Otteman v. Interstate Fire & Cas. Co.

• Decision Date: 13 October 1961
• Docket Number: No. 35007,35007
• Citation: 172 Neb. 574,89 A.L.R.2d 1182,111 N.W.2d 97
• Court: Nebraska Supreme Court
• Parties: , 89 A.L.R.2d 1182 Clarence R. OTTEMAN, Appellee, v. INTERSTATE FIRE & CASUALTY CO., Inc., a corporation, Appellant.

Page 97

111 N.W.2d 97

172 Neb. 574, 89 A.L.R.2d 1182

Clarence R. OTTEMAN, Appellee, v. INTERSTATE FIRE & CASUALTY CO., Inc., a corporation, Appellant.

No. 35007.

Supreme Court of Nebraska.

Oct. 13, 1961.

Syllabus by the Court

1. The summary judgment procedure is not intended to be used as a device to prevent a trial of an action on the merits but is available only when no genuine issue of fact exists.

2. Where waiver by denial of liability or coverage is involved, it is not necessary that the denial be express or unequivocal, it being sufficient that the facts and circumstances warrant the inference that liability was or would be denied.

3. An insured may not be deprived of his rights by a narrow and technical construction of formal requisites by which that right is to be made available. On the contrary, a liberal and reasonable construction should be given.

4. The provision against settlement by insured cannot be taken advantage of by an insurer where it unreasonably delays to take any action after notice of the claim.

5. An unreasonable delay to process insured's claim will amount to a denial of coverage and will constitute a waiver of any policy provisions regarding defense or settlement of the claim.

6. Where an insurer waives its right to defend, this leaves the insured free to defend the action to judgment or, in good faith, to make such settlement as ordinary and reasonable prudence and caution might indicate to be advisable.

Wm. G. Line, Fremont, for appellant.

Spear, Lamme & Simmons, Fremont, for appellee.

Heard before CARTER, MESSMORE, YEAGER, SPENCER, BOSLAUGH and BROWER, JJ.

SPENCER, Justice.

This is an action by Clarence R. Otteman, an insurance agent, hereinafter referred to as plaintiff, against Interstate Fire & Casualty Co., Inc., hereinafter referred to as defendant, upon a policy covering claims arising from errors and omissions the plaintiff might commit as an insurance agent. Trial was had to the court without a jury and judgment was entered for the plaintiff. Defendant appeals.

This case was previously before the court on the vacation of a summary judgment. Otteman v. Interstate Fire & Cas. Co., Inc., 171 Neb. 148, 105 N.W.2d 583. The trial court originally sustained a motion filed by the defendant for summary judgment. At the same term of court, the judgment was vacated. An appeal was taken to this court by the defendant and was dismissed for the reason that the vacation of the summary judgment was not an appealable order. The defendant's first three assignments of error and much of the argument in its brief relate to the vacation of the summary judgment. The defendant apparently does not appreciate that the court examines the evidence on a motion for a summary judgment, not to decide any issue of fact present but solely to discover if any real issue of fact exists. If there is an issue of fact to be determined, a summary judgment cannot be entered. Healy v. Metropolitan Utilities Dist., 158 Neb. 151, 62 N.W.2d 543.

It will be apparent from what is said hereafter that a material issue of fact was present in this record. As already noted, the trial court found for the plaintiff on the evidence adduced. Suffice it to say that the summary judgment procedure is not intended to be used as a device to prevent a trial on the merits but is available only when no genuine issue of fact exists.

The plaintiff in 1953, through the Reynolds General Agency at Fremont, Nebraska, secured an insurance brokers and agents errors and omissions policy issued by the defendant. Through renewals, this policy was maintained in full force and effect until December 7, 1960. On January 22, 1957, one Voss applied to the plaintiff as an agent for the Farmers Mutual Insurance Company of Nebraska for the renewal of a policy of fire insurance in that company on certain personal property, including a tractor and a cornpicker. The plaintiff through error failed to send the application to the Farmers Mutual Insurance Company and the insurance policy then in force was not renewed. The plaintiff did not collect or remit a premium for the renewal. The plaintiff had been writing insurance for Voss for several years. The usual procedure was for the plaintiff to pay for the insurance when billed by the company at the end of the month. He would then bill Voss after the policy was issued. However, no bill was ever rendered to Voss in this instance.

On October 18, 1958, the tractor and the cornpicker owned by Voss were damaged by fire. Voss filed a claim for $1,433.37 with plaintiff as agent for the Farmers Mutual Insurance Company. When the claim was forwarded to the company the plaintiff discovered his failure to secure the renewal and subsequently found the original application in his office files. On November 20, 1958, the Farmers Mutual Insurance Company refused the claim for the reason that the Voss property was not insured. The plaintiff then notified the Reynolds General Insurance Agency that Voss was making claim against him for the loss. On November 21, 1958, that agency wrote the managing agent for defendant about the loss and requested proper forms to process it. No reply was received. The agency wrote again on December 1, 1958, December 11, 1958, and June 15, 1959. The Reynolds General Insurance Agency never received a reply to any of its letters despite the fact that it also filed two complaints with the Department of Insurance of the State of Illinois because of the failure of the defendant to reply.

William G. Line, defendant's attorney, who was called as a witness on behalf of plaintiff, testified that he was appointed as attorney for the defendant on December 11 or 12, 1958, and that he wrote the plaintiff at once. The defendant's testimony indicates that the plaintiff visited Line's office 11 times about the claim between December 12, 1958, and July 18, 1959. Line testified that he never inspected the loss; that the plaintiff brought him two estimates on the loss; and that the plaintiff brought Voss to his office. He further testified that he wrote the defendant about the matter on eight occasions as follows: December 16, 1958; December 19, 1958; February 26, 1959; March 27, 1959; June 19, 1959; July 20, 1959; July 22, 1959; and September 30, 1959. The only replies he received were on February 23, 1959; July 16, 1959; October 14, 1959; and December 21, 1959. This action was filed December 12, 1959.

Mr. Line wrote plaintiff on February 24, 1959, as follows: 'I received a letter from the company today and they would like to have estimates on the damage. I have estimates from Ladehoff's at North Bend and I will send that in today but I believe it would be helpful to get another independent estimate. The company is reserving its decision as to whether you are liable to Voss under the facts of the case but they would like to have me interview Voss to see if a possible settlement can be arranged. I can contact Voss, myself, or if you would prefer, you can ask him to get in touch with me for an appointment.'

The defendant lists 17 assignments of error. Excluding those assignments referring to the vacation of the summary judgment referred to heretofore, we find that the defendant's main contentions may be grouped as follows: First, the loss is specifically excluded from the policy because it was brought about by the failure to collect or to remit a premium; second, that the Farmers Mutual Insurance Company was liable for the loss and not the plaintiff; and third, that the plaintiff breached the policy conditions by an unauthorized settlement without notice to the defendant and without the defendant's consent. We will discuss these contentions in the order listed above.

Was the loss specifically excluded by the policy? The exception in the policy is as follows: 'This Insurance shall not indemnify the Insured in respect of any claim * * * (d) brought about or contributed to by any commingling of or inability or failure to pay or collect premium, claim or tax moneys.' The evidence is undisputed that in the plaintiff's dealings with the Farmers Mutual Insurance Company it was customary for him to send in the renewal application without money; that the policy would be renewed; and that he would be billed by the company for the premiums at the end of the month. When he received the renewal he would then bill the customer. We do not believe the exclusion applies in this case. It was not the failure to collect a premium but rather it was the failure to send in the renewal application which resulted in the failure to renew. If the defendant's policy has any meaning, this would be an error or omission within the terms of the policy.

The second contention may be disposed of very summarily. The evidence adequately establishes that by the terms of the fire insurance policy issued by the Farmers Mutual Insurance Company there could be no liability on its part until the renewal application had actually been received and accepted by the company at its home office. It is admitted that the renewal application was never sent to the insurance company but was mislaid in the office of the plaintiff.

The third contention is the major one and, the record would indicate, the one which gave the trial court the most concern. The policy contains the following conditions: 'The Insured shall not admit liability for or settle any claim or incur any costs or expenses in connection therewith without the written consent of the Company, who shall be entitled at any time to take over and conduct in the name of the Insured the defense of any claim.

'Nevertheless, the Insured shall not be required to contest any legal proceedings unless a lawyer (to be mutually agreed upon by the Insured and the Company) shall advise that such proceedings should be contested.'

The plaintiff contends, and the trial court found, that the defendant by its conduct waived its right to insist upon the plaintiff's compliance with this provision....