Priddy v. Mayer Aviation, Inc., 75--347

• Decision Date: 14 June 1976
• Docket Number: No. 75--347,75--347
• Citation: 260 Ark. 3,537 S.W.2d 370
• Parties: John M. PRIDDY et al., Appellants, v. MAYER AVIATION, INC., Appellee.
• Court: Arkansas Supreme Court

Page 370

537 S.W.2d 370

260 Ark. 3

John M. PRIDDY et al., Appellants, v. MAYER AVIATION, INC., Appellee.

No. 75--347.

Supreme Court of Arkansas.

June 14, 1976.

Coleman, Gantt, Ramsay & Cox, Pine Bluff, for Utica Mutual Ins. co.

Barber, McCaskill, Amsler & Jones, Little Rock, for John M. Priddy d/b/a Priddy Ins. Agency.

Gibson & Gibson, P.A., Dermott, Laser, Sharp, Haley, Young & Boswell, Little Rock, for Pan American Fire and Cas. Ins. Co.

Smith, Williams, Friday, Eldredge & Clark, Little Rock, by William H. Sutton and Hermann Ivester, for R. B. Stimson, Executor of the Estate of A. V. Stimson.

JONES, Justice.

John M. Priddy, d/b/a Priddy Insurance Agency, and Utica Mutual Insurance Company, his insurance Carrier for errors and omissions, bring this appeal from a declaratory judgment rendered on the petition of the appellee, Mayer Aviation, Inc.

The facts, as gathered from the testimony, appear as follows: The appellee Mayer Aviation, Inc., hereafter referred to as Mayer, was engaged in crop dusting operations by distributing chemicals, including 2--4--D, on growing crops from the air by airplane. Mayer obtained his liability insurance coverage through the appellant insurance agent Priddy. Prior to August, 1970, Priddy had obtained the required coverage for Mayer's operations through brokers in policies issued by North American Insurance Company and Lloyd's of London. Mayer had obtained favorable information concerning liability coverage for his type of operation in policies being written by Pan American Fire and Casualty Company through its underwriters, Aviation Office of America, hereafter referred to as AOA. Mayer requested Priddy to obtain coverage through AOA and he paid Priddy approximately $5,000 as intended insurance premium for the coverage requested.

It appears that in order to distribute the chemical 2--4--D it was necessary to have special license from the Arkansas State Plant Board, and in order to obtain the license it was necessary to file a copy of liability insurance policy with the Board as a condition precedent to issuing the license. Priddy made application to AOA for the coverage requested by Mayer but the application was refused because of Mayer's past year's loss experience. It appears that when the application was refused by AOA, Priddy intended to place the coverage with one of the original insurers, North American or Lloyd's of London, but failed to do so. In the meantime, however, in order to obtain a renewal of Mayer's license to distribute 2--4--D, it appears that Priddy simply altered a copy of a similar policy he had obtained from Pan American through AOA for a Mr. King and filed the altered copy, showing Mayer as the insured, with the Plant Board and Mayer's license was issued. It appears that Mayer thought he had the coverage he had requested until he was unable to find his policy following rumors of pending claims against him for damages to crops growing out of his operation. When he was unable to find his policy, he obtained a copy from the Plant Board and upon contacting Pan American was advised that no such policy had been issued to him by that company.

It appears that when Mayer advised Priddy of the pending claims and Pan American's denial that it had issued the policy or authorized a binder, Priddy admitted he had not placed the coverage. Priddy advised Mayer of Priddy's own coverage under an errors and omissions policy issued by Utica Mutual and advised Mayer he would have the same protection under that policy as he would have had if the policy coverage he had requested had been obtained.

Two lawsuits, alleging damages to crops in the total amount of approximately $168,000, were filed in circuit court against Mayer, and on February 8, 1974, Mr. Mayer filed in chancery court his petition for declaratory judgment from whence comes this appeal. In his petition Mayer alleged that on or about August 5, 1970, he contracted with Priddy to provide insurance liability coverage for his operation of aircraft in the application of agricultural chemicals. He alleged that Priddy allegedly did provide the coverage by Pan American under policy No. AC6--3--1281, and that he paid a premium to the defendant Priddy for the coverage which was to expire on August 5, 1971; that in July, 1971, claims arose for damages to crops caused by his operation; that he called on Pan American to take action because of its liability coverage, but that Pan American denied it had issued any policy to him. He alleged that a copy of the alleged policy contract was in the possession of Pan American and he believed at all times he did have liability coverage for damage to crops in the operation of his business. He alleged that the matter had been investigated by the Arkansas insurance commissioner who apparently determined that no valid policy had been issued by Pan American, and that Priddy had acted in error, omission, negligence and/or fraud in connection with the matter. He alleged that subsequent to July, 1971, there had been filed against him lawsuits in circuit court for alleged damages occurring in July, 1971, growing out of his operation during July, 1971, and that lawsuits were then pending against him in the approximate amount of $168,000 for alleged damages occurring during July, 1971. He alleged that he had given notice to the defendant Utica Mutual Insurance Company who had insurance coverage under policy No. 6456--LE for errors, negligence, omissions and/or fraud on the part of the defendant Priddy but that Utica had denied liability. He allleged that he was entitled to legal aid and expenses sustained from either Pan American or Utica Mutual and for the purposes of defending the pending litigation or settlement of same if proper. He alleged that he was presently in the position of not knowing what his best procedure would be to protect his interest due to the actions of the defendants; that he is having to expend money for legal services without the assistance of the defendants, and that he needs their assistance. He alleged that since his legal position as to insurance coverage had not been passed on by a court, his future liability would depend to a large extent on the question of his insurance coverage and the acts of the defendants in connection therewith, and that without such adjudication he will suffer irreparable damage to his business because of the serious consequences of the liability involved. He alleged that either Pan American or Utica Mutual should provide the coverage and assitance for which he contracted and paid to the defendant Priddy. He prayed for a declaratory judgment against all the defendants jointly and severally or for declaratory judgment as to which one of the defendants is responsible for the present and future damage that he has suffered and will suffer.

Priddy filed a response and cross complaint denying the material allegations in the petition for declaratory judgment and alleged that if the policy was not issued as alleged in the petition, it was due to simple negligence on his part and that Utica Mutual Insurance Company should take over his defense and pay any judgment rendered, up to the applicable limits of its obligation to him under its policy. He prayed that the petition be denied and in the alternative that it be denied in so far as it seeks relief from him; and, in the alternative, that if any acts of his caused the petitioner to not have coverage, that Utica Mutual, his errors and omissions carrier, should provide his defense and pay any judgment rendered against him.

Utica Mutual and Pan American demurred to the petition on the grounds that the chancery court was without jurisdiction of the subject matter.

On March 14, 1974, Priddy filed a separate answer in which he denied the allegations in the petition for declaratory judgment and specifically denied that he acted in error, omission, neglect and/or fraud as alleged in the petition.

On March 15, 1974, Utica filed a demurrer to the petition on the grounds that the petition did not state a cause of action against it and that it was not subject to a direct action by Mayer even if it had coverage for the errors and omissions of Priddy as alleged in the petition. On May 24, 1974, Pan American filed a separate demurrer to the petition on the ground of defect in parties defendant, and on June 19, 1974, Mayer filed a motion to strike the allegation of fraud by Priddy from his petition and the motion was granted. On September 3, 1974, Priddy filed a third party complaint making the various plaintiffs in the circuit court action parties defendant and prayed that they be bound by the final ruling of the chancellor on the petition for declaratory judgment.

On September 23, 1974, the chancellor entered an order denying the demurrers and motions to dismiss and finding that all interested parties had been joined. He gave 20 days in which to answer or plead.

On October 1, 1974, Priddy amended his answer and cross complaint by praying attorney's fees against Utica and on October 2 Utica filed a response denying the allegations in the petition; denying that the acts or Priddy constituted acts of error, omissions, etc. In the alternative it alleged that it would not be liable for Priddy's defense in the litigation, and as a second alternative it alleged it would in no event be liable for any amount in excess of the amount of insurance Priddy was supposed to have contracted for. On November 12, 1974, the chancellor entered an order, at the request or Priddy, dismissing his cross complaint as to statutory penalty and attorney's fees against Utica without prejudice.

In answer to interrogatories propounded by Pan American, Priddy answered that he does not contend Pan American issued the policy in question or authorized him to do so. He answered that he deposited the premium he collected in his agency account. He answered that he advised Mayer that his application had been submitted and...