Travelers Ins. Co. v. Wells

• Decision Date: 19 November 1993
• Docket Number: Nos. 92-2958,92-2959,s. 92-2958
• Citation: 633 So.2d 457
• Parties: 18 Fla. L. Weekly D2444 The TRAVELERS INSURANCE COMPANY, et al., Appellants, v. D.J. WELLS, Jr. and Vesta Wells d/b/a Mill Creek Sawmill Building Materials, et al., Appellees.
• Court: Florida District Court of Appeals

Page 457

633 So.2d 457

18 Fla. L. Weekly D2444

The TRAVELERS INSURANCE COMPANY, et al., Appellants, v. D.J. WELLS, Jr. and Vesta Wells d/b/a Mill Creek Sawmill

Building Materials, et al., Appellees.

Nos. 92-2958, 92-2959.

District Court of Appeal of Florida,

Fifth District.

Nov. 19, 1993.

Opinion Clarifying Decision March 18, 1994.

John R. Bello, Jr. and Eliott R. Good of Chorpenning, Good, Gibbons & Cohn, Tampa, for appellant.

Donald L. O'Dell and David W. Henry of McDonough, O'Neal & O'Dell, Orlando, for appellant George Mangan Ins., Inc.

Lewis E. Dinkins of Lewis E. Dinkins, P.A., Ocala, for appellees.

W. SHARP, Judge.

The Travelers Insurance Company and George Mangan Insurance, Inc. appeal from judgments rendered against them in favor of D.J. Wells, Jr. and Vesta Wells, doing business as Mill Creek Sawmill Building Materials, a Florida partnership. The jury specifically found that Travelers and Mangan (an insurance agency) had breached their respective contracts with Mill Creek to provide a policy for worker's compensation insurance for the year 1987 and that Mill Creek could Viewing the evidence presented at trial in a light most favorable to the appellee, which as an appellate court we must do, ¹ Mill Creek established it was a moderately successful, family-originated and run sawmill business in Marion County, Florida. Vesta Wells and her husband, D.J. Wells, Sr. started the mill sometime after they married in 1941. In the past ten years, Vesta's and D.J.'s son, D.J. Wells, Jr., and his wife, Paula, ran the business. Paula took care of the bookkeeping and paper work. D.J., Jr. handled the yard and mill operations.

not have avoided the ensuing damage (loss of net profits for 1987) caused by the breach by exercising reasonable effort and care. It awarded Mill Creek $75,000 against Travelers and $50,000 against Mangan. The appellants argue the damage awards are not supported by competent and substantial evidence. We agree in part, and remand for a new trial on the damage issue or for the entry of an order of remittitur.

It was a small business, with a well-established reputation in the industry for fair dealing and good prices. Mill Creek was able to compete in the highly competitive lumber business by specializing in cutting cypress logs, and special orders not handled economically by the larger lumber mills. It also sold small amounts of hardware on a retail basis. In 1984, Mill Creek added the retail sales of other building supplies and hardware.

In 1985, Paula contacted Mangan to obtain coverage for workers' compensation insurance for the mill when their insurance carrier ceased to write policies for sawmills. She dealt with Mrs. Gaffney, Mangan's employee, who had extensive years of experience in the insurance business. Gaffney obtained coverage for Mill Creek by applying to the "assigned risk pool." ² Travelers was the assigned carrier.

For workers' compensation policies, the premium is based on payroll. It is estimated for the year and an advance deposit is required prior to issuing the policy. Later in the year, audits are made, and based on findings regarding payroll, additional premiums may be charged.

Unfortunately, the Mill Creek account was not handled appropriately. Evidence was adduced that Mill Creek paid the initial premium for 1985. The semiannual audit showed an additional premium due of $2,011 and the final audit showed an additional premium due of $2,140 for a total of $4,151. Mangan received a copy of a billing for 1985 showing there was a balance due. Mill Creek did not receive one, and did not pay the additional sum owed for 1985. Nevertheless, Travelers sent Mill Creek a renewal notice for 1986, with an estimate and required deposit. Mill Creek paid the 1986 estimated amount, and was issued a policy for 1986.

In October of 1986, Travelers generated an additional billing of $2,212 for 1986. Mill Creek did not receive this billing. A copy of this notice was sent to Mangan. Mangan did not copy Mill Creek with the billing notice, nor inquire whether it was paid.

As the 1986 policy year drew to a close, Travelers sent Mill Creek a cancellation notice issued November 19, 1986, asserting it was owed past due premiums and if they were not paid by December 20, it would cancel the policy. No copy of this notice was sent to Mangan's. Paula also had received a renewal notice from Travelers dated October 9, 1986. It notified her she should pay a $3,857 deposit by January 1, 1987, in order to continue coverage.

Paula called Gaffney because she was confused by the two notices. She told Gaffney the cancelation notice did not look right to her. Gaffney did not check her file to see whether or not Mangan had received copies of past due premium notices for the 1985 and 1986 coverage years. She assumed Paula was calling about the "same old renewal notice" which every one receives each year. She had a copy of the 1987 renewal notice in her file.

Mrs. Gaffney testified insurance companies would not send renewal notices if there were unpaid premium billings. Thus, she simply advised Paula to pay the renewal amount requested. Paula sent a check payable to Mangan for that amount, with a notation it was to pay for the 1987 policy.

Mangan deposited the check in its own account, and issued a check payable to Travelers for the same amount. However, without any verbal or written permission from Mill Creek, and contrary to Mill Creek's direction that the payment be applied to the 1987 policy, Mangan directed payment be applied to the 1986 billing. How that came about, no one was able to explain.

When the check from Mangan was received by Travelers there was evidently some dispute (in-house) about whether it should be applied to the 1987 renewal policy. Notations on the check stated it should not be applied to the back premium charges. Clearly it was in the exact amount Travelers had billed for the 1987 renewal.

Travelers went both ways on this one. It applied the $3,857 to the 1985-86 back billings, and on January 8, 1987, it notified Gaffney that the policy had been cancelled. Later it paid Mangan's a commission or "fee" for the 1987 policy. When Gaffney later questioned Travelers about how to handle the commission on the 1987 unissued policy, she was told to "put it in the bank, the thing would straighten itself out."

Mrs. Gaffney immediately called Paula and told her they were operating the mill without the required insurance. All parties were well aware that in Florida, the mill could not be operated with non-family employees without workers' compensation insurance. Paula and D.J., Jr. sent their nine outside employees home, and shut down most of the mill operations.

Paula and D.J., Jr. called Travelers to try to get their insurance coverage reinstated. They explained they had no notice they owed back charges for 1985 and 1986. They offered to pay the charges in full, over six months time, if the 1987 policy were issued, and they could operate the mill. They explained they could not immediately pay the back charges, plus the 1987 premium.

Travelers took a hard line. It told them they owed some $6,000 additional monies. However, even if Mill Creek paid that amount instantly, Travelers would not under any circumstances, issue a new policy for Mill Creek. The agent for Travelers told Paula and D.J., Jr. that without insurance, they must shut down and that as long as Travelers was owed money by Mill Creek, it could not be assigned another carrier from the "assigned risk pool."

Paula and D.J., Jr. called a lengthy list of other insurance agents and companies to try to get coverage from another carrier for 1987 with no success. They contacted the State Insurance Commissioner's Office for help. Someone made a preliminary investigation, but declined to intervene on their behalf. As the person explained to Paula, the people in that office work with insurance companies all the time and they had to "get along" with them.

At that point, Paula and D.J., Jr. concluded they had no alternative but to permanently close Mill Creek. During 1987, they operated the mill and lumber yard on a minimal basis, with only their own personal or other family member's labor. Without the income from the mill, D.J. Jr. testified they contemplated filing for bankruptcy. But, they continued in business on a much reduced basis, and were paying all of their bills, a small amount at a time, including Travelers'.

At trial, counsel for Mill Creek sought to prove Mill Creek's projected lost profits for 1987 as the damages proximately resulting from Travelers' and Mangan's breach of contract to issue and procure the 1987 insurance policy. D.J. Wells, Jr. testified the mill lost $200,000 during 1987 because of the forced closing of most of its mill operations. However, he admitted the $200,000 was a gross sales figure and that he did not handle the bookkeeping side of the business.

Paula testified she was the primary record keeper and bill payer for the business, although she had no special training in bookkeeping or accounting. She kept the books and records the way D.J. Jr.'s parents had Mr. Furman testified as to the net profit Mill Creek would have earned in 1987, if it had not been shut down due to lack of workers' compensation insurance. He prepared an economic "forecast" or projection, based on assumptions that 1987 would have continued on the same course as set by 1984, 1985 and 1986. He based his forecast on Mill Creek's income tax returns for 1984, 1985 and 1986. They were also available in court, although they were not placed in evidence.

done, in the past, and furnished them, as well as all requested information, to their accountant, Mr. Furman, a C.P.A. His firm had done all of the accounting service for Mill Creek since 1978 and he had prepared Mill Creek's income tax returns for the last several years. Mill Creek's business records were brought into the courtroom at trial in boxes, but neither side...