Szelenyi v. Morse, Payson & Noyes Ins.

• Decision Date: 30 July 1991
• Citation: 594 A.2d 1092
• Parties: Ernest SZELENYI v. MORSE, PAYSON & NOYES INSURANCE.
• Court: Maine Supreme Court

Page 1092

594 A.2d 1092

Ernest SZELENYI v. MORSE, PAYSON & NOYES INSURANCE.

Supreme Judicial Court of Maine.

Argued June 6, 1991.

Decided July 30, 1991.

Harrison L. Richardson (orally), William K. McKinley, Richardson & Troubh, Portland, for plaintiff.

Thomas F. Monaghan (orally), Monaghan, Leahy, Hochadel & Libby, Portland, for defendant.

Before McKUSICK, C.J., and ROBERTS, WATHEN, GLASSMAN, CLIFFORD and COLLINS, JJ.

CLIFFORD, Justice.

The Superior Court (Cumberland County, Lipez, J.) awarded $309,889.10 in damages to plaintiff Dr. Ernest Szelenyi against defendant Morse, Payson & Noyes Insurance (MPN) based on a jury verdict that MPN had breached an implied agency agreement to advise Szelenyi as to the adequacy of his professional liability insurance coverage or to provide Szelenyi with information to make an informed decision as to the adequacy of his coverage. MPN brings an appeal from the judgment. We conclude that there is not sufficient evidence in the record to support a finding that the parties had an implied agreement that MPN would advise Szelenyi or give him information as to the sufficiency of his insurance coverage, and we vacate the judgment of the Superior Court.

Szelenyi, a physician, became associated in 1969 with the Pineland Center, a state facility for the mentally handicapped in Pownal. In January 1971, Szelenyi procured through Dow & Pinkham Insurance, a Portland insurance agency, a professional liability insurance policy issued by the St. Paul Fire & Marine Insurance Company (St. Paul), with limits of $100,000 per claim and $300,000 per occurrence. MPN, another insurance agency based in Portland, purchased the Dow & Pinkham agency on October 1, 1971, and renewed Szelenyi's policy annually until 1983. The limits on Szelenyi's policy remained at $100,000 per claim and $300,000 per occurrence during that time. Szelenyi terminated his relationship with MPN in March of 1983, when he notified the agency that he was resigning from Pineland.

In 1984, Szelenyi was named as a defendant in a medical malpractice lawsuit for damages arising out of the death of Therese Miller, a nurse's aide at the Pineland Center who suffered a fatal heart attack while Szelenyi was a physician on duty at Pineland in January 1983. Judgment in the malpractice action was entered against Szelenyi in 1987 for damages in the amount of $260,000. See Miller v. Szelenyi, 546 A.2d 1013, 1015-17 (Me.1988). Only $100,000 of the judgment was covered by Szelenyi's professional liability insurance. Szelenyi filed a complaint against MPN and St. Paul ¹ alleging that MPN had breached its duty as Szelenyi's agent to advise him of the consequences of underinsurance and to procure adequate insurance for him, and that MPN had breached its contract to procure adequate insurance protection for him.

After the court granted summary judgment to MPN on the breach of contract claim, the case went to trial on the issue of whether MPN had breached an implied agency agreement to advise Szelenyi on the adequacy of his professional liability insurance coverage or to provide him with information that would permit him to make an informed decision on the adequacy of his coverage. ² The jury returned a special verdict finding that MPN had breached such an implied agency agreement, and that the breach of the agreement was a proximate cause of damages to Szelenyi in the amount of $309,889.10. The court entered judgment in that amount for Szelenyi, and denied MPN's motion for judgment notwithstanding the verdict. MPN then brought this appeal.

We review the record in a light most favorable to Szelenyi to determine if there is credible evidence to support a finding of an implied agency agreement under which MPN assumed the duty to advise or give Szelenyi information as to the adequacy of his insurance coverage. Jourdain v. Dineen, 527 A.2d 1304, 1306 (Me.1987).

An insurance agent generally assumes only those duties found in an ordinary agency relationship, that is, to use reasonable care, diligence and judgment in obtaining the insurance coverage requested by the insured party. Sandbulte v. Farm Bur. Mut. Ins. Co., 343 N.W.2d 457, 464 (Iowa 1984); see Hardt v. Brink, 192 F.Supp. 879, 880 (W.D.Wash.1961). An insurance agent does not have a duty to advise an insured about adequacy of coverage merely because an agency relationship exists between the parties. ³ Before such a duty can arise, a special agency relationship must exist between the parties. See, e.g., Nelson v. Davidson, 155 Wis.2d 674, 456 N.W.2d 343, 347 (1990); Bruner v. League Gen. Ins. Co., 164 Mich.App. 28, 416 N.W.2d 318, 320 (1987); Nowell v. Dawn Leavitt Agency, Inc., 127 Ariz. 48, 617 P.2d 1164, 1168 (App.1980); but see Dimeo v. Burns, Brooks & McNeil, Inc., 6 Conn.App. 241, 504 A.2d 557, 559 (1986).

"The existence and extent of the duties of the agent to the principal are determined by the terms of the agreement between the parties, interpreted in light of the circumstances under which it is made...." Resta...