Riddle-Duckworth, Inc. v. Sullivan

• Decision Date: 08 December 1969
• Docket Number: RIDDLE-DUCKWORT,No. 18991,INC,18991
• Citation: 171 S.E.2d 486,253 S.C. 411
• Parties: , Respondent, v. Harold SULLIVAN and Fred Green d/b/a Sullivan-Green Insurance Agency, Appellants.
• Court: South Carolina Supreme Court

Page 486

171 S.E.2d 486

253 S.C. 411

RIDDLE-DUCKWORTH, INC., Respondent, v. Harold SULLIVAN and Fred Green d/b/a Sullivan-Green Insurance Agency, Appellants.

No. 18991.

Supreme Court of South Carolina.

Dec. 8, 1969.

Fant & Doyle, Anderson, for appellants.

Anderson, Chapman & Kenyon, Anderson, for respondent.

LEWIS, Justice.

This appeal involves a review of a judgment obtained against the defendants, as insurance agents, for damages sustained by plaintiff from their alleged negligence in the procurement of a liability insurance policy. Error is assigned in the failure of the lower court to grant defendants' timely motions for nonsuit, directed verdict and judgment non obstante veredicto and, in the alternative, in the refusal to grant a new trial.

We first dispose of those exceptions which assign error in the refusal of the lower court to enter judgment in favor of the defendants. These are based upon the contentions that (1) there was no showing of actionable negligence on the part of the defendants, (2) the plaintiff was guilty of contributory negligence as a matter of law, and (3) the action was barred by the statute of limitations.

In determining the foregoing issues, we are required to view the evidence and the reasonable inferences to be drawn therefrom in the light most favorable to plaintiff. Our review of the testimony will be so confined, although the facts are in direct conflict on practically all material issues.

It appears that Marshall B. Duckworth and a Mr. Riddle began operating a home and auto appliance business in 1956 under the name of the plaintiff corporation, with Duckworth as the general manager. Complete liability insurance coverage for the business premises was desired and Duckworth discussed the matter with the defendant Green, an experienced insurance agent. Green was shown an elevator or hoist lift located in the plaintiff's place of business, which, while used primarily for transporting goods to and from a second floor storage area, was occasionally used to carry people. Green was informed of the uses made of the elevator and was specifically requested by plaintiff to include it in the liability coverage to be procured. Green undertook to procure the coverage desired and subsequently delivered an Owners', Landlords' and Tenants' liability insurance policy, giving assurances to plaintiff that it afforded full coverage for the business premises, including the elevator, and received from plaintiff the requested premium.

In 1958, plaintiff's business was moved to a new location nearby and Green was informed of the change so that coverage under the liability policy, which had been renewed each year, could be transferred to the new building. The new building contained a second floor to be used for storage and the elevator used in the old building was moved and installed in the new. There were no stairs in the new building and the elevator was the only way to get to the second floor. Green was informed of this fact. He immediately made the requested policy change as to location and assured plaintiff that complete coverage of the new business premises, including the elevator, was provided.

The original policy was issued on January 16, 1956 for a one year period. It was renewed annually thereafter, with Green sending a new policy each year and a bill for the premium. As plaintiff added new items of merchandise to the appliance business, such as lawn mowers and a machine for making keys, Green was called in each instance to inquire if the liability policy covered the additions. Green assured plaintiff each time that the business was 'fully covered and there was nothing to worry about.'

The last discussion of the policy coverage was in early 1962. When Duckworth, the manager of plaintiff, received the policy covering the period from January 16, 1962 to January 16, 1963, he read it and apparently some doubt arose in his mind as to whether coverage was afforded for the operation of the elevator. The policy contained a provision that insurance was afforded 'only with respect to such and so many of the following coverages * * * as are indicated by specific premium charge or charges.' There then followed a list of coverages with a space opposite for the amount of the premium charged for each. The word 'elevator' was included in the list but no premium was entered or charged for such coverage.

After reading the 1962 policy, Duckworth called Green and asked him about coverage on various items listed in the policy, including that of Elevator. Duckworth testified that, although he could read and was experienced in his own business, he was unfamiliar with the insurance business and was not sure as to whether the policy afforded the coverage which Green undertook to procure. In response to the specific inquiry concerning the 1962 policy, Green informed Duckworth that the policy provided full coverage. Duckworth relied upon Green's assurance that the policy afforded the desired protection and did nothing further about the matter.

The lift or elevator in question was apparently designed primarily for handling freight and not people. It is inferable that, because of the nature of the lift, Green did not consider it an elevator within the meaning of the policy, so as to require specific Elevator coverage, but considered that it was covered under the general policy provisions. It is further inferable that such construction by Green prompted the representations made to the plaintiff that protection was afforded from the hazards of the operation of the elevator.

Thereafter, in May 1962, the elevator in plaintiff's building fell and injured a customer. Plaintiff's manager immediately notified Green of the accident and asked him to take care of it. Green assured him that 'everything would be taken care of.' Subsequently, defendant Sullivan, who was then an adjuster, came to plaintiff's place of business and, upon being shown plaintiff's policy, concluded that it did not provide coverage for the operation of the elevator. Plaintiff's manager then called Green about the lack of coverage, to which Green replied: 'I just made a mistake * * * don't worry * * * I will take care of it.'

Thereafter, suit was entered against plaintiff in the Summer of 1962 by the injured party to recover the damages sustained in the fall of the elevator, resulting in a verdict against plaintiff in the amount of $7,500.00. This action was then brought by plaintiff to recover the amount of the judgment obtained against it, and resulted in a verdict against defendants in that amount, from which they have prosecuted this appeal.

At the outset, we dispose of defendant Sullivan's contention that the lower court erred in refusing to direct a verdict in his favor. The action was brought against Harold Sullivan and Fred Green and the complaint alleges that they were partners doing business as insurance agents under the name of Sullivan-Green Insurance Agency. While judgment was rendered against both defendants, the record conclusively shows that the agency was a corporation and that Sullivan had effectively severed all connection with it long before the events in 1962 which caused plaintiff's damage. The transactions relative to the procurement of the insurance in question were solely between plaintiff and defendant Green and the lower court was in error in refusing the motion of the defendant Sullivan for a directed verdict. Our further consideration of the issues, therefore, concerns solely the liability of the defendant Green.

This is an action ex delicto based upon the alleged negligence of defendants in failing to procure, as they undertook to do, a liability insurance policy for plaintiff covering loss from the operation of the elevator located on its business premises. The first question to be decided is whether there was any evidence to sustain a finding of actionable negligence on the part of the defendant.

Insurance has long been recognized as a business affected with public interest. It is a complicated business and its intricacies often confuse the average layman. The Legislature has accordingly provided for the licensing of insurance agents by the State so as to place the business of insurance in competent and trustworthy hands. This court in La Tourette v. McMaster, 104 S.C. 501, 89 S.E. 398, in recognizing the specialized nature of the insurance business, stated: 'It is one of many complications, requiring, for its safe conduct, not only expert knowledge, but such knowledge as can be acquired only by experience in the business.'

Therefore, the respective duties and obligations arising from the relationship of a principal and his agent in the procurement of insurance must be determined in the light of the fact that the agent was an expert dealing in a highly specialized business, with knowledge and means of knowledge not possessed by the average applicant for insurance.

We have long recognized the general rule that insurance agents and brokers 'are required to exercise due care in placing insurance and would be personally liable for the neglect of that duty.' La Tourette v. McMaster, supra, 104 S.C. 501, 89 S.E. 398. This principle was restated with approval in the recent case of Hinds v. United Insurance Company of America, 248 S.C. 285, 149 S.E.2d 771.

The foregoing rule is in accord with the principle generally recognized as governing the duties and responsibilities of an insurance agent or broker in negotiating insurance contracts for a member of the public. 43 Am.Jur.2d, Insurance, Sections 174 and 176; 44 C.J.S. Insurance § 172; Appleman, Insurance Law and Practice, Sections 8831, 8841; Annotation: 29 A.L.R.2d 171.

The cited authorities state the applicable general principles to be that, where an insurance agent or broker, with a view toward being compensated, undertakes to procure insurance for a member of the public, the law holds the agent or broker to the exercise of good faith, and...