U.S. Fidelity & Guar. Co. v. Hollerich & Walgenbach Co., 73--72
| Decision Date | 18 September 1974 |
| Docket Number | No. 73--72,73--72 |
| Citation | 319 N.E.2d 280,22 Ill.App.3d 156 |
| Parties | UNITED STATES FIDELITY AND GUARANTY COMPANY, a corporation, Plaintiff and Counter-defendant-Appellee, v. HOLLERICH AND WALGENBACH CO., a corporation, Defendant and Counter- plaintiff- Appellant. HOLLERICH AND WALGENBACH CO., a corporation, Plaintiff-Appellant, v. Walter DUNCAN et al., Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
Kevin D. Kelly, LaSalle, Louis E. Olivero, Peru, for plaintiff-appellant.
John A. Berry, Ottawa, Anthony C. Raccuglia, Peru, for defendants-appellees.
This is an appeal from various orders of the Circuit Court of LaSalle County entered in a jury trial of consolidated causes of action wherein the principal parties were United States Fidelity and Guaranty Company (Fidelity), Hollerich and Walgenbach Co. (H & W), a contractor engaged in asphalt road construction, and the Duncan Insurance Agency (Duncan), an agent of Fidelity.
Basic facts gathered from a voluminous record disclose that in August 1963 an officer of H & W contacted Duncan relative to the acquisition of insurance coverage and indemnity bonds necessary for a heavy road construction company. Thereafter, H & W purchased various types of insurance, including fire, floater, general liability and workmen's compensation policies, and from time to time obtained indemnity bonds guaranteeing its performance of contracts with municipalities, counties and the State of Illinois. All of such bonds and policies were obtained from Fidelity with Duncan acting as agent.
Some of the policies had a fixed annual premium. The workmen's compensation and general liability policies, however, required periodic audits of the number of employees, their wages and other factors, such as type of work, in order to determine the amount of annual premium due in excess of deposits made at the beginning of the policy terms. In connection therewith, each of the polices in question provided for an interim audit and the adjustment and payment of premiums at the end of the first six months of the policy term, and for a final audit, adjustment and payment of premiums at the close of the policy year. Bills for premiums were sent to Duncan as they became due or were determined, and, under the arrangement between Duncan and Fidelity, Duncan would pay Fidelity for all charges and premiums billed, whether or not they had as yet been collected from the insured. If it later turned out that Duncan was unable to make collection, the bill would be returned to Fidelity, which would reimburse Duncan and then attempt direct collection from the insured.
On December 29, 1965, H & W owed Duncan a balance of $4,510,84 in a running account maintained in Duncan's books. When such balance remained unpaid on February 3, 1966, Duncan, following up a telephone conversation, wrote H & W that if payment was not made by February 8, its only alternative would be to cause cancellation notices to be sent out on all policies. It should be noted that the policies involved gave the insurer the right to cancel on 10 days' notice without stating a reason. Payment was not made within the time limit set and cancellation notices were sent out on all policies. On February 11, 1966, however, the $4,510.84 was paid and the policies were reinstated. At this time, H & W's account with Duncan showed a credit balance of $38.00, the credit arising from a change in insured automobiles. Also about this time, according to witnesses for H & W, the latter started to complain to Duncan that errors and discrepancies in the computation of prior premiums had resulted in overcharges to H & W.
On March 21, 1966, Duncan received the interim audit on the policies for the period from August 26, 1965, to February 26, 1966, which showed an additional premium of $6,113.47 due for such period. Duncan paid this amount to Fidelity, debited the H & W account therefor, and, on April 5, 1966, billed H & W for $6,075.47, being the amount due as shown by the interim audit, less the $38.00 credit. According to its president, H & W had by this time made a determination that prior discrepancies and miscalculations had resulted in premium overcharges in excess of $12,000.00, and he advised Duncan that the April 5 bill would not be paid until the matters questioned had been resolved and adjusted. Duncan, the witness further testified, promised to look into the complaints and to discuss them with Fidelity, but did not again contact H & W with respect thereto. On April 26, 1966, Duncan sent notice to H & W that if the account was not paid by April 30, 1966, cancellation notices would be set out on all policies. Payment was not received and on May 9, 1966, at Duncan's request, Fidelity cancelled all policies.
In the meantime, on April 29, 1966, the final audit for the period from August 26, 1964, to August 26, 1965, was completed and showed additional premiums of $12,063.96 due for that period. This audit was also sent to Duncan, and was apparently received prior to the date of cancellation. Duncan, however, did not pay such amount to Fidelity, or charge it to the H & W account, or bill it to H & W or try to collect it, in the belief that an attempt to collect would be futile in light of the lack of success in collecting the $6,075.47 already billed. On May 9, 1966, Duncan returned both audit bills to Fidelity for direct collection from H & W, and entered a credit of $6,113.47 in its book account with H & W, since Fidelity was to undertake collection of premiums due on its policies. As was true in the earlier instance referred to, this left H & W with a credit of $38.00 so far shown on Duncan's books.
The present litigation was initiated on May 31, 1972, when Fidelity brought suit against H & W to recover $18,177.43, the total amount due under the two audits. (In the record, Fidelity conceded that, as a result of credits for unearned premiums and adjustments produced by a final audit, the Ad damnum could be reduced to $13,178.67). H & W filed a counterclaim, one count charging Fidelity with breach of contract and other counts charging slander and libel. In addition, H & W filed a separate action against Duncan for breach of contract. The actions were consolidated and at the conclusion of all of H & W's evidence (offered with respect to its defense in the principal action, in support of its counterclaim, and in the separate action against Duncan) various motions for directed verdicts were filed and considered by the court. As a result, verdicts were directed for Fidelity on H & W's counterclaim, and for Duncan in H & W's separate action for breach of contract. In the principal action, the court denied Fidelity's motion for a directed verdict in the amount of $8,389.32, stating that there were factual questions as to the amount owed, but allowed an alternative motion directing a verdict on the issue of liability and instructed the jury that the sole issue for its determination was the amount Fidelity was entitled to recover from H & W. Thereafter, the jury returned a verdict of $7,500.00 in favor of Fidelity, and, when post-trial relief was denied, H & W (hereinafter referred to as appellant) perfected this appeal. For the most part, the issues center on the rulings made on the motions for directed verdicts.
From appellant's brief, which apparently fails to recognize that Fidelity had an unfettered right to cancel the policies in question at any time, we interpret appellant's first contention to be that the trial court erred in the principal case when it directed a verdict for Fidelity on the issue of liability. Broadly speaking, it is appellant's theory that the evidence, viewed in its aspects most favorable to appellant, (Pedrick v. Peoria & Eastern Ry. Co., 37 Ill.2d 494, 229 N.E.2d 504), shows that it owed Fidelity no premiums, by reason of which it is contended that it was wrong to direct a verdict on the issue of liability and to submit the amount of damages to the jury. To arrive at the conclusion that the evidence shows no premiums were due to Fidelity, appellant rationalizes, in sequence, that Duncan was the agent of Fidelity for the purpose of collecting premiums on all policies; that the books of Duncan were therefore conclusive and controlling as to the amount of premiums due and owing by appellant from time to time; and that the books of Duncan showed nothing due and owing on May 9, 1966, the date the policies were cancelled and the insured-insurer relationship was terminated, inasmuch as Duncan's books showed a credit on that date for the $6,113.47 due and billed as the result of the interim audit, and since the $12,063.96 shown to be due by the final audit had neither been charged to appellant on Duncan's books nor billed to appellant.
When all of the evidence in the record is considered, particularly that which explains the basis for Duncan's system of accounting for Fidelity's premiums and shows the circumstances surrounding the entries upon which appellant's theory is based, it is our opinion that this contention is clearly unsound. The insurance contracts were between appellant and Fidelity, not appellant and Duncan. It is not denied that Fidelity extended coverage for the periods for which additional premiums were due, and there is no...
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