Parmet Homes, Inc. v. Republic Ins. Co.

• Citation: 314 N.W.2d 453,111 Mich.App. 140
• Decision Date: 26 January 1982
• Docket Number: 49401,Docket Nos. 48960
• Parties: PARMET HOMES, INC., a Michigan corporation, Plaintiff-Appellee, v. REPUBLIC INSURANCE COMPANY, a foreign corporation, and Kelter-Thorner, Inc., aMichigan corporation, Defendants-Appellants.
• Court: Court of Appeal of Michigan (US)

Page 453

314 N.W.2d 453

111 Mich.App. 140

PARMET HOMES, INC., a Michigan corporation, Plaintiff-Appellee, v. REPUBLIC INSURANCE COMPANY, a foreign corporation, and Kelter-Thorner, Inc., aMichigan corporation,

Defendants-Appellants.

Docket Nos. 48960, 49401.

Court of Appeals of Michigan.

Submitted May 6, 1981.

Decided Sept. 14, 1981.

As Amended on Granting of Rehearing Nov. 2, 1981.

Released for Publication Jan. 26, 1982.

Hyman, Gurwin, Nachman, Friedman & Winkelman by Thomas J. Beale, Southfield, for plaintiff-appellee.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen, P. C. by D. J. Watters and Christine D. Oldani, Detroit, for Republic Ins. Co.

Lakin, Worsham & Victor, P. C. by Larry A. Smith, Southfield, for Kelter-Thorner, Inc.

Before BASHARA, P. J., and KAUFMAN and BANKS, ^* JJ.

PER CURIAM.

Plaintiff, Parmet Homes, Inc., filed suit against defendants, Republic Insurance Company and Kelter-Thorner, Inc., seeking fire loss benefits under an insurance policy. The jury rendered a verdict against both defendants in the amount of $297,818.67, and against defendant Republic individually in the additional amount of $114,797.49. Defendant Kelter-Thorner, Inc., appeals the trial court's denial of its motion for judgment notwithstanding the verdict and for a new trial. Defendant Republic appeals entry of judgment.

Plaintiff is engaged in the business of constructing homes. From May 25, 1973, until May 25, 1976, plaintiff was insured against fire loss under a builder's risk insurance policy issued by the Insurance Company of North America (INA). The INA policy was sold to plaintiff by Kelter-Thorner.

When the INA policy was about to expire, Kelter-Thorner reviewed the policy and determined that Republic Insurance Company could better meet the needs of plaintiff. Thus, on May 25, 1976, the INA policy was allowed to lapse and a new policy was procured from Republic. Although the testimony is conflicting, the evidence indicates that plaintiff was not consulted about the change but was mailed a copy of the new policy and invoices for payment of premiums containing Republic's letterhead.

The INA policy and the Republic policy had one critical difference: Republic required notice of construction starts every 30 days, whereas INA only required a report of new construction every 90 days.

During the summer of 1976, Parmet suffered five fire losses, one of which was paid by Republic and is not at issue. Republic denied coverage of the four fires because the 30-day reporting requirement had not been fulfilled.

Parmet asserted at trial that it was unaware of the fact INA was no longer its insurer and that, under the INA policy, the report of new construction on the four lots was timely. Parmet claimed negligence on the part of Kelter-Thorner in not notifying it of the policy differences. Plaintiff submitted evidence that it only received correspondence concerning "renewal" of policy, which indicated to it that the INA policy was being continued. Kelter-Thorner argued that plaintiff was on notice because the reporting forms supplied to plaintiff stated that they were to be filed every 30 days. Plaintiff countered by arguing that the same form was used when the INA policy was in effect, which did not require 30-day filing and that Kelter-Thorner had advised it to ignore the instruction so that plaintiff was led to believe that it should continue to ignore the instruction when the policy was "renewed". There was evidence that Kelter-Thorner had established procedures for personal contact of insureds who are tardy in completing the reports but that there was no indication in plaintiff's file that such contacts were made in this case. It was undisputed that plaintiff never read the policy.

On appeal, defendants challenge the trial court's instructions to the jury. Initially, they argue that the court erred in refusing to instruct the jury that the insured has a duty to read the insurance policy and may not claim ignorance of the policy's terms. The trial court instructed the jury as follows:

"Generally, I instruct you that the law in Michigan places a duty upon an insured to read his insurance policy. It is for you to decide what a reasonably careful person would, or would not do under the circumstances which you find existed in this case. If you find that Parmet Homes acted reasonably in believing the policy to be a renewal of the INA policy, then Parmet Homes does not have the duty to read the policy. If you find that a reasonably careful person would have read his policy under the circumstances which you find existed in this case, you may consider this with respect to the plaintiff's conduct in considering contributory negligence.

"There is a specific rule of law which applies to the renewal of insurance policies. That rule is that an insurance company is bound by the greater coverage in an earlier policy where the renewal policy is issued without calling the insured's attention to a reduction in coverage."

Both defendants objected to these instructions.

An insured is obligated to read the insurance policy and raise questions concerning coverage within a reasonable time after the issuance of the policy. House v. Billman, 340 Mich. 621, 66 N.W.2d 213 (1954); Russell v. State Farm Mutual Automobile Ins. Co., 47 Mich.App. 677, 209 N.W.2d 815 (1973). However, there is an exception to the rule where a policy is renewed without actual notice to the insured that the policy has been altered. Industro Motive Corp. v. Morris Agency, Inc., 76 Mich.App. 390, 395-396, 256 N.W.2d 607 (1977). Although it is clear that, in fact, the Republic policy was not a "renewal" of the earlier INA policy, plaintiff presented evidence that it was led to believe such was the case. Under these circumstances, we find the above instruction to be in conformance with the law. Industro Motive, supra.

Republic also claims error in the trial court's instruction to the jury on the agency relationship between Republic and Kelter-Thorner. The court charged the jury as follows:

"The relationship between Republic and Kelter-Thorner is that of principal and agent. Because of this, Republic is bound by all acts of Kelter-Thorner which are within the apparent scope of Kelter-Thorner's authority as agent for Republic.

"The apparent scope of Kelter-Thorner's authority to act for Republic is whatever authority a reasonable person would assume Kelter-Thorner to have by virtue of the fact that Republic held Kelter-Thorner out to the public as its agent for the purpose of selling and administering insurance policies.

"If you find that Kelter-Thorner made any statements or communications to Parmet or failed to make statements or communications which should have been made regarding the existence of coverage or the terms of coverage, such statements or communications or lack thereof are as binding upon Republic as they are upon Kelter-Thorner, provided they were made within Kelter-Thorner's apparent scope of authority to act for Republic.

"If you find that Kelter-Thorner, while acting as Republic's agent, had any knowledge or notice of facts which is relevant to the issues of this case, then you must find that Republic also had such knowledge or notice, even if such matters were not in fact communicated to Republic.

"Furthermore, a principal can be held liable for any negligent conduct of its agent if the conduct occurs within the apparent scope of the agent's authority. If you find such negligence on the part of Kelter-Thorner, you must find that Republic was liable for it as well as Kelter-Thorner."

Republic objected to the instruction on apparent authority, arguing that since plaintiff was unaware of the existence of Republic, the doctrine of apparent authority is not applicable. At no time did Republic argue that Kelter-Thorner was not an agent of Republic. Thus, that allegation of error is not preserved for review.

Furthermore, the record clearly establishes that Kelter-Thorner was a licensed agent for Republic. Where an agency relationship exists, a plaintiff's knowledge of the agency is not necessary to hold the principal liable for the agent's actions which are within the scope of his authority. Timmerman v. Bultman, 243 Mich. 344, 347-348, 220 N.W. 754 (1928). The court properly left consideration of whether Kelter-Thorner was acting within the scope of its authority to the jury. Lincoln v. Fairfield-Nobel Co., 76 Mich.App. 514, 520, 257 N.W.2d 148 (1977). Thus, Republic's argument is without merit. Also see, Palmer v. Pacific Indemnity Co., 74 Mich.App. 259, 268, 254 N.W.2d 52 (1977); State Automobile Mutual Ins. Co. v. Babcock, 54 Mich.App. 194, 202-203, 220 N.W.2d 717 (1974).

Republic...