determined from the employees of appellant when and how the claimed damage occurred and the amount of the claim and sent this information to the Insurance Company.
By the terms of the policy of insurance, appellant deposited certain sums of money with the insurance company as a standard premium, subject to a 'retrospective Rating Plan D,' which prescribed in detail the method to be followed in computing the final premiums. The company was required to compute the retrospective premium based upon incurred losses valued as of a date six months after the termination of the policy. This constitutes the final premium if all claims have been closed. If claims are pending, then a further review is required annually after the first review. The retrospective premium is defined to be the sum of the basic premium, the excess loss premium, and the modified losses multiplied by the applicable state tax multiplier; each of the terms concerned with premiums is defined. 'Incurred Losses' is defined as the sum of (1) all losses, including medical actually paid, (2) reserves for unpaid losses as determined by the company, and (3) allocated loss expenses. There is also a further provision that 'incurred lossess' do not include amounts, exclusive of allocated loss expense, in excess of $10,000.00 for any one accident for property damage liability. 'Modified Losses' means the 'incurred losses' multiplied by a loss conversion factor set out in the policy . After the retrospective premium is determined, the insured is either refunded part of the standard premium he had previously deposited, or required to pay an additional premium depending on his loss experience.
Appellee made its first computation of the retrospective premium during August or September, 1956, and on September 19, 1956, credited appellant with a substantial return of premium. In making this computation a reserve of $1,000.00 was set up for the Rice Mill claim as an incurred loss. As a result the premium return credit was $1,000.00 less than it would have been had no reserve been set up on the Rice Mill claim. In effect the premium paid by appellant at this time was increased by the sum of $1,000.00 because of the reserve set up for this claim.
On September 20, 1956, the Superintendent of Claims for the Insurance Company wrote appellant a letter with reference to this claim requesting a label from a bag of lindane and copies of literature available to appellant concerning the use of lindane. In this letter these statements are found:
'We feel we have a very dangerous situation on our hands in so far as this claim is concerned, and we will appreciate your co-operation and assistance in combatting the allegations of these claimants.
'For your information we are sending you a copy of the signed statement secured from your representative, Joe D. Preston, in order that it may help you to determine what information we will need to defend this claim.'
Appellant, in reply to this letter, sent the information requested together with a letter dated October 23, 1956, in which appeared this statement: 'I wish to apologize for the delay in answering your letter and trust that the information contained herein will be useful to you in defending this particular claim.'
Between August, 1956, and January, 1957, the adjuster made a thorough investigation of the claim and made periodic status reports to the Superintendent of Claims. On January 1, 1956, and again on January 1, 1957, the policy of insurance was renewed.
In January, 1957, the second computation of the retrospective premium was made and the reserve for the Rice Mill claim was increased to $10,000.00. This computation was reflected in the claim analysis received by appellant on July 15, 1957. By this analysis appellee determined that the 'Modified Losses' arising from the claim as computed under the premium plan would result in an increase in premiums of about $11,856.00, the maximum which could be charged under the plan for full protection against the claim. The net premium due was paid on receipt of statement October 31, 1958.
Correspondence between the adjuster and the Superintendent of Claims reflects that the adjuster inquired as to the position which the company intended to take relative to liability on the claim in view of the late notice received and also raised a question as to whether the incident from which the claim arose constituted an 'accident' as contemplated by the insurance policy. During the investigation the adjuster interviewed agents of the Rice Mill and had conferences with the attorney representing it from whom he received an opinion that the claim might be settled for 50% Of itemized damage.
In March, 1957, the adjuster wrote a letter to the Superintendent of Claims, in which appeared an implied criticism of the cooperation which he had received from appellant. In reply he received a letter in which this statement appeared: 'We have no reason to criticize our assured for failure to cooperate with us in the handling of any claim in the past and we do not feel that they should be criticized now in this instance.'
The investigation continued into the summer of 1957. On June 25, 1957, Gulf Coast Rice Mills filed suit against appellant and citation was served on July 6, 1957. On July 22, 1957, the adjuster brought a proposed 'Non-Waiver' agreement to appellant's Houston office and stated that unless it was signed...
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