Twin City Fire Ins. Co. v. Philadelphia Life Ins. Co.

• Citation: 795 F.2d 1417
• Decision Date: 29 July 1986
• Docket Number: 85-3907,Nos. 85-3906,s. 85-3906
• Parties: TWIN CITY FIRE INSURANCE CO., Plaintiff-Appellee-Cross-Appellant, v. PHILADELPHIA LIFE INSURANCE CO., Defendant, and Rask & Associates, et al., Defendants-Appellants-Cross-Appellees. RASK & ASSOCIATES, et al., Third-Party Plaintiffs-Appellants, v. John L. GRIFFITH, et al., Third-Party Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1417

795 F.2d 1417

TWIN CITY FIRE INSURANCE CO., Plaintiff-Appellee-Cross-Appellant, v. PHILADELPHIA LIFE INSURANCE CO., Defendant, and Rask & Associates, et al., Defendants-Appellants-Cross-Appellees.

RASK & ASSOCIATES, et al., Third-Party Plaintiffs-Appellants, v. John L. GRIFFITH, et al., Third-Party Defendants-Appellees.

Nos. 85-3906, 85-3907.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 9, 1986.

Decided July 29, 1986.

Andrew R. Gardner, Richard S. Gleason, Stoel, Rives, Boley, Fraser & Wyse, John R. Faust and Mildred Carmack, Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for Twin City Fire Ins. Co.

Andrew Chenowith and Fred Kopatich, Allen, Kilmer, Schrader, Yazabeck & Chenowith, Portland, Or., for Rask & Associates, et al.

Appeal from the United States District Court for the District of Oregon.

Before ALARCON, REINHARDT and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge:

Lee M. Rask ("Rask") appeals from the district court's (a) entry of directed verdict in favor of Twin City Fire Insurance Co. ("Twin City") on Twin City's breach of contract claim; (b) entry of directed verdict in favor of John L. Griffith ("Griffith") and St. Paul Insurance Co. and St. Paul Risk Services, Inc. ("St. Paul") on Rask's claim for indemnity; (c) denial of Rask's motion for directed verdict in his favor on Twin City's contract, promissory estoppel, and negligence claims, and; (d) pretrial determination that Rask was precluded from raising, at trial, mistake and impossibility as defenses to Twin City's contract claim.

Twin City appeals from the district court's entry of summary judgment against it on its claim for attorney's fees against Philadelphia Life Insurance Co. ("Philadelphia Life").

We affirm in part and reverse in part.

I FACTS AND PRIOR PROCEEDINGS

In January 1982 Douglas Powell was severely injured in Oregon by a power line owned by Pacific Power & Light Co. ("Pacific"). Officials at Pacific believed the company faced a substantial liability and entered into settlement negotiations with Powell's attorney. Pacific was self-insured up to $1 million. Twin City was Pacific's excess liability carrier and was responsible for payment of any loss over $1 million on the Powell claim. Pacific contested the amount of damages but conceded liability for settlement purposes.

Sam Witters ("Witters") was Pacific's litigation coordinator. He had handled numerous claims for personal injuries, and had successfully settled many of them by negotiating "structured settlements" (settlements providing deferred payments over a number of years). Offering annuities in structured settlements allowed Pacific to avoid the present dollar cost of the full settlement and to take advantage of certain tax benefits. Accepting annuities permitted claimants to receive a steady income over a period of time and thereby achieve a measure of long-term security. Witters determined that Powell might be interested in accepting an annuity as part of a structured settlement of his claim.

In June 1982 Witters contacted appellant Rask to procure quotes on various types of annuities from insurance companies. Rask owned Rask & Associates, an insurance brokerage firm, and held brokerage licenses in four states including Oregon. Approximately thirty to thirty-five percent of Rask's business came from commissions earned in procuring annuities in structured settlements. Because of the increased use of annuities in structured settlements and the complexity of the annuity market, Rask had developed a profitable specialty in this field. Typically, a client would provide Rask with medical information and general guidelines on the type of annuity desired, and Rask would submit this information by phone to one or more insurance companies for a price quotation. The insurance company would provide a quote and Rask would, in turn, relay the information to the client. Because a client requesting an annuity quote was usually involved in negotiating a settlement, Rask was often asked to produce quotes on short notice. Rask typically obtained the quotes via telephone.

Witters had used Rask's services about a dozen times. In previous dealings, Witters would give Rask medical information and On six occasions Rask had used the services of John Griffith, an agent for St. Paul. Griffith was also a general agent for Philadelphia Life and had acquired an expertise in the annuity business. When Rask used Griffith's services, he would gather data from the client and pass that on to Griffith who would then obtain telephone quotes from an insurance company. Griffith would relay the information back to Rask who would provide the information by telephone to the client. When the annuity was issued, Griffith would receive a commission (typically four percent) from the annuity company issuing the annuity, and he and Rask would split the commission.

guidelines and Rask would provide quotes on prices by telephone. Witters had used the quotes in arranging several settlements, and the insurance companies always issued the annuities for the prices quoted by Rask. Rask never informed Witters that he should not rely on verbal price quotations.

When Witters asked Rask to provide annuity quotes for the Powell case, Rask contacted Griffith. Witters never dealt directly with Griffith, but Rask wrote Witters that he was using Griffith's services.

Between December 1982 and mid-February 1983 Witters requested several quotes from Rask in connection with the Powell case. Rask relayed the requests to Griffith and received from Griffith several quotes which he conveyed to Witters. Relying on the quotes, Witters made several offers to Powell's attorney. The largest offer discussed was a combination of cash and annuities which had an aggregate cost to Pacific and Twin City of $1.6 million. Powell's attorney rejected this and other offers. His objections, however, were primarily to the design of the annuities offered. Both Witters and Powell's attorney felt the parties were "close" to a settlement.

In February 1983 Witters asked Rask to obtain quotes on a deferred annuity which would cost around $200,000. Witters phoned Rask several times expressing a sense of urgency and stating that the quotes were needed immediately because he and Powell's attorney were close to reaching a settlement. Rask, in turn, telephoned Griffith several times over a period of two-to-four days asking Griffith to provide quotes for the type of annuity requested. Griffith informed Rask that he had attempted to obtain quotes from Philadelphia Life (which both Griffith and Rask believed offered the lowest rates on deferred annuities), but that Griffith had been unable to contact anyone at Philadelphia Life.

Finally, in a telephone conversation, Griffith provided Rask with a quote from Philadelphia Life for the annuity. Its price was approximately $200,000. Rask's and Griffith's versions of this conversation differed. Rask testified that Griffith informed him the quote had not been confirmed by Philadelphia Life, and that Griffith had calculated the quote "at his own office." Rask, however, recalled that Griffith stated he was "comfortable" with the number. Rask thought "comfortable" meant that Philadelphia Life would issue the annuity for the price quoted by Griffith. Griffith testified (by deposition excerpt) that Rask had made several "desperation calls" asking for a quote; that Rask had asked for a "ballpark figure," and Griffith had calculated an estimate, but that he had told Rask not to relay the figure to Witters until Philadelphia Life provided confirmation.

Rask then called Witters. Rask and Witters also provided conflicting accounts of their conversation. Rask testified he told Witters the quote had not been confirmed. However, Rask conceded he told Witters that he was "comfortable" with the quote and that Witters could rely on it (i.e., use the quote in the Powell settlement). Witters testified Rask had said that he had "difficulty" in getting the quote, but Witters did not recall the nature of the difficulty. Witters did recall that he told Rask he was in the middle of negotiations and when he asked Rask if he could rely on the quote Rask said "yes."

Shortly thereafter, Powell, through his attorney, and Pacific, through Witters, agreed on a settlement (the "February Settlement"). The combined cash and annuity cost of the settlement to Pacific and Twin City was approximately $1.77 million. The deferred annuity quoted by Rask was included in the settlement. Witters called Rask to tell him the case had been settled and that Pacific would purchase the deferred annuity. Rask stated he considered the annuity "sold" at that point, and told Griffith to order the annuity from Philadelphia Life. During the following week, Rask assured Witters he would obtain the annuity.

About one week later, Griffith told Rask that Philadelphia Life could not issue a deferred annuity in Oregon because it had not submitted a required form to Oregon's Insurance Commissioner. Griffith later told Rask that Philadelphia Life did not write deferred annuities. Rask relayed this to Witters and told him he would try to find another annuity "close" in cost and benefits. Witters, in turn, informed Powell's attorney that the annuity could not be obtained at the anticipated cost. Powell's attorney replied that Pacific and his client had entered into a binding settlement agreement and that he expected "them to stand behind the offer regardless of the cost." He also told Witters that Powell would consider other offers, "so long as [they] didn't diminish in any way the value of the annuity that was offered to Mr. Powell."

Thereafter, Rask and Witters attempted to find a comparable deferred annuity. Witters offered Powell several alternative annuity and cash packages, but Powell rejected them because they were not as favorable as that offered in the February Settlement. Finally, Witters offered and...