Schuknecht v. Western Mut. Ins. Co., 55160

• Decision Date: 17 January 1973
• Docket Number: No. 55160,55160
• Citation: 203 N.W.2d 605
• Parties: Galen SCHUKNECHT, Appellant, v. WESTERN MUTUAL INSURANCE COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 605

203 N.W.2d 605

Galen SCHUKNECHT, Appellant, v. WESTERN MUTUAL INSURANCE COMPANY, Appellee.

No. 55160.

Supreme Court of Iowa.

Jan. 17, 1973.

Frye & McCartney, Charles City, for appellant.

Kennedy, Kepford, Kelsen & White, Waterloo, for appellee.

Considered en banc.

REES, Justice.

This appeal comes to us from a decree of the district court entered in an equity action by which plaintiff sought to reform three certain liability insurance policies on the grounds of mutual mistake. Trial court dismissed plaintiff's petition and entered judgment against him for costs, and he brings this appeal.

On and prior to January 16, 1967 plaintiff was engaged in the business of farming, and operating a truck-mounted cornsheller which he used in a custom shelling business. The truck was identified as a 1948 international KB6 two-ton, six-cylinder truck, number H64935. Plaintiff had been a client of the Sperry-Ray Insurance Agency of Greene, Iowa, which was apparently a sole proprietorship owned and operated by Mr. Charles R. Ray. Ray had been active in the operation of the agency from July 1, 1962 until 1969, when he sold his interest in the agency to one Brinkman. During a portion, at least, of the time Mr. Ray was engaged in the insurance business at Greene, he employed a secretary in his office, one Mrs. Ruffridge.

Three insurance polices issued by defendant are involved in this litigation: policy No. 3--384--553 was issued January 16, 1967, by which defendant agreed to insure and protect plaintiff against liability arising out of the operation by plaintiff of a certain truck described as a 1948 International KB6, two-ton, six-cylinder truck, No. H64935, upon which there was mounted a cornsheller; the second policy, No. 3--417--149, issued January 16, 1968, by which the defendant agreed to insure and protect plaintiff from liability occasioned by his operation of a 1964 GMC two-ton truck upon which was mounted a cornsheller, and which was described as model No. V4008; the third policy, No. 3--425--164, dated January 16, 1969, reflected the same undertakings on the part of the defendant to plaintiff as did the second policy above referred to.

While the first policy was in force, plaintiff acquired the 1964 GMC two-ton truck and cornsheller. Plaintiff testified that on the morning of November 1, 1967, after the cornsheller was mounted on the GMC truck he had just acquired, he went to the Ray insurance office and asked Mr. Ray to 'put insurance on my new cornsheller'. He further testified he asked Mr. Ray if he could put both of the cornshellers on the same policy, and Mr. Ray answered that he thought he could. Apparently on November 1 there was prepared in the office of Agent Ray a form request for change of automobile policy which directed the defendant company to transfer the coverage on policy No. 3--384--553 to a 1964 GMC two-ton truck with sheller, model No. V4008. One of the questions on the request for change of automobile policy form was, 'Does insured still own the automobile that is being eliminated?' The answer to this question on the form (which is identified in the record as plaintiff's exhibit 1) is, 'No.' The request for change of automobile policy form was apparently forwarded to the defendant company, as it bears a file stamp indicating its receipt in the office of the company on November 2, 1967.

Exhibit 1 purports to bear the signatures of the agent, Charles R. Ray and the insured, Galen Schuknecht. On the trial of the case, however, Mrs. Ruffridge, the agent's employee, testified she signed the names of both Ray and Schuknecht on the form. She testified she had authority from Ray to sign his name, but had no authority to sign Schuknecht's name on the change of policy form.

Neither Ray nor Mrs. Ruffridge could testify with any positiveness that a copy of the form had been forwarded to the insured Schuknecht.

Apparently when the request for change of policy form above referred to reached the home office of defendant, the company caused to be issued its substitution of automobile endorsement as a part of policy No. 3--417--149. The endorsement indicates it became effective on November 1, 1967, and by its terms provides the policy to which the endorsement is attached, was amended to cease to apply to the 1948 International truck and to apply to the 1964 GMC truck and sheller. Both plaintiff and his wife testified they did not at any time receive a copy of the substitution of vehicle endorsement. Agent Ray testified that while the insured would not get a copy of the request for change (exhibit 1), that it would be unusual if the insured did not receive the original of the substitution endorsement, although he (Ray) said he had no knowledge of mailing the endorsement to Mr. Schuknecht, nor could he remember delivering the same to him.

Mrs. Ruffridge, the secretary in the Ray Insurance Agency office, testified that normally the endorsement would be mailed to the insured at the same time a statement was made out and mailed for the increase in premium occasioned by the substitution of auto, although she was unable to testify from any record or from her direct knowledge that the endorsement (defendant's exhibit 2) was at any time mailed or otherwise delivered to the plaintiff. Mrs. Ruffridge stated that in April of 1969, while policy No. 3--425--164 was in force, the plaintiff came into the insurance office and changed the medical pay coverage on the policy from $500 to $2000, and a change of coverage endorsement was secured and the plaintiff was billed for the increased premium.

There is no question, apparently, but that the policies issued January 16, 1968 and January 16, 1969 referred only to the 1964 GMC truck, and no question further but that the policies were delivered to the plaintiff.

In his petition plaintiff prayed the court to enter its order reforming policy No. 3--425--164 (the policy issued January 16, 1969) by including in the declaration of the policy the words and figures '1948 International KB6, two-ton truck, and mounted cornsheller, number 864935, six cylinder', and for such other reformations of said policy as would provide plaintiff with a policy of insurance to insure and protect him against any liabilities occasioned by the negligent operation of the 1948 truck and sheller during the period of time of coverage afforded by said policy, to the end that the policy would correctly recite the claimed agreement of the parties.

The underlying motivation for the institution of the suit was the fact the 1948 truck was involved in an accident on September 2, 1969, and plaintiff had been exposed to suit and liability as a consequence of the accident.

In its answer defendant admitted the issuance of the policies and admitted that the defendant company had removed the 1948 truck and sheller from the provisions of policy No. 3--425--164--the policy covering the term January 16, 1969 to January 16, 1970. The defendant, however, denied it had neglected or failed to notify the plaintiff of its action in removing said truck and sheller from the coverage of the policy, and denied that such removal from the policy was contrary to the direction of the plaintiff. It further denied it had failed and neglected, through mistake and inadvertence, to conform the policy issued in 1967 to include the 1964 truck and sheller, or that it had deleted the 1948 truck and sheller from the coverage of the policy contrary to the agreement and understanding of plaintiff and defendant's agent.

Further, in its answer the defendant alleged plaintiff had been guilty of laches and unreasonable delay in asserting any claimed rights or in bringing any action thereon against the defendant, and further stated plaintiff had paid insurance premiums to the defendant based upon the coverage afforded him by the two latter policies, one issued in 1968 and one in 1969, and based upon the coverage afforded him after the endorsement was issued removing the 1948 truck from the policy issued in 1967. Defendant further asserted in its answer that the 1948 sheller and truck had been involved in an accident on September 2, 1967, as a consequence of which a suit had been filed against plaintiff demanding judgment for $146,822.16, and that to afford plaintiff the relief he seeks in this action would materially affect the rights of defendant and subject defendant to liability. Defendant, therefore, prayed that plaintiff's petition be dismissed.

Trial court entered extensive findings of fact substantially as above recited, and concluded the burden was on plaintiff in the action for reformation of the policy to establish a mutual mistake by clear, satisfactory and convincing evidence. The trial court concluded that if the insurance agent, Ray, made a mistake as alleged by plaintiff, such a mistake would have been a mutual mistake, but the court's ruling was based on its conclusion that Ray made no mistake on November 1, 1967 in removing the 1948 truck from the coverage of defendant's policy, and that the subsequent renewal policies issued by the defendant to plaintiff were not the result of mistake. The court thereupon dismissed the petition of the plaintiff.

Plaintiff urges four propositions to justify a reversal: (1) a mistake due to the negligence of an insurance agent, acting within the scope of his employment, is a satisfactory ground for reformation of the insurance policy, where the insured relies upon the agent to insure his property as requested; (2) insurance company is bound by coverage in earlier policy where renewal policy is issued without calling to insured's attention a reduction or a change or a substitution in the policy coverage; (3) when a policy of insurance has been delivered to the insured he is entitled to assume that the property requested to be insured is correctly described in said policy and in failing to read the policy or its renewals he is not guilty of such negligence as would bar...