Wells Petroleum Co. v. Fidelity-Phenix Fire Ins. Co.
| Decision Date | 10 June 1954 |
| Docket Number | No. 51C1622.,51C1622. |
| Citation | 121 F. Supp. 739 |
| Parties | WELLS PETROLEUM CO. v. FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK et al. |
| Court | U.S. District Court — Northern District of Illinois |
Ruff & Grotefeld, Chicago, Ill., for plaintiff.
Heineke & Conklin, Chicago, Ill., for defendants Fidelity-Phenix Fire Ins. Co. and Nat. Fire Ins. Co. and Provident Fire Ins. Co.
Heth, Lister & Flynn, Chicago, Ill., for Equitable Fire & Marine Ins. Co.
LA BUY, District Judge.
This is an action upon policies of fire insurance issued by the defendants to the plaintiff seeking the recovery of damages for loss by fire on November 9, 1950, to a certain building owned by the plaintiff and described in defendants' policies of insurance. Copies of the policies are attached to plaintiff's complaint, and it is alleged in the complaint that they were in force and effect on November 9, 1950, the date of the fire. Each of the defendants have filed a separate answer to the plaintiff's complaint and therein denied that their respective policies of insurance were in force and effect on November 9, 1950, the date of the fire, and affirmatively allege that said policies of insurance were cancelled on August 3, 1950, by virtue of replacement and substitution of the insurance by the plaintiff.
The plaintiff is a corporation organized under the laws of the State of Illinois, with its principal office and place of business located in the State of Illinois; and each of the defendants is a corporation organized under the laws of States other than the State of Illinois, and each is authorized to do business in the State of Illinois.
The amount in controversy, as between the plaintiff and each of the defendants, is in excess of the sum of $3,000, exclusive of interest and costs.
Now at the close of all of the evidence offered in the case on behalf of the plaintiff, each of the defendants has filed a motion for directed verdict. This necessitates a summary of the facts as they appear from the plaintiff's evidence and a review of the law which, in the opinion of the Court, is applicable thereto.
The property owned by the plaintiff and described in the defendants' policies of insurance was located at the junction of Highway 66 and 66A in Will County, Illinois, and consisted of a hollow concrete block and frame building used for automobile filling station and restaurant purposes.
In September of 1946 the plaintiff appointed B. E. Baal to act as its insurance broker in the placing of fire and extended coverage insurance upon the property involved in this suit. In this appointment Baal was instructed and empowered by the plaintiff to obtain a gross amount of insurance, approximately $32,000, upon the property and to do all that was necessary to keep the property insured in that amount. Baal was not instructed or limited in any manner as to the identity of the companies issuing such insurance, nor as to the specific amount of insurance to be placed in any particular company.
Baal was, and is, a licensed insurance broker in the State of Illinois and in 1946, and for some time prior thereto, he officed in the office of Homer Gwinn & Company, a general insurance agency licensed by the State of Illinois. Pursuant to the direction and authority given to him by the plaintiff, he placed the insurance coverage requested through the Homer Gwinn & Company agency in six companies, including the four defendant companies, as follows:
Company Policy No. Amount
Equitable Fire
& Marine 209558 $ 7,150.00
Home Insurance 6874 6,300.00
Fidelity-Phenix Fire OCWDB 6827 4,200.00
National Fire OC 282150 5,000.00
Provident Fire BK 22542 5,000.00
Rhode Island 15-25016 3,150.00
__________
$30,800.00
There was a small additional amount of coverage placed in certain of these companies covering shrubbery and the like, not material here, but which brought the total coverage to the approximate figure of $32,000.
Baal continued his office arrangement with Homer Gwinn & Company until June 23, 1950, when, as the result of a disagreement not material here between him and Mr. Homer Gwinn of the agency, he left that agency and moved his office to the American Insurance Agency, Inc. Thereafter, on August 7, 1950, Baal addressed a letter to Homer Gwinn & Company in which he stated that he had replaced all business which he had written through the Homer Gwinn & Company agency as of August 3, 1950, and that the policies would be forwarded through the clearing house for cancellation on a prorata basis. The pertinent portion of this letter is as follows:
"Furthermore, as I construe your threat of serving cancellation notices to my clients, tantamount to a notice to me that you will not further service my business my only recourse, to protect my business and safeguard the interest of my clients, is to pick up all policies written by or through your agency and return them to you for cancellation prorata as of August 3, 1950, the day on which I received your notice and on which day I arranged for replacement coverage." (Emphasis supplied.)
On August 15, 1950, the Homer Gwinn & Company agency replied to Baal's letter of August 7, 1950, by stating that should Baal elect to cancel all business written through the agency, as stated in his letter, the short rate basis of premium return would be insisted upon. Baal's reply to the Homer Gwinn & Company letter of August 15, 1950, on the following day, August 16, 1950, stated, in part, as follows:
(Emphasis supplied.)
As appears from this exchange of correspondence, Baal did on August 3, 1950, replace all of the insurance which he had placed through the Homer Gwinn & Company agency with policies of insurance placed in other companies through the American Insurance Agency, Inc. With specific reference to the policies obtained for the plaintiff through the Homer Gwinn & Company agency, as above set forth, the following policies were so placed in substitution for them:
Company Policy No. Amount
Birmingham Fire 2938 $ 5,000.00
Columbia Fire OC 959434 6,000.00
Commercial Union OC 20590 5,000.00
Detroit Fire
& Marine OC 908456 5,000.00
Pearl Assurance OC 1138882 5,000.00
Reliance 20409 5,000.00
__________
$31,000.00
It will be noted that these policies were written in a gross amount approximately the same as the policies which they were intended to replace. Further, they were written for the unexpired term of those policies and at the identical rate of those policies, it being the admitted intention of Baal to effect this replacement and substitution without charge to his client. The only manner in which this could be effected would be by obtaining cancellation of the original policies upon a prorata basis; that is, by effecting a full return of the unearned premium to be applied upon the premium charged for the new policies.
The dispute reflected in the above-described exchange of correspondence between Baal and the Homer Gwinn & Company agency with reference to the basis of determining the return premium upon the cancelled policies continued through and beyond the date of the fire here in question, November 9, 1950. In this dispute Mr. Baal insisted that the return premiums should be determined upon a prorata basis and Mr. Homer Gwinn insisted that it should be determined upon a short rate basis. When it became evident that the dispute could not be resolved, Mr. Baal on or about November 24, 1950, determined to return the cancelled policies direct to the various companies with the same request that the return premium be figured upon a prorata basis as of August 3, 1950. In this connection, he prepared separate lists of the various policies issued in the several companies, including the defendant companies, and upon the lists submitted to the defendant companies there was inserted a note pertaining to the policies here in question as follows:
"Total loss main building occurred on November 9, 1950, which loss is admitted and being adjusted by replacement carriers."
Each of the four defendant companies refused to accede to Baal's demand that the return premium upon the cancelled policies be figured upon a prorata basis rather than upon a short rate basis, as provided by the terms of the policies themselves. The Home Insurance Company which, as of the date of the fire, occupied an identical position with that of the four defendant companies did, however, accede to this demand and paid to the plaintiff through its broker, Baal, a return premium figured upon a prorata basis as of August 3, 1950. The Rhode Island Insurance Company had gone into receivership prior to August 3, 1950, and the claim for return premium figured upon a prorata basis as of August 3, 1950, was filed on behalf of the plaintiff by Baal with the receiver. It is significant that the plaintiff treats both The Home Insurance Company policy and the Rhode Island policy as not having been in force and effect on November 9, 1950, the date of the fire, although, as indicated, both of those companies occupied an identical position with that of the defendant companies on the date of the fire.
Following the occurrence of the fire the replacement companies, above listed, assigned the loss to the Underwriters Adjusting...
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