Vina v. Jefferson Ins. Co. of New York

• Decision Date: 21 September 1988
• Docket Number: No. 880132-CA,880132-CA
• Parties: Tony VINA, Plaintiff and Appellant, v. JEFFERSON INSURANCE COMPANY OF NEW YORK, a corporation, and Transwestern General Agency, a corporation, Defendants and Respondents. JEFFERSON INSURANCE COMPANY OF NEW YORK, Third-Party Plaintiff, v. Jon DUNN, Third-Party Defendant and Respondent.
• Court: Utah Court of Appeals

Page 581

761 P.2d 581

Tony VINA, Plaintiff and Appellant, v. JEFFERSON INSURANCE COMPANY OF NEW YORK, a corporation, and Transwestern General Agency, a corporation,

Defendants and Respondents.

JEFFERSON INSURANCE COMPANY OF NEW YORK, Third-Party Plaintiff, v. Jon DUNN, Third-Party Defendant and Respondent.

No. 880132-CA.

Court of Appeals of Utah.

Sept. 21, 1988.

David E. Yocum, Salt Lake City, for plaintiff and appellant.

David W. Slagle, Salt Lake City, for defendant and respondent Jefferson Ins.

Paul N. Cotro-Manes, Salt Lake City, for defendant and respondent Transwestern General Agency.

H. Wayne Wadsworth (argued), Thomas P. Melloy, Watkiss & Campbell, Salt Lake City, for third-party defendant and respondent Dunn.

Before GREENWOOD, BILLINGS and DAVIDSON, JJ.

OPINION

GREENWOOD, Judge:

Plaintiff, Tony Vina, appeals the trial court's judgment of no cause of action entered in his lawsuit against Jefferson Insurance Company of New York (Jefferson) and Transwestern General Agency (Transwestern). Vina claims Transwestern improperly cancelled his insurance policy without his knowledge or consent and should pay his insurance claim for the losses he sustained after cancellation of the policy. Vina further contends the trial court erred in ruling that his motion to amend his complaint to include Dunn as a defendant was not timely and did not relate back to the date of the original complaint.

In 1977, Vina subleased a tavern to Beverly Pencille. Pencille agreed to insure Vina's equipment on the premises, including electronic games, pool tables, juke boxes, cigarette machines, restaurant and bar equipment. In the spring of 1979, Vina and Pencille met with Jon Dunn, a licensed insurance agent and broker, to discuss procuring insurance for the tavern. Dunn worked through an independent insurance agency, Walter Sondrup Insurance Agency, and had previously secured insurance for Vina. Dunn met with Vina and Pencille at the tavern and discussed with them the type and amount of insurance coverage desired. Dunn was informed that the insurance policy was to cover the tavern as well as Vina's equipment. Dunn obtained a quote for insuring the tavern from Transwestern and communicated the quote to Pencille and Vina. After receiving Vina and Pencille's authorization to acquire the insurance, Dunn filled out a Transwestern questionnaire and incorrectly indicated that the insured entity was a partnership. Vina and Pencille never saw the questionnaire.

Subsequently, the policy was issued through Transwestern with Jefferson as the insuring company. Both Pencille and Vina received a copy of the policy which stated that the named insured was "Beverly Pencille and Tony Vina, d/b/a Bevie-Lee's Friendly Tavern." On the policy, a box was checked indicating that the insured was a corporation. Neither Pencille nor Vina complained that the policy implied that the parties were operating as a corporation or joint venture rather than as lessor and lessee. Shortly after the policy was issued, Pencille, with Vina's knowledge and consent, contacted Dunn to reduce the amount of coverage. Dunn met with Pencille at the tavern and Pencille signed a change endorsement reducing the amount of coverage. Vina did not sign the change endorsement but received a copy.

In early November 1979, Pencille informed Dunn that she was going to sell the business or cease operation on November 28, 1979 when the lease expired and wanted to cancel the insurance policy as of that date. On November 15, 1979, Dunn met Pencille at the tavern, without Vina's knowledge or consent, and Pencille signed a form cancelling the insurance coverage. Vina did not sign or receive a copy of the cancellation form and did not know that the insurance had been cancelled.

Pencille, however, did not close the tavern in November 1979. During December 1979, Dunn drove by the tavern and observed that it had not closed. On December 31, 1979, the tavern was fire-bombed and the contents, including Vina's games and equipment, suffered extensive damage. Vina contacted Dunn, requested investigation and coverage for the losses incurred, and was notified that the insurance on the tavern had been cancelled effective November 28, 1979. After Jefferson refused to pay his claim, Vina filed a complaint with the Utah State Insurance Commission. Following a hearing before the Commission in September of 1980, the Commission found that Vina's insurance coverage could not be effectively cancelled without proper notice of the cancellation to Vina and ordered Jefferson to pay Vina's claim. Jefferson appealed to the Utah Supreme Court. Before the appeal was heard, Vina commenced this action against Jefferson and Transwestern and the pending appeal to the Utah Supreme Court was dismissed.

On March 30, 1982, Jefferson filed a third-party complaint against Dunn, claiming that in the event of judgment against Jefferson, Jefferson was entitled to indemnification from Dunn. On June 24, 1985, the court entered an order requiring all motions to amend the pleadings to be heard by August 30, 1985. On September 3, 1985, Vina filed a motion to amend his complaint to add Dunn as a defendant. The court heard Vina's motion to amend at the commencement of trial on October 1, 1985. The court took the motion under advisement, and, at the conclusion of the trial, denied the motion to amend.

The court entered findings of fact and conclusions of law stating that Dunn was not an agent of Jefferson or Transwestern but was an agent of Vina and Pencille for purposes of obtaining insurance coverage. The court concluded that Jefferson and Transwestern were entitled to rely on Dunn's representation that Pencille had the authority and power to cancel the insurance policy without further signature of or notice to Vina. Accordingly, the court ruled that the insurance policy was effectively cancelled and Vina's losses were not covered.

I

On appeal, Vina contends the trial court erred in ruling that Dunn was not an agent of Jefferson and Transwestern in writing or cancelling Vina's insurance policy coverage. According to Vina, Dunn was the agent of Jefferson and Transwestern and his negligence in misinforming Transwestern that Vina and Pencille were a partnership and in cancelling the policy without Vina's knowledge or consent should be attributed to Jefferson and Transwestern. We examine Vina's argument under both statutory and general agency law.

Examining first applicable statutes, we review the trial court's statutory interpretation as a question of law. Gonzales v. Morris, 610 P.2d 1285, 1286 (Utah 1980). Utah Code Ann. § 31-17-1 (1985) ¹ defines an agent as:

any person authorized by an insurer and on its behalf to solicit applications for insurance or to effectuate and countersign insurance contracts or to collect premiums on insurance so applied for or effectuated.

Utah Code Ann. § 31-17-2 (1985) defines a broker as:

(1) [A]ny person who, on behalf of the insured, as an independent contractor for compensation and not acting as an agent of the insurer, solicits, negotiates, or procures insurance or reinsurance or in any manner aids therein, for insureds or prospective insureds other than himself. A broker is not an agent or other representative of an insurer and does not have power, by his own act, to bind the insurers upon any risk or with reference to any contract.

(2) If a person is licensed to act as an insurance broker and as an insurance agent, he shall be deemed to be acting as an insurance agent in the transaction of insurance placed with those insurers for whom an appointment has been filed with the commissioner in accordance with section 31-17-10 and which is then in force.

Dunn does not qualify under the definition of an insurance agent provided in section 31-17-1 because he was not specifically authorized to solicit insurance or otherwise act on behalf of Jefferson or Transwestern. Dunn was an independent agent working through the Walter Sondrup Insurance Agency. Dunn testified that he contacted Transwestern because the insurance companies for whom he was a licensed agent did not write the kind of policy Vina and Pencille wanted. Dunn had no authority from Transwestern to bind insurance coverage or to issue a policy, but could only do so with Transwestern's express permission on a case by case basis. Dunn was clearly acting as an insurance broker as defined in section 31-17-2(1), as he was an independent contractor acting for a prospective insured and not for an insurer.

Section 31-17-2(2) provides that one may be licensed and act as both an insurance agent and an insurance broker, but is only deemed to be acting as an insurance agent when an appointment has been filed by an insurer under section 31-17-10. Dunn had not been appointed as an insurance agent by Jefferson or Transwestern and, therefore, under section 31-17-2(2) he was not an insurance agent for either company.

As a result, in these circumstances, the court correctly found that under the controlling statutes, Dunn was not acting as an agent of Transwestern or Jefferson, but was a broker acting as the agent of Vina and Pencille.

We must also consider whether Dunn was the agent of Jefferson and Transwestern or of Vina under general agency principles, because the insurance code's purpose is "primarily for the purpose of regulating insurance companies, agents, brokers, solicitors and adjusters" and does not supplant ordinary legal principles of agency. Farrington v. Granite State Fire Ins. Co., 120 Utah2d 109, 232 P.2d 754, 756 (1951). The question of whether an insurance agent is the agent of the insurer or the insured is a question of fact. 3 Couch on Insurance 2d § 25:106 (1984). We defer to the trial court's findings of fact unless they are clearly erroneous. State v. Walker, 743 P.2d 191, 193 (Utah 1987).

The trial court found that Dunn was not an agent of Jefferson or Transwestern, but was the agent of Vina in procuring insurance coverage....