Watson v. Ocean Acc. & Guarantee Corp., Ltd.

• Decision Date: 23 July 1925
• Docket Number: Civil 2348
• Citation: 28 Ariz. 573,238 P. 338
• Parties: M. B. WATSON, S. J. JENNINGS and W. L. TROUT, Copartners Doing Business Under the Firm Name and Style of PIMA GINNING COMPANY, Appellants, v. THE OCEAN ACCIDENT AND GUARANTEE CORPORATION, LIMITED, a Corporation, Appellee
• Court: Arizona Supreme Court

238 P. 338

28 Ariz. 573

M. B. WATSON, S. J. JENNINGS and W. L. TROUT, Copartners Doing Business Under the Firm Name and Style of PIMA GINNING COMPANY, Appellants, v. THE OCEAN ACCIDENT AND GUARANTEE CORPORATION, LIMITED, a Corporation, Appellee

Civil No. 2348

Supreme Court of Arizona

July 23, 1925

APPEAL from a judgment of the Superior Court of the County of Maricopa. A. S. Gibbons, Judge. Judgment reversed and cause remanded.

Messrs Armstrong, Lewis & Kramer, for Appellants.

Mr Griffith R. Williams, Mr. J. Early Craig, and Mr. Frederick H. Griffith, for Appellee.

OPINION

LOCKWOOD, J.

M. B Watson, S. J. Jennings, and W. L. Trout, copartners as Pima Ginning Company, hereinafter called plaintiffs, were engaged in the cotton ginning business in Maricopa county during 1921 and 1922. At the time E. J. Bennitt & Company were local agents for a number of insurance companies, among them the Ocean Accident & Guarantee Corporation, Limited, a corporation, hereinafter called defendant, with power to place policies, collect the premiums and remit them, but not to issue or cancel policies. Frank Mosshammer was manager of the insurance department of Bennitt & Company, and conducted all matters involved in this action on behalf of Bennitt & Company and the defendant, except as hereinafter set forth. In July, 1921, plaintiffs took out a policy of indemnity insurance in Maryland Casualty Company through Mosshammer. The rule with policies of this nature in regard to payment of premium was that the policy-holders should make a deposit of One Hundred Dollars ($100) when the policy was issued, and thereafter pay premiums based on their pay-roll from time to time. The premium on the aforesaid policy was duly paid in accordance with this rule to Bennitt & Company. The policy would have expired in July, 1922.Some time before that date Mosshammer asked permission of plaintiffs to change the policy for one in defendant company. Plaintiffs were satisfied with the Maryland Casualty Company and at first objected, but, on Mosshammer's representation that they could get better service from defendant, they finally agreed to the change. The Maryland Casualty Company policy was then canceled and a new policy issued by defendant, the material conditions of which, so far as this suit is concerned, were as follows:

"B. This policy may be canceled at any time by either of the parties upon written notice to the other party stating when, not less than ten days thereafter, cancellation shall be effective."

"F. This employer, upon the occurrence of an accident, shall give immediate written notice thereof to the company with the fullest information obtainable. He shall give like notice with full particulars of any claim made on account of such accident. If thereafter suit or other proceeding is instituted against this employer, he shall immediately forward to the company every summons, notice, or other process served upon him. Nothing elsewhere contained in this policy shall relieve this employer of his obligations to the company with respect to notice as herein imposed upon him."

"The . . . company . . . agrees . . . to indemnify this employer against loss by reason of the liability imposed upon him by law for damages on account of such injuries to such of said employees . . . and to pay all costs taxed against this employer in any legal proceeding defended by the company . . . and all expenses incurred by the company for investigation, negotiation, and defense."

After the cancellation of the Maryland policy there was $100 credit to plaintiff on the books of Bennitt & Company, which was the amount necessary to be paid down on the new policy; the remainder of the premium accruing from time to time as it did under the old. Plaintiffs had instructed Mosshammer to deliver this policy to their attorneys, Armstrong, Lewis & Kramer, but he had failed to do so, and the policy was held by Bennitt & Company, without either the knowledge or consent of plaintiffs. In September, 1922, Mosshammer, having some personal difficulties with Mel Fickas, the general agent of defendant, without authority from or the knowledge of plaintiffs, ordered the policy issued by defendant to be canceled, on the ground of nonacceptance by plaintiffs and nonpayment of premium, and applied for another policy with the Maryland Casualty Company, which had not been issued at the time of the fire. On October 10th, 1922, a fire occurred at the plant of plaintiffs, in which W. H. Early and L. E. Minter, two of their employees, were injured. After the injury, and while the fire was still burning, Mosshammer came to the gin, and one of the plaintiffs stated to him that he supposed the insurance was all right, whereupon for the first time plaintiffs were informed of the cancellation of the policy issued by defendant. Mosshammer also told plaintiff of his application for a new policy in the Maryland Casualty Company, and that he thought the latter company would be liable. Plaintiffs, however, always felt that the liability, if any, was upon defendant. Apparently no further steps were taken in the matter until Early brought suit against plaintiffs for the injuries which he had received during the fire. Plaintiffs addressed a letter to defendant in care of Bennitt & Company and Mel Fickas, which reads in part as follows:

"You are hereby notified that on October 10th, 1922, the ginning plant of the undersigned, located in Phoenix, Arizona, was partly destroyed by fire and that L. E. Minter and W. H. Early, two of our employees covered by employers' liability insurance policy issued by you in our favor in July, 1922, and expiring July 21, 1923, in order to escape death in the fire, were forced to jump from the third story of the building to the ground. . . On the 23rd of December, 1922, Early filed suit against us, in accordance with copy of summons and complaint attached to the duplicate of this letter, which is being delivered to you by service upon Mr. Fickas, your general agent. We were served on December 28, 1922. We trust that you will undertake the defense of this suit, in accordance with the obligations of your policy. We should be very glad indeed to co-operate with you to furnish you with any additional information which you may desire.

"[Signed] PIMA GINNING COMPANY."

To this Fickas replied on January 15th in writing as follows:

"I herewith return the summons and complaint inclosed with your letter to me as agent of the Ocean Accident & Guarantee Corporation, Limited, date January 9, 1923, for the reason that the Ocean Accident & Guarantee Corporation, Limited, denies all liability."

Thereafter plaintiffs settled the suit of Early out...