Pete's Satire, Inc. v. Commercial Union Ins., Co., 82CA1125

• Citation: 698 P.2d 1388
• Decision Date: 28 February 1985
• Docket Number: No. 82CA1125,82CA1125
• Parties: PETE'S SATIRE, INC., a Colorado corporation, d/b/a the Satire Lounge, and Pete Contos, an individual, Plaintiffs-Appellees, v. COMMERCIAL UNION INSURANCE COMPANY, a Massachusetts corporation, Bayly, Martin & Fay, Inc., a Colorado corporation, and Norman Sterling, Jr., individually, Defendants-Appellants. . I
• Court: Court of Appeals of Colorado

Page 1388

698 P.2d 1388

PETE'S SATIRE, INC., a Colorado corporation, d/b/a the Satire Lounge, and Pete Contos, an individual Plaintiffs-Appellees, v. COMMERCIAL UNION INSURANCE COMPANY, a Massachusetts corporation, Bayly, Martin & Fay, Inc., a Colorado corporation, and Norman Sterling, Jr. individually, Defendants-Appellants.

No. 82CA1125.

Colorado Court of Appeals Div. I.

Feb. 28, 1985.

Rehearing Denied March 28, 1985.

Certiorari Pending as of May 28, 1985.

Geer and Goodwin, P.C., Robert E. Goodwin, Denver, for plaintiffs-appellees.

Glasman, Jaynes & Carpenter, Richard H. Glasman, Denver, for defendant-appellant Commercial Union Ins. Co.

Renner, Rodman & Burke, John R. Rodman, Denver, for defendants-appellants Bayly, Martin & Fay, Inc., and Norman Sterling, Jr.

PIERCE, Judge.

In this declaratory judgment action, Commercial Union Insurance Company (Commercial Union), Bayly, Martin and Fay, Inc. (Bayly), and Norman Sterling, Jr. (Sterling), appeal a judgment favoring Pete's Satire, Inc., a Colorado corporation, d/b/a the Satire Lounge (the Lounge), and Pete Contos (Contos). With one variation, we affirm the judgment against Bayly and Sterling, and reverse as to Commercial Union and remand.

Contos is the owner of the Lounge and another bar and restaurant called the Olympic Flame. Sterling is an insurance agent who was a vice president of and worked under the auspices of Bayly, an insurance brokerage firm. Contos and Sterling had a business relationship over many years, and Contos relied considerably upon Sterling's expertise to provide him with his insurance needs. Contos, and representatives of his corporation, negotiated with Sterling to obtain multi-peril insurance on both the Lounge and the Olympic Flame.

Sterling placed the insurance on the Lounge with Commercial Union Insurance Company, and informed Contos and his agents that it was "fully covered." Specifically, when asked whether the policy would cover the Lounge regarding risks related to ingestion and consumption of alcoholic beverages on the premises by customers, he informed them they had coverage up to $500,000. However, only the policy on the Olympic Flame contained such coverage, the policy on the Lounge did not.

While the policy on the Lounge was in force, it was sued for negligence on allegations that it allowed a minor customer to leave its premises in an intoxicated condition which, in turn, caused an automobile accident. The Lounge contacted Sterling, Bayly, and Commercial Union regarding defense of this lawsuit. Commercial Union refused to defend, and denied coverage on the ground that this type of loss was explicitly excluded from the coverage afforded by the policy. The Lounge hired other counsel and incurred considerable expenses in doing so. The Lounge was successful in the trial court, but that case is presently in this court on appeal.

In the instant suit on appeal here, the trial court found that Sterling and Bayly were responsible for their negligence in failing to obtain the necessary coverage. Also, the court found that Commercial Union was also liable in that it had clothed Bayly and Sterling with actual or apparent authority to bind Commercial Union, and had not explained to the representatives of the Lounge that the agents could not bind the company beyond the authority stated in the policy.

The court ruled that there was coverage under the policy and that all defendants were liable for the cost of defending the other lawsuit. It also ruled that all defendants were liable for any judgments that might result from the other lawsuit and its costs, and also to pay attorney's fees and costs in the action which is before us.

I.

Liability of Bayly and Sterling

A.

Relying on language in Heller-Mark & Co. v. Kassler & Co., 37 Colo.App. 267, 544 P.2d 995 (1976), Sterling and Bayly's principal contention is that the Lounge and Contos failed to "establish ... by a preponderance of evidence that other insurance could have been obtained ...." We disagree.

Here, the Lounge and Contos proved: (1) that the type of insurance covering this type of loss was available in the industry at the time of the occurrence; (2) that Contos had purchased this type of coverage through Sterling and Bayly for the Olympic Flame; and (3) that, although Commercial Union put on evidence that the coverage might not have been available to Contos or the Lounge through it, there was no evidence that the coverage was not available through other carriers. Under these facts, the Lounge and Contos sufficiently carried their burden on this issue.

B.

Sterling and Bayly also contend they cannot be held liable where the insurer's identity was disclosed and known to the policyholder. We do not agree.

Even agents of a disclosed principal cannot escape personal liability for their own wrongs. See Restatement (Second) of Agency §§ 329, 343, 348 (1958). First, where an insurance agency undertakes to secure specific coverage or leads a policyholder to believe certain coverage has been obtained, if the coverage is not included in the policy, it is liable for its negligence. Hampton Roads Carriers v. Boston Insurance Co., 150 F.Supp. 338 (D.Md.1957); see Mayhew v. Glazier, 68 Colo. 350, 189 P. 843 (1920); Annot., 64 A.L.R.3d 398 (1975); see also Restatement (Second) of Agency §§ 376, 378 (1958).

Second, nothing in the record indicates that Sterling and Bayly had authorization to make the representations that they made, and therefore, they are individually liable for any damages resulting from acts beyond their authority....