Scott v. Allstate Ins. Co.

• Decision Date: 01 July 1976
• Docket Number: No. 1,CA-CIV,1
• Citation: 553 P.2d 1221,27 Ariz.App. 236
• Parties: Robert E. SCOTT and Lorna M. Scott, Appellants, v. ALLSTATE INSURANCE COMPANY and Allstate Enterprises Management Company, Appellees. 3060.
• Court: Arizona Court of Appeals

Page 1221

553 P.2d 1221

27 Ariz.App. 236

Robert E. SCOTT and Lorna M. Scott, Appellants, v. ALLSTATE INSURANCE COMPANY and Allstate Enterprises Management Company, Appellees.

No. 1 CA-CIV 3060.

Court of Appeals of Arizona, Division 1.

July 1, 1976.

Rehearing Denied Aug. 3, 1976.

Petition for Review Denied Sept. 16, 1976.

Thur, Preston & Hungerford by Calvin C. Thur, Scottsdale, for appellants.

Johnson, Tucker, Jessen, Dake & Murphy, P.A. by Arthur M. Johnson, Phoenix, for appellees.

HOWARD, Chief Judge.

Appellants sued appellees for conversion and unlawful interference with a contractual relationship, both claims arising out of the cancellation of a homeowner's insurance policy. A jury trial resulted in a defense verdict. Appellants present the following questions for review:

'1. Did the Trial Court err in denying plaintiffs' Motion for Directed Verdict and for Judgment Notwithstanding the Verdict on the issue of conversion when the evidence whoed (sic) a conversion by allstate (sic) Insurance Company as a matter of law?

2. Viewing the record as a whole, was the jury's verdict contrary to the law and evidence?

3. Did the Trial Court err in granting defendant's Motion for Directed Verdict on the issue of punitive damages, when there was evidence of forgery, conversion, aggravated, outrageous and wanton conduct?

4. Was Allstate properly permitted to describe to the jury, over objections, the reason that their salesman signed Mr. Scott's name to a legal document?

5. Did the Court err in permitting conclusionary testimony by Allstate's manager that their salesman's forgery was not 'within the scope of his employment'?

6. Did the Trial Court err in rejecting plaintiffs' evidence of Allstate's bad reputation, when reputation is an issue in the case, and Allstate presents evidence of their 'fine reputation'?

7. Did the Trial Court err in refusing plaintiffs' Instructions on the issues of conversion, ratification, punitive damages, wanton and reckless conduct, and on the unfair and deceptive insurance practices prohibited in the Arizona Statutes?'

The facts considered in the light most favorable to upholding the verdict of the jury and the action of the trial court in refusing to direct a verdict and refusing to enter a judgment notwithstanding the verdict are as follows.

In June of 1966, appellants were married and moved into a house on West Townley in Phoenix, Arizona, which was insured by appellee Allstate Insurance Company. Appellants also had their automobiles insured with Allstate. In August of 1968, appellants moved into another home. This home was covered by a homeowner's insurance policy issued by Travelers Insurance Company. In 1973, appellants bought a second-hand car and contacted an Allstate representative, Clay Boone, to secure coverage for the automobile.

The car was added to the insurance policy and Mr. Boone told appellants that he would like to get them total Allstate coverage. Nothing was done at that time, but in June of 1973, Mr. Boone contacted Mr. Scott about an Allstate homeowner's policy as a replacement for the Travelers Insurance policy which expired on August 10, 1973. In the course of this conversation Boone received and recorded information from Mr. Scott concerning the house which would only be elicited and recorded if a policy of insurance were going to be written. Boone wrote a policy of homeowner's insurance for appellants on the home, and cancelled the Travelers policy. The policy issued by Allstate was in the sum of $30,000 whereas the Travelers policy provided coverage on the house in the sum of $34,500. Western Savings and Loan Company, the mortgagee on the home, impounded certain amounts from the mortgage payments in order to pay the premiums on the Travelers Insurance Policy. In order for the mortgagee to accept the new insurance policy and transfer any sums in the impoundment account to Allstate in payment of the premium on the new Allstate policy, it was necessary to secure from appellant their written authorization. This written authorization was provided to the mortgagee when appellants were on vacation. The application contained the signature of a Robert E. Scott, but this signature had been written by Boone.

The husband returned from vacation on August 12, 1973, and his wife, Lorna, returned on August 15, 1973. They had received in the mail a copy of the new Allstate insurance policy and a notice of the cancellation of the Travelers insurance policy. Mrs. Scott became quite upset and called Allstate to try to find out why the new policy was issued and the Travelers insurance policy had been cancelled. She told the supervisor of Allstate's office, Mr. Fulton, that she did not want Allstate insurance and that they had never authorized the cancellation of the Travelers policy or the issuance of the Allstate policy. Mr. Fulton talked to Mr. Boone who told him that Mr. Scott had definitely ordered the new Allstate policy. Mr. Fulton spoke with Mr. Scott who told him there was a possibility that Mr. Boone had been mistaken as to his intentions. Mr. Fulton spoke with Mrs. Scott and offered to rescind the Allstate policy but she stated that would not resolve the matter. He could not ascertain from her what she wanted the company to do. On September 11, 1973, the Scotts received from Allstate a refund check in the amount of money taken from the impound account at Western Savings and at the same time Western Savings received a reinstatement notice from Travelers reinstating the Scotts' Travelers insurance policy retroactive to August 10, 1972.

Boone was reprimanded by Fulton for signing the authorization for the substitution of the policies and the transfer of the impoundment account. Boone did not have the authority to sign Mr. Scott's name from either Scott or Allstate.

In their complaint appellants asked for punitive damages and compensatory damages for Mrs. Scott's pain and suffering from aggravation of a congenital neck problem which she claimed was the result of her worrying about whether her home was insured.

Appellants assert that as a matter of law the court should have directed a verdict in their favor on the conversion count, leaving for the jury only the issue of damages. Appellees contend that there were factual issues which proscribed direction of a verdict, in particular, an issue as to whether or not there was consent and whether Boone's actions could be attributed to them under the doctrine of respondeat superior. As far as the agency issue is concerned, the uncontradicted evidence shows as a matter of law that Boone was acting within the scope of his employment at the time he signed Mr. Scott's name to the authorization and secured the transfer of the funds to the account of Allstate Insurance Company. Appellees led the trial court to believe that if Boone had no authority to sign the authorization then Allstate could not be liable because Boone would then be acting beyond the scope of his authority and employment. This view of the law is incorrect. The test of liability of the principal for the agent's tortious acts is not whether the tortious act itself is a transaction within the ordinary course of the business of the principal, or within the scope of the agent's authority, but whether the service itself in which the tortious act was done was within the ordinary course of such business or was in the scope of such authority. United Brotherhood of Carpenters and Joiners of America, AFL-CIO v. Humphreys, 203 Va. 781, 127 S.E.2d 98 (1962); 53 Am.Jur.2d Master and Servant Sec. 438; 3 C.J.S. Agency § 424, pp. 281--284; 57 C.J.S. Master and Servant § 555, pp. 266--267.

We quote with approval from 2 Mechem on Agency, 2nd Ed. Sec. 1960 the following definition of 'scope of employment':

'In many cases no better definition can be given than the words themselves suggest. But, in general terms, it may be said that an act is within the course of the employment if (1) it be something fairly and naturally incident to the business, and if (2) it be done while the servant was engaged upon the master's business and be done, although mistakenly or ill-advisedly, with a view to further the master's interests, or from some impulse or emotion which naturally grew out of or was incident to the attempt to perform the master's business. . . .'

It is clear that Boone was performing a service authorized by appellees and was acting for and on behalf of appellees.

When we turn our attention to the facts of the alleged conversion, we do find that there were material issues which required submission to the jury.

Conversion is any act of dominion wrongfully asserted over another's personal property in denial of or inconsistent with his rights therein. Western Coach Corporation v. Kincheloe, 24 Ariz.App. 55, 535 P.2d 1059 (1975). Neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are the gist of the action. Markel v. Transamerica Title Insurance Company, 103 Ariz. 353, 442 P.2d 97 (1968). However, an act which would otherwise constitute a conversion may be precluded from having that effect by the plaintiff's consent to the act, either express or implied. Rose Brother's Inc. v. City of Alva, 356 P.2d 1083 (Okl.1960). A mistake can be a defense if the mistake is induced by the plaintiff. Restatement (Second) of Torts Sec. 244.

The conversion, if any, in this case would have consisted of the appropriation of the impound account to Allstate's use and benefit. The conversion did not consist of the unauthorized signing of the authorization. There was evidence from which the jury could have concluded that either Mr. Boone had the implied consent to transfer the impoundment account to Allstate upon the expiration of the Travelers insurance policy and effective date of the Allstate policy, or, that he was induced by Mr. Scott to mistakenly believe that the Scotts wanted him to take all steps necessary to accomplish the issuance of the...