Virginia Sur. Co. v. Lee

• Citation: 55 Tenn.App. 501,402 S.W.2d 714
• Parties: VIRGINIA SURETY COMPANY, Inc., Plaintiff-in-Error, v. Walter LEE, d/b/a Walter Lee Insurance Agency, Defendant-in-Error.
• Decision Date: 16 July 1964
• Court: Tennessee Court of Appeals

Page 714

402 S.W.2d 714

55 Tenn.App. 501

VIRGINIA SURETY COMPANY, Inc., Plaintiff-in-Error, v. Walter LEE, d/b/a Walter Lee Insurance Agency, Defendant-in-Error.

Court of Appeals of Tennessee, Western Section.

July 16, 1964.

Certiorari Denied by Supreme Court Oct. 5, 1964.

Irving M. Strauch, Strauch & Jones, Memphis, for plaintiff in error.

Crawford McDonald, W. Percy McDonald, McDonald, Kuhn, McDonald, Crenshaw & Smith, Memphis, for defendant in error.

CARNEY, Judge.

When this case was argued Judge J. B. Avery, Sr. was ill and Honorable Hearn Spragins, Esq., of the Madison County Bar sat as Special Judge in his place.

The plaintiff, Virginia Surety Company, Inc., is a long-haul liability insurance company incorporated in the State of Virginia and qualified to do business in the State of Tennessee. Plaintiff sued the defendant, Walter Lee, b/d/a Walter Lee Insurance Agency, one of its general agents in Memphis, Tennessee, for damages arising out of an oral binder of insurance made by the defendant, Walter Lee, to one Roy Bolick of Keiser, Arkansas.

On May 31, 1961, the oral binder was given over the telephone by Walter Lee to Oren Ward of Hull Dobbs Insurance Agency in Memphis, Tennessee, covering Roy Bolick for public liability against bodily injury of $50,000 and $100,000 and property damage of $25,000. On June 7, 1961, a tractor-trailer driven by Roy Bolick collided with a train in southeast Missouri. Roy Bolick was killed in the accident. Plaintiff Virginia Surety Company, Inc. accepted coverage under the oral binder and had paid over $26,000 in expenses and settlement of claims arising out of the accident at the time of trial of this case below. Other claims were still pending.

Plaintiff sought to recover $75,000 from the defendant. The declaration was in two counts: Count No. 1 averred a breach of contract: (1) That the defendant wrote a contract in Arkansas in violation of his agency contract; and (2) that the defendant failed to comply with the terms of his agency contract by failing to report the oral binder of insurance to the plaintiff's home office until after the accident had occurred.

Count No. 2 averred that the defendant, Walter Lee, was guilty of negligence in failing to ascertain the residence of the insured, Roy Bolick, before issuing the binder of insurance; that he negligently failed to obtain a written application for insurance from Roy Bolick; that he negligently failed to make a report of the issuance of the oral binder; and that he negligently failed to ascertain that another agent of Virginia Surety Company, Inc. had let prior insurance of Roy Bolick expire and had deliberately failed to renew the same.

The case was tried before the Circuit Judge without a jury. The Trial Judge found all issues in favor of the defendant and rendered judgment against the plaintiff. The plaintiff has appealed to this court and assigned error.

Of course, the case comes to this court for trial de novo accompanied by a presumption of correctness. T.C.A. Section 27--303. Unless the evidence preponderates against the findings of the Trial Judge the judgment of the court below must be affirmed. Life & Casualty Insurance Co. of Tennessee v. Vertrees, 44 Tenn.App. 672, 318 S.W.2d 559 (1958); Roberts v. Ray (1959), 45 Tenn.App. 280, 322 S.W.2d 435.

Mr. Roy Bolick of Keiser, Arkansas, was a trucker hauling frozen produce over the country. He had had a policy of liability insurance with Virginia Surety Company issued by Surplus Excess Underwriters, Inc. of Conway, Arkansas. This policy was issued on May 13, 1960, and expired on May 13, 1961. A Mr. Novak was the president or manager of Surplus Excess Underwriters, Inc. and is no longer in business. At the time of the trial Central Underwriter, Inc. of Conway, Arkansas, had taken over the business of Surplus Excess Underwriters, Inc. and its president, Lawrence MacNicholas, testified as a witness for the plaintiff.

Mr. Bolick had had a number of other policies with other companies most of which had been cancelled or discontinued at the time he applied for the insurance coverage in this litigation. On May 31, 1961, he applied to Mr. Ward of Hull Dobbs Insurance Agency in Memphis for liability coverage on his equipment which consisted of two tractor-trailer outfits. Mr. Ward was unable to write Mr. Bolick the coverage he desired and he called Mr. Lee as agent for Virginia Surety Company, Inc. to broker the business through him.

Mr. Ward explained to Mr. Lee that Bolick had had prior coverage with the plaintiff and that his policy had expired May 13, 1961. Mr. Lee asked if there had been any cancellation by Virginia Surety Company and whether there had been any changes, from an underwriting standpoint, or losses since the last coverage which ended on May 13, 1961. He was advised by Mr. Ward that there had been no changes or losses.

Mr. Lee did not ask where Mr. Bolick lived and did not ask the name of the agent who wrote the policy which expired on May 13, 1961. He was informed that the reason Mr. Bolick did not renew the policy which expired on May 13, 1961, was that he had had a personality clash or disagreement with such agent. Mr. Lee issued by telephone the oral binder of coverage on May 13, 1961, and mailed an application blank to Mr. Ward to be filled in with information for the motor and serial numbers of the two tractor-trailer units being covered. The application was to be signed by Mr. Bolick.

On June 7, 1961, Mr. Bolick, while driving one of the tractor-trailer units insured under the oral binder, collided with a train near Haiti, Missouri, and was killed. A railroad employee named Ham was injured very severely being unconscious at the time of the trial. On June 8, 1961, after he heard of the accident Mr. Lee called the home office of Virginia Surety Company and reported both the oral binder and the accident.

The written application was never signed by Mr. Bolick and the plaintiff company never actually issued the insurance policy pursuant to the binder. However, the plaintiff accepted liability coverage, investigated the accident and settled some of the claims including that of Mr. Ham. At the time of the trial they had paid out approximately $26,000 in expenses and settlement of claims.

Mr. Lee explained that he assumed that Mr. Bolick was a resident of Tennessee since Mr. Ward was calling for him from his office in Memphis, Tennessee. The plaintiff company continued to accept renewal contracts from Mr. Lee after June 8, 1961, up until February, 1962, but accepted no new business in the interim. It terminated all business relationships with Mr. Lee in February, 1962.

Plaintiff contends that the defendant, Walter Lee, violated his contract by executing a contract of insurance in Arkansas in violation of the express terms of the agency agreement. The contract provides as follows: 'The Company hereby grants to the agent on a non-exclusive basis the following authority with respect to business in such territory as...