Russell v. Reliance Ins. Co., s. 12318

• Decision Date: 14 December 1982
• Docket Number: Nos. 12318,12642,s. 12318
• Parties: Rod RUSSELL d/b/a Galva-Foam Steel Docks et al., Plaintiffs-Respondents, v. RELIANCE INSURANCE COMPANY, Defendant-Appellant, and Farmer-Foster Insurance Agency, Inc., Defendant.
• Court: Missouri Court of Appeals

Page 166

645 S.W.2d 166

Rod RUSSELL d/b/a Galva-Foam Steel Docks et al., Plaintiffs-Respondents, v. RELIANCE INSURANCE COMPANY, Defendant-Appellant, and Farmer-Foster Insurance Agency, Inc., Defendant.

Nos. 12318, 12642.

Missouri Court of Appeals,

Southern District,

Division Two.

Dec. 14, 1982.

Motion for Rehearing and to Transfer to

Supreme Court Denied Jan. 5, 1983.

Application to Transfer Denied

Feb. 23, 1983.

William Icenogle, Icenogle, Drover & Icenogle, Camdenton, for plaintiffs-respondents.

Wiley Morrison, Stanley W. Baker, Morrison, Baker, Neds & Odneal, Raytown, for defendant-appellant.

Charles E. McElyea, Camdenton, for defendant.

MAUS, Presiding Judge.

The petition in this action is in two alternative counts. The sole defendant in Count I is the appellant insurance company. The sole defendant in Count II is an independent insurance agency. A summary of the allegations of Count I follows. The plaintiff ¹ was in the business of constructing boat docks. On April 20, 1977, the insurance company issued a policy to the plaintiff, a copy of which was attached to the petition and incorporated therein. In 1977, the plaintiff contracted to construct a boat dock for Jack Gilbert on Lake Buchanan, Texas. On or about November 1, 1977, the uncompleted boat dock was "totally destroyed by cyclone, tornado or windstorm." The insurance company wrongfully refused to pay the plaintiff under the policy referred to for its loss in the amount of $12,000, for which he prayed judgment. The plaintiff also sought a penalty and attorney's fees for the insurance company's alleged vexatious refusal to pay.

The policy attached to the petition was entitled "Installation Floater." The insured property was declared to be "materials necessary for construction of floating boat docks." The policy insured against "all risks of direct physical loss of or damage to the described property from any external cause except as hereinafter excluded." Item IV provided: "This policy does not insure against loss or damage" caused by any one of eleven enumerated perils including loss "caused by flood, meaning inundation, waves, tide or tidal waves, high water, or overflow of streams or bodies of water, whether driven by wind or not (property in transit excepted)."

Count II incorporated the basic allegations of Count I. The additional allegations thereof were as follows. The plaintiff requested the insurance agency to secure for the plaintiff "a policy of insurance insuring him against risk of loss by damage to floating steel docks while the same were under construction ..., a so-called 'builders' risk policy.' " However, it was alleged the policy referred to in Count I was delivered to plaintiff and the insurance agency was negligent in not ascertaining "that said policy was not a 'builders' risk policy' as plaintiff had requested and ordered, but rather an 'installation floater (broad form)' policy." In the alternative, in the event the plaintiff did not recover against the insurance company, Count II prayed judgment against the insurance agency for $12,000.

With the issues so presented by the petition, the following is a resume of the salient evidence. The trial court made extensive findings of fact as well as reaching conclusions of law. Except where otherwise noted, the resume is consistent with those findings of fact.

The plaintiff had, for approximately ten years, engaged in the business of constructing steel boat docks on lakes throughout the Midwest. On April 12, 1977, the plaintiff entered into a contract to construct for Jack Gilbert an eight-well covered boat dock on Lake Buchanan, Texas. Construction started in May and by the end of June, the dock was substantially complete. In June, because of improper anchoring, the dock was blown from its original position onto Gilbert's boat ramp. Gilbert called Russell (managing officer and sole shareholder of the corporate plaintiff) informing him that the boat dock had been improperly anchored, had many defective welds and other defects. Russell sent his construction personnel to repair the welds and make additions to the anchoring. In August, 1977, Russell went to Lake Buchanan primarily to collect the balance he contended was due under the contract. While there, he inspected and took pictures of the dock. Russell admitted the dock was not yet properly anchored. Gilbert, who testified by deposition, stated that the dock was not fully repaired and that he pointed out the defects, including at least four defective welds to Russell. He further testified Russell said that further repairs and additions would be made. He also testified that Russell told him they had a new welder and that he wasn't watched closely enough and that "[h]e was responsible." Russell admitted it was possible he made such a statement. No additional work was done to the dock after Russell was there and Gilbert testified that it remained in a defective condition. Gilbert further testified that in the first week of November, 1977, Lake Buchanan experienced "three northers." He repeatedly stated that a norther was not a storm, but a wind from the north of approximately 15 to 20 m.p.h. that blew about 24 to 48 hours. Such a norther produced waves 2 1/2 to 3 feet in height. The first norther began to destroy the boat dock. When the third norther had exhausted itself, the boat dock as such was destroyed. Gilbert observed that the wind itself did not damage the boat dock, but the destruction was caused by the dock working up and down in waves until it fell apart.

While much of the same was admitted over the objection of the insurance company, the evidence relating to the plaintiff's purchase of insurance may be summarized as follows. Russell testified that the plaintiff first purchased insurance in 1972 after the company suffered a loss due to a storm. At that time he asked the agency to "get me some coverage to protect me on the docks while I was building them." Upon redirect, he said he wanted insurance to cover any loss he may have from any kind of loss. He was aware the plaintiff's insurance was changed from an individual policy basis to a reporting basis. However, he had not read and did not know the terms of any policy that he received.

The insurance agent testified that when Russell sought insurance, he was primarily interested in windstorm coverage. Initially, the insurance agency obtained for the plaintiff a builders' risk policy for each construction project. In 1976 the insurance company was asked to provide builders' risk coverage upon a reporting basis. There is an indication this change was suggested by an officer of the insurance company. By a letter, the claims manager of the insurance company stated the company was considering the plaintiff's claim in question on the basis of builders' risk coverage.

A builders' risk policy was introduced and identified as the type of policy that had been issued to the plaintiff. This policy insured against specified perils including fire and lightning, windstorm and hail. It excluded "loss caused by, resulting from, contributed to or aggravated by ... waves ... whether driven by wind or not."

The trial court declared that the occurrence of windstorms during November 2--9, 1977, created the inference that the proximate cause of the destruction of the dock was windstorm. It then found the exclusion pertaining to loss caused by waves, whether driven by wind or not, was ambiguous and not applicable to a floating boat dock. It found the testimony of Gilbert that the dock was destroyed by waves was not credible evidence. Upon the basis of these findings, the trial court rendered judgment for the plaintiff against the insurance company for $9,916.03. The prayer for a penalty and an attorney's fee for vexatious delay was denied.

One of the insurance company's points is based upon the following argument. By its petition the plaintiff sought recovery upon an "installation floater" policy. However, the judgment of the trial court is not for the value of the materials (insured under installation floater policy) but is based upon a completed structure (insured under a builders' risk policy). Therefore, the plaintiff contends the trial court erred in granting relief beyond the scope of the pleadings.

By this point there is presented to the court the question of whether or not, under a petition seeking recovery upon a designated insurance policy, a court may reform that policy. The general topic of the necessity of reformation in a separate action or under a separate count is the subject of many decisions and much legal literature. 4A Appleman, Insurance Law and Practice § 2912 (1969); 43 Am.Jur.2d Insurance § 358 (1982). Recovery without prior reformation has been generally allowed in regard to so called "simple errors" in the policy as issued. Annot., Insurance--Reformation- --Person Insured 25 A.L.R.3d 580 (1969); Annot., Property Insurance--Reformation 25 A.L.R.3d 1232 (1969). In this state that doctrine has been recognized in regard to a mistake in an application, Lorenz v. Bull Dog Automobile Ins. Ass'n., 277 S.W. 596 (Mo.App.1925), and in regard to a street address, Sloss v. Farmers Mutual Automobile Insurance Co., 350 S.W.2d 446 (Mo.App.1961). The doctrine has been declared applicable to prevent an insurance company from relying upon a breach of the policy by the insured known to the company to exist at the time the policy was issued. Hearsh v. German Fire Ins. Co., 130 Mo.App. 457, 110 S.W. 23 (1908).

However, it is not clear that such a doctrine extends to a more substantial modification of the language of a policy, such as the perils insured against or excluded. Annot., Insurance--Risks--Reformation 32 A.L.R.3d 661 (1970). Generally, a plaintiff may not declare upon one contract and recover upon another. Fogle v. Fidelity-Phenix Fire Ins. Co. of New York, 342 Mo. 1, 111 S.W.2d 154 (1937). Also see 20B Appleman, Insurance Law and Practice § 11828 (1980). The...