E. S. Harper Co. v. General Ins. Co. of America

• Decision Date: 18 July 1967
• Docket Number: No. 9850,9850
• Citation: 91 Idaho 767,430 P.2d 658
• Parties: E. S. HARPER, CO., Inc., an Idaho Corporation, Plaintiff-Appellant, v. GENERAL INSURANCE COMPANY OF AMERICA, a Foreign Corporation, and, Tandy and Wood, Inc., an Idaho Corporation, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 658

430 P.2d 658

91 Idaho 767

E. S. HARPER, CO., Inc., an Idaho Corporation, Plaintiff-Appellant, v. GENERAL INSURANCE COMPANY OF AMERICA, a Foreign Corporation, and, Tandy and Wood, Inc., an Idaho Corporation, Defendants-Respondents.

No. 9850.

Supreme Court of Idaho.

July 18, 1967.

Stephan & Harvey and Balleisen & Galley, Twin Falls, for appellant.

Parry, Robertson & Daly, Twin Falls, Albaugh, Bloem, Smith & Pike, Idaho Falls, for respondents.

SMITH, Justice.

Appellant (hereinafter sometimes referred to as Harper), brought this action seeking to recover the balance of a fire loss, the inventory of which was allegedly not covered by a provisional reporting form of fire insurance policy, due to the alleged negligence of respondents.

Respondent, General Insurance Company of America (hereinafter sometimes referred to as General), issued the policy through Tandy and Wood, Inc. (hereinafter sometimes referred to as the Agent), the agent for General and other insurers.

December 18, 1962, during the policy period, appellant suffered extensive losses of stock and equipment in a fire at Harper's warehouse in Twin Falls. General conceded liability under the policy of $4,219.35, a sum considerably less than the amount of the loss. Harper commenced this action against respondents for recovery of the value of personal property destroyed by the fire and not fully compensated by the amount of General's conceded liability under the policy.

Respondents moved for a summary judgment in favor of appellant and against General in the amount of $4,219.35; also for a summary judgment in favor of the Agent. The district court granted the motions and entered summary judgments accordingly. Appellant Harper has appealed.

This court has not previously considered the provisional reporting form insurance policy, sometimes referred to as provisional insurance. The discussions contained in certain cases are informative as to the purpose and mechanics of this form of coverage. See Commonwealth Ins. Co. of New York v. O. Henry Tent & Awn. Co., 287 F.2d 316 (7th Cir. 1961); American Eagle Fire Ins. Co. v. Burdine, 200 F.2d 26 (10th Cir. 1952); Columbia Fire Ins. Co. v. Boykin & Tayloe, 185 F.2d 771 (4th Cir. 1950); Anderson Feed & Produce Company v. Moore, 66 Wash.2d 237, 401 P.2d 964 (1965); Albert v. Home Fire and Marine Ins. Co. of California, 275 Wis. 280, 81 N.W.2d 549 (1957); 5 Couch, Insurance § 30:18 (2d ed. 1962); cases collected in Annot. 13 A.L.R.2d 713 (1950).

The provisional reporting form insurance policy which the Agent obtained for Harper provided flexible premium rates and coverage, which varied according to the amount of equipment and stock which the insured actually held and reported as inventory. Certain policy provisions, set forth in the margins, guaranteed Harper coverage of all stock and equipment reported as inventory and premium rates directly proportional to the amount of property actually insured. Paragraph 9 of the policy, the value reporting clause, ¹ directed the insured, Harper, to submit to General monthly reports of the location and actual cash value of property which the insured held, and the amount of specific insurance applicable to that property. Paragraph 11, the premium adjustment clause, ² provided that Harper's insurance premiums should be calculated annually according to the average of the monthly values reported. Paragraph 10, the full reporting clause, ³ governed General's liability in the event of loss, and provides in effect that liability under the policy shall not in any case exceed that proportion of any loss which the last reported value, less the amount of specific insurance reported, bears to the actual value less the amount of specific insurance at the time of the report.

Whether the insured obtains total coverage under the terms of this type of policy depends upon the insured's monthly reports of actual values. Understatement of the value of inventory results in proportionately less coverage and payment of proportionately smaller premium. The insurer, assuming notice that the insured has undervalued or omitted to include some portion of inventory, may infer that the insured desires to limit its insurance to the amount shown by the insured's latest monthly report.

In the instant case, Harper departed from the conventional practice of submitting monthly reports directly to the insurer. Harper, and the Agent, through its vice-president Ervin Hill, collaborated from the inception of the policy in 1947 in the preparation and submission of reports to General. Under the practice pursued Harper mailed monthly statements of inventory and specific insurance to Hill at the Agent's office, and Hill accepted Harper's inventory statement, made necessary corrections in the specific insurance figures, transferred the figures to General's monthly reporting forms, and mailed the reports to the insurer. General consistently accepted those forms without protest or inquiry.

Harper's monthly statement to Hill prior to the fire, understated the value of inventory located in Harper's Twin Falls warehouse. The statement submitted shortly before the loss ⁴ valued all equipment in that warehouse at $49,430.18. The actual value of that equipment, however, when the fire occurred eighteen days later, as compiled in inventories prepared for the insurance adjustor, was $53,169.75 for major equipment and $23,780.44 for other personal property (miscellaneous equipment), or an aggregate of $76,950.19. Accepting Harper's statement of value and applying the liability formula stated in paragraph 10, General determined, and conceded, its liability under the policy to be $4,219.35, the amount of the summary judgment against it entered by the district court.

Harper fundamentally challenges the correctness of the summary judgment on the ground that the Agent and General were responsible for Harper's systematic undervaluation of the Twin Falls properties, and are consequently liable for the amount of actual loss not covered under the terms of Harper's policy.

Harper's first contention rests upon the fact that the Agent regularly submitted to General the formal monthly reports, based upon Harper's inventory statements, and that General accepted the reports over an extended period of time without protest.

Appellant urges the rule that where the insurer has notice that the agent has undertaken the insured's primary duty of submitting timely monthly reports, and where the insurer declines to protest or object to its agent's conduct, the insurer cannot interpose as a defense the failure to submit reports, at the times fixed by the policy, prior to the loss. American Eagle Fire Insurance Co. v. Burdine, supra; Columbia Fire Insurance Co. v. Boykin & Tayloe, supra. In the cited cases, the insurer ordinarily received reports of inventory from the agent, and when the agent failed to transmit the reports each month as required by the policy, the insurer was held estopped to assert against the insured the agent's neglect in complying with the obligation of periodic reporting.

The rule of those cases obviously does not control the present case, where the failure of the policy to cover Harper's loss fully arose through no infirmity in the procedures for monthly reporting. The Agent diligently transferred the figures received from Harper to the reporting forms and-unlike the agents in the aforementioned cases-transmitted the forms promptly to General, the insurer. Harper's reliance upon the alleged irregular procedure of reporting in no way affected the extent and amount of Harper's coverage as reported by him, and therefore does not relate to the Agent's or General's asserted liability.

Harper next contends that the Agent neglected to exercise reasonable skill and ordinary diligence in the effectuation of Harper's policy, and that such negligence proximately resulted in the failure of Harper's insurance to cover the amount of actual loss. As hereinbefore shown, the insufficient coverage at Harper's Twin Falls warehouse was directly attributable to Harper's undervaluation of the stock, equipment and other personally at that location. The question presented is therefore limited to whether the Agent assumed any duty to list the inventory at Harper's Twin Falls warehouse and to ensure that the inventory of that stock, equipment and other personalty, correctly listed and valued, was reported to General.

Express provisions controlling the rights of the parties and the duties of General and its agents to Harper, the insured, appear in the insurance policy itself, which constitutes a binding, integrated contract of the parties. March v. Snake River Mutual Fire Insurance Company, 89 Idaho 275, 404 P.2d 614 (1965). The clear and unambiguous terms of the policy instructed 'the insured (to) report in writing to this company * * * the total actual cash value of * * * property at each location.' (Emphasis supplied.) By that condition the insured Harper reasonably assumed the obligation to account for the valuation of its own property, thus excusing the insurer and its agents from any duty in that respect. Peters v. Great American Ins. Co., 177 F.2d 773, 777, (4th Cir. 1949); Camilla Feed Mills v. St. Paul Fire & Marine Insurance Co., 177 F.2d 746, 748-749, 13 A.L.R.2d 705 (5th Cir. 1949); Hanover Insurance Co. v. McLoney, 205 F.Supp. 49, 52 (E.D.Ky.1962).

Harper observes that the Agent departed from its capacity as General's agent in acting on behalf of Harper in procuring the provisional form insurance policy and in transmitting monthly reports to the insurer. There is, of course, no legal barrier to the Agent's acting in that limited manner as agent for the insured, since no conflicts of interest or inconsistency of duties were present. American Eagle Fire Ins. Co. v. Burdine, 200 F.2d at 30; 3 Couch, Insurance § 25:40 (2d ed. 1962). Harper does not dispute the Agent's due care in procuring the provisional form policy...