Turner and Boisseau v. Marshall Adjusting

• Decision Date: 13 September 1991
• Docket Number: No. 86-6000-C.,86-6000-C.
• Citation: 775 F. Supp. 372
• Court: U.S. District Court — District of Kansas
• Parties: TURNER AND BOISSEAU, CHTD., Plaintiff, v. MARSHALL ADJUSTING CORPORATION and the Law Firm of Wilson, Elser, Moskowitz, Edelman and Dicker, Defendants.

775 F. Supp. 372

TURNER AND BOISSEAU, CHTD., Plaintiff, v. MARSHALL ADJUSTING CORPORATION and the Law Firm of Wilson, Elser, Moskowitz, Edelman and Dicker, Defendants.

No. 86-6000-C.

United States District Court, D. Kansas.

September 13, 1991.

Turner & Boisseau, Wichita, Kan., Dan E. Turner, Phillip L. Turner, Topeka, Kan., for plaintiff.

Richard C. Hite, Dennis V. Lacey, Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., for defendants.

MEMORANDUM AND ORDER

CROW, District Judge.

This action is brought by Turner and Boisseau, Chtd., to recover legal fees which Turner & Boisseau claims are owed by the defendants. The central issues of this case concern contract and agency law. It is undisputed that Turner & Boisseau represented certain insureds of Transit Casualty Company (Transit), including two cases known as Morales v. City of Garden City ("Morales") and Savard v. City of Hutchinson ("Savard"). In 1985 Transit was placed in receivership. Turner & Boisseau brings this action to collect the fees it claims to have earned in defense of the Morales and Savard cases and for which it has not been paid. The only issue is whether these defendants, as agents of a partially disclosed principal, are contractually obligated to pay Turner & Boisseau for the fees it claims to have earned in defending the Morales and Savard cases. Turner & Boisseau claims damages in the amount of $68,894.42 plus interest.

This matter comes before the court upon Turner & Boisseau's motion for summary judgment and upon the defendants' cross-motion for summary judgment. Each party has filed a response.

Standards for Summary Judgment

Summary judgment is appropriate when the movant can demonstrate that there is no genuine issue of material fact and is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Fed.R.Civ.P. 56(c). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2511-12.

An issue of fact is "genuine" if the evidence is significantly probative or more than merely colorable such that a jury could reasonably return a verdict for the nonmoving party. Id. at 248, 106 S.Ct. at 2510. An issue of fact is "material" if proof thereof might affect the outcome of the lawsuit as assessed from the controlling substantive law. Id. at 249, 106 S.Ct. at 2510-11. Factual inferences are drawn to favor the existence of triable issues, and where reasonable minds could ultimately reach different conclusions, summary judgment is appropriate. See Riley v. Brown & Root, Inc., 896 F.2d 474, 476-77 (10th Cir.1990).

Facts

The majority of facts are undisputed; the material facts are uncontroverted. The parties stipulate that the law of the State of Kansas governs the issues of this case.

Transit was an insurance company. Transit offered insurance policies to cities and other entities to insure against various types of losses, including police professional liability insurance. On August 31, 1981, Transit entered a reinsurance agreement¹ with undisclosed underwriters who are members of Lloyd's of London (London reinsurer's).² Pursuant to that agreement, the London reinsurer's agreed to accept 95% of certain losses (and defense costs) insured by Transit; Transit retained the other 5% risk and thus spread 95% of the risk of loss to the London reinsurer's. In return for acceptance of 95% of the risk, the London reinsurer's received a portion of the premiums Transit received.

Under Article XI of the reinsurance agreement, the London reinsurers "had an opportunity to be associated with Transit, at the London reinsurer's expense, in the defense of any claim or suit or proceeding involving this reinsurance. Transit will cooperate in every respect in the defense or control of such claim, suit or proceeding."³

An addendum to the reinsurance agreement provided in part:

ARTICLE VI

CLAIMS

. . . . .

So far as claims or circumstances likely to give rise to a claim greater than $10,000 are concerned all papers and files in connection therewith shall be forwarded to the London reinsurers and Transit and the Agent shall cooperate with and assist the London reinsurers in the defence or control of any claim or suit.

. . . . .

In respect to all claims arising under this Agreement —

The London reinsurers shall pay their proportion of all losses and all loss adjustment expenses incurred in connection with the investigation, adjustment, appraisal, or defence (including Extra Contractual Liability) of all claims under policies reinsured hereunder (other than office expenses of the salaried employees of Transit and/or Agent); and further, the London reinsurers shall receive their proportion of all recoveries of such losses and/or loss adjustment expenses.

At some point thereafter, Transit hired Marinco, Inc. ("Marinco") as its agent. Marinco was given authority to rate and issue policies. Marinco also handled claims for Transit. Transit insured Garden City, Kansas.

In early 1983, Vickie Morales filed suit against Garden City. Prior to being retained, in a letter dated May 5, 1983, Turner & Boisseau was informed that Marinco "is not an insurer but is the issuer of certain insurance policies and the authorized representative of the companies providing the insurance." In a letter dated May 13, 1983, Turner & Boisseau was retained by Marinco to defend Garden City in the Morales case. That letter also informed Turner & Boisseau that Marinco was not the insurer and that the insurance policy was issued through Transit. On May 4, 1984, on behalf of Garden City, Turner & Boisseau filed answers to interrogatories in the Morales case, which included a copy of the Transit insurance policy itself.

Prior to December 28, 1983, Turner & Boisseau was retained to defend the City of Hutchinson in the Savard case. On December 28, 1983, this retention was confirmed by a letter from Marinco. This letter once again informed Turner & Boisseau that Marinco "is not an insurer, but is the issuer of certain insurance policies and the authorized representative of the companies providing that insurance." The letter also states that "Hutchinson, Kansas is insured through Transit."

On April 25, 1984, Turner & Boisseau was notified that supervision of the Morales case was being transferred from Marinco to Caronia Corporation in Houston, Texas. On May 14, 1984, Joseph R. Ebbert, an attorney with Turner & Boisseau, wrote to Randall Brent of Caronia Corporation recognizing Caronia was "presently monitoring the above captioned file ..."

In May 1984, representatives of London reinsurer's contacted Thomas Wilson of the law firm Wilson, Elser, Moskowitz, Edelman and Dicker (Wilson). London reinsurer's expressed concern about the way claims on reinsured policies were being handled by Marinco. Specifically, London reinsurer's was concerned about the underwriting capabilities of Marinco. The reinsurers did not think that Marinco was doing a good job of underwriting and suspected that the claims and reserves were not being handled in a satisfactory manner.

By May 29, 1984, Wilson had been hired by London reinsurers to generally investigate Marinco's management of the insurance. This included travelling to Marinco's offices in San Antonio, Texas to review claim files. In July, 1984, Richard Klein of the Wilson law firm, headed a team which conducted the audit of claim files at Marinco. At approximately the same time, Transit Casualty was conducting its own audit of the files at both Marinco and Caronia. The audit consisted of reviewing a random sample of claim files.

Thomas Wilson of Wilson, along with Marshall Rattner, owner of Marshall Adjusting Corporation, also conducted an examination of Transit policy files located at Marinco in San Antonio, Texas.

As a result of the audits conducted by Transit and defendants, both the London reinsurers and Transit concluded that they no longer had confidence in Marinco's ability. Faced with this situation, London reinsurers desired to make certain that claim files and policy files were preserved and that Marinco was removed from involvement. The defendants were assigned the task of negotiating the transfer of claims files and policy files from Marinco.

Transit authorized the defendants to assume custody and control of the files from both Marinco and Caronia. The defendants received both oral and written authority to assume custody of the files.

In November 1984, the defendants began receiving files from Marinco and Caronia. Turner & Boisseau was notified by a letter dated November 27, 1984, that Marshall Adjusting Corporation was assuming supervision of the Savard file "at the instruction of the insurer." Turner & Boisseau was notified by a letter dated March 12, 1985, that "at the instruction of the insurer, Wilson has now assumed all further responsibility for the supervision of the Morales case to its conclusion." Turner & Boisseau was apparently aware that the defendants made reports to "London" and sought authority for settlement of cases from "London."

Prior to Wilson assuming supervision of Morales, Turner & Boisseau submitted interim billings and received payments for fees and expenses through Marinco, Inc. in the amount of $43,037.02. Turner & Boisseau submitted interim billings and was paid $23,061.92 for fees and expenses in the Morales case after Wilson assumed supervision. Turner & Boisseau also submitted interim billings and was paid for $2,616.93 for fees and expenses in the Savard case after Marshall assumed supervision. These fees paid to Turner & Boisseau were paid 95% by drawing down a letter of credit (apparently established by the London reinsurers) and 5% from an escrow account...