239 Conn. 658 | Conn. | 1997
In these consolidated appeals, the issues arise out of the negligent failure of an insurance broker to include the names of mortgagees on a property own
In the first case, Docket No. 15489, the plaintiffs, Charles Hallas, Patapios Zervos and Henry Nyland
Dobosz appealed and Zervos and Nyland cross appealed from the judgment in Docket No. 15489; Hallas, Zervos and Nyland appealed from the judgment in Docket No. 15490. Although the appeals were properly filed in the Appellate Court, we transferred them to this court pursuant to Practice Book § 4023 and General Statutes § 51-199 (c). We reverse, in part, the judgment
I
As a result of the evidence presented in the consolidated trial of these two cases, the jury reasonably could have found the following facts. On November 3, 1989, Alves purchased for $300,000 a rooming house located at 331-335 Clinton Avenue in Bridgeport. Alves obtained most of his financing for this purchase from Lois Simpson, trustee, the wife of Hallas. Simpson secured her loan by two mortgages on the property in the amounts of $188,200 and $30,000, respectively. The vendors of the property, Zervos and Nyland, provided a third mortgage to Alves in the amount of $103,214.24. Hallas insisted that Alves obtain fire and extended coverage insurance on the property and spoke with Dobosz on the day of the closing for this purpose.
At the request of Hallas, Dobosz filled out an “Accord Commercial Insurance Application.” Because the requested coverage was excess lines insurance
From his conversation with Hallas, Dobosz understood that the beneficiaries of the insurance policy were
Nonetheless, upon receiving information that Scottsdale would provide insurance coverage, Dobosz issued a binder, effective November 3, 1989, until November 3,1990, identifying Scottsdale as the insurer and including as insured Alves as owner and the plaintiffs as mortgagees. Hallas received a copy of this binder, but Scottsdale did not receive one. The binder provided: “This binder is cancelled when replaced by a policy.” When Scottsdale subsequently delivered the Alves policy to Dobosz, Dobosz mailed it to Alves without reviewing its contents to ascertain whether it provided coverage for the mortgagees.
Alves did not have the money to pay the insurance premium. Hallas made a down payment in the amount of $2035 on Alves’ behalf; for the remainder of the premium, Dobosz assisted Alves, on November 3,1989, in entering into a financing arrangement with the Bank of Boston. The Bank of Boston undertook to pay directly to Continental that part of the premium that it had financed. The financing arrangement provided that, in the event of a default by Alves, the Bank of Boston had the right to cancel the Scottsdale policy. The Bank of Boston exercised this right when Alves failed to make his payments as they became due. On January 16, 1990, the Bank of Boston sent to Alves, Dobosz and Continental notices of its intent to cancel and, twenty days later, sent them notices of cancellation. No notices were sent to the mortgagees. On February 15, 1990, Continental mailed a copy of the cancellation notice to Glanvill, Scottsdale’s agent, and requested cancellation of the
Hallas learned that the insurance had been cancelled in May or June, 1990. After a conversation with Dobosz confirming that fact, Hallas also learned that the mortgagees had never been covered by the Scottsdale policy. Upon discovering these facts, Hallas informed the other plaintiffs that the property was uninsured. Hallas also tried, unsuccessfully, to obtain reinstatement of the policy. In July, 1990, after having taken assignment of the first and second mortgages from Simpson, Hallas procured from the Mt. Hawley Insurance Company (Mt. Hawley) other insurance covering his interest in the rooming house. The other two mortgagees did not obtain insurance.
On September 24,1990, the rooming house was extensively damaged by fire. Hallas filed a claim with Mt. Hawley to recover for his loss. That claim, filed in the United States District Court for the District of Connecticut, had not been resolved at the time that these cases were tried.
II
In the first case, Docket No. 15489, which was grounded on a claim of negligence, Dobosz appeals from the jury verdict finding him liable in damages to Hallas, and Zervos and Nyland cross appeal from the directed verdict against them. Because the issues raised on the appeal and the cross appeal have no relationship to each other, we will consider them separately.
A
In his appeal, Dobosz contends that the trial court improperly: (1) failed to instruct the jury that Hallas had actual notice of the cancellation of the Scottsdale policy; (2) failed to instruct the jury that it could find
Most of these claims of impropriety flow from the same basic premise. Dobosz does not contest, in any serious fashion, that he was negligent in failing to include the mortgagees in the application for coverage from Scottsdale and in failing to check the terms of the Scottsdale policy before he mailed it to Alves. He maintains, however, that the trial court improperly impaired his ability to show that his negligence was not the proximate cause of Hallas’ losses. He argues that he was relieved of all liability because of Hallas’ actual knowledge concerning the cancellation of the coverage provided by the Scottsdale insurance policy and Hallas’ subsequent timely procurement of substitute insurance from Mt. Hawley. Hallas contends, to the contrary, that the trial court’s rulings were proper because the Mt. Hawley policy was a collateral source of reimbursement for Hallas’ losses that was independent of Dobosz’ negligence and was therefore irrelevant to the damages that Dobosz had caused Hallas to suffer. We agree with neither of these propositions and, therefore, conclude that a new trial is required.
Dobosz’ claim for complete exoneration as a result of the outstanding Mt. Hawley policy is likewise flawed. But for Dobosz’ negligence, Hallas would have been a named mortgagee entitled to receive notice, and presumably would have received notice, of Alves’ failure to pay the insurance premium. Hallas would then have had a right to reinstate the policy upon paying the premium. General Statutes § 38a-324.
In Preston v. Keith, 217 Conn. 12, 584 A.2d 439 (1991), we recently restated the rules that govern a claim that the conduct of an injured plaintiff exonerates a tortfeasor, in whole or in part, from the consequences of his negligence. In the context of a personal injury action, we held that a person “ ‘who has been injured by the negligence of another must use reasonable care to promote recovery and prevent any aggravation or increase of the injuries.’ ” Id., 15, quoting Morro v. Brockett, 109 Conn. 87, 92, 145 A. 659 (1929); see also Sette v. Dakis, 133 Conn. 55, 60, 48 A.2d 271 (1946); Lange v. Hoyt, 114 Conn. 590, 595,159 A. 575 (1932). We observed that an assessment of whether a person has done what a
Applying Preston to the facts of this case, we agree with the trial court that Hallas’ knowledge and conduct did not automatically relieve Dobosz of all liability, but we disagree that the Mt. Hawley policy, which the trial court withdrew from the jury, bore no relevance whatsoever to the damages proximately flowing from Dobosz’ negligence. Had Hallas failed to procure any substitute fire insurance within a reasonable time after receiving notice of the cancellation of the Scottsdale policy, Dobosz could have argued, pursuant to the principles enunciated in Preston, that Hallas had improperly failed to take steps to mitigate damages and thus had diminished his right to recover from Dobosz. By the same token, the steps that Hallas did take to mitigate his damages, i.e., his procurement of the Mt. Hawley policy, also had the potential of diminishing his right of recovery. Preston demonstrates that: (1) Hallas is not entitled to a double recovery; and (2) Dobosz has the burden of proving the extent to which the Mt. Haw
We recognize that none of the parties brought Preston to the attention of the trial court and that the trial court, therefore, made no improper ruling relating thereto. Nonetheless, in the interests of fairness to all concerned, we are persuaded that it is appropriate to order a new trial to afford Dobosz the opportunity to prove that access to the Mt. Hawley policy mitigated Hallas’ losses in whole or in part.
B
In their cross appeal, Zervos and Nyland, the holders of two mortgages junior in interest to the mortgages held by Hallas, challenge the propriety of the verdict directed against them by the trial court. They contend that the trial court improperly ruled that they had failed to prove that the Alves property had sufficient value to cover their junior liens. We agree with the trial court’s judgment with regard to these claims.
In order to establish their claim for relief, Zervos and Nyland produced the following evidence. The amount of the Scottsdale policy was $325,000. At the time of the fire, Hallas’ mortgage liens amounted to $218,200, while their liens amounted to $115,255.94.
The right of mortgagees to recover rests, however, not only on the face amount of their lien interests but also on the value of the insured property. Zervos and Nyland concede that, as junior mortgagees, they can only recover to the extent that both (1) the amount of insurance coverage, and (2) the damage done to the insured premises, based on an accurate valuation of the destroyed property, exceed the amount secured by the senior mortgages.
For the purpose of establishing the value of the destroyed property, the three plaintiffs relied on the testimony of John Cotter, Jr., a licensed public adjuster, who prepared the figures in the claim that Hallas filed against Mt. Hawley. Cotter testified, on the basis of his inspection of the property after the fire, that its replacement cost value was $531,269.83. He was less precise about its actual cash value before the fire. He could not identify when he had last seen the property before it had burned, and acknowledged that the time gap might have been as much as four years. Although the property was used as a rooming house, Cotter did not know what income it had generated prior to the fire. He did not calculate the depreciation on the property because even a 50 percent depreciation factor would still have provided full coverage for Hallas. He ventured the opinion, nonetheless, that the property’s actual depreciation would have been in the neighborhood of 30 to 35 percent, an amount that would have protected the junior liens under the Scottsdale policy.
The trial court apparently concluded that this testimony was, with respect to Zervos and Nyland, so specu
Ill
In the second case, Docket No. 15490, which was grounded on a claim of breach of contract, the three plaintiffs appeal from the trial court’s direction of a verdict in favor of Scottsdale. The parties agree that the basis for the trial court’s ruling was the plaintiffs’ actual knowledge, some four months prior to the fire, that the Scottsdale policy had been cancelled. We conclude that the trial court’s judgment in favor of Scottsdale should be affirmed, but for reasons partially different from the conclusions reached by the trial court. See Bernstein v. Nemeyer, 213 Conn. 665, 669, 570 A.2d 164 (1990); Favorite v. Miller, 176 Conn. 310, 317, 407 A.2d 974 (1978).
In assigning dispositive weight to the plaintiffs’ actual knowledge of the cancellation of the Scottsdale policy, the trial court assumed that the plaintiffs were entitled to notice in the first place. The trial court relied on Johnston v. American Employers Ins. Co., 25 Conn. App. 95, 592 A.2d 975 (1991), but that case is inapposite because it involved the rights of the insureds named on the insurance policy.
Written notice of cancellation of a fire insurance policy must be given, pursuant to General Statutes § 38a-
“[T]he three elements required to show the existence of an agency relationship include: (1) a manifestation by the principal that the agent will act for him; (2) acceptance by the agent of the undertaking; and (3) an understanding between the parties that the principal will be in control of the undertaking. Restatement (Second), 1 Agency § 1, comment b (1958).” (Internal quotation marks omitted.) Gateway Co. v. DiNoia, 232 Conn. 223, 240, 654 A.2d 342 (1995); see also Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 184, 544 A.2d 1185 (1988); Botticello v. Stefanovicz, 177 Conn. 22, 25, 411 A.2d 16 (1979). “A principal is generally liable for the authorized acts of his agent; 1 Restatement (Second), Agency § 140, p. 349 (1958) . . . .” Gateway Co. v. DiNoia, supra, 240.
The record contains no evidence that, in issuing the binder listing the mortgagees, Dobosz was acting as an agent for Scottsdale. Scottsdale could not very well
Turning to the law of apparent authority, we similarly find nothing in the record to show that Dobosz was acting as an apparent agent of Scottsdale. “Apparent authority must be derived not from the acts of the agent but from the acts of his principal. [T]he acts of the principal must be such that (1) the principal held the agent out as possessing sufficient authority to embrace the act in question, or knowingly permitted him to act as having such authority, and (2) in consequence thereof the person dealing with the agent, acting in good faith, reasonably believed, under all the circumstances, that the agent had the necessary authority.” (Internal quotation marks omitted.) Lettieri v. American Savings Bank, 182 Conn. 1, 8, 437 A.2d 822 (1980); see also Beckenstein v. Potter & Carrier, Inc., supra, 191 Conn. 140; Fireman’s Fund Indemnity Co. v. Longshore Beach & Country Club, Inc., 127 Conn. 493, 497, 18
Without an agency relationship of any kind between Scottsdale and Dobosz, Scottsdale owed the plaintiffs
In the first case, Docket No. 15489, the judgment with respect to Hallas is reversed and the case is remanded for a new trial; the judgment with respect to the defendants as against Zervos and Nyland is affirmed. In the second case, Docket No. 15490, the judgment is affirmed.
In this opinion the other justices concurred.
Nyland died subsequent to filing this appeal. Griffith H. Trow, acting as fiduciary for Nyland’s estate, was substituted as a party plaintiff. We will continue to refer to Nyland, however, as a plaintiff.
Because the record discloses no difference in the interests of the defendants Boehmke and Dobosz, Inc., and Walter Dobosz in this litigation, we will refer to the defendants, in the singular, as Dobosz.
The plaintiffs’ complaint alleged that Dobosz had been negligent in: (1) representing that coverage had been obtained to reflect the plaintiffs’ interest as mortgagees, when such coverage had not been obtained; (2) issuing an insurance binder purporting to cover the plaintiffs’ interest as mortgagees and representing that he had the authority to issue such a binder, when he had no such authority; (3) preparing and processing a commercial insurance application that failed to notify the Scottsdale Insurance Company (Scottsdale) of the plaintiffs’ interest as mortgagees; and (4) delivering the Scottsdale policy to Alves without informing the plaintiffs that their interest as mortgagees was not protected by that policy.
The corrected amount is equal to the amount secured by the first mortgage originally held by Lois Simpson and subsequently assigned to Hallas. Evidently, the jury did not include in its award the $30,000 secured by the second mortgage also held by Simpson and subsequently assigned to Hallas.
The plaintiffs filed a nine count complaint. In the first four counts, Hallas alleged that Scottsdale’s failure to provide him with notice of the cancellation of the Alves policy; see General Statutes § 38a-170; imposed liability upon Scottsdale to pay for the fire loss because: (1) it was bound by the terms of the binder issued by its agent, Dobosz; (2) it was obligated to act in accordance with its implied covenant of good faith and fair dealing; (3) its conduct constituted unfair and deceptive acts or practices in the business of insurance; General Statutes §§ 38a-815 and 38a-816; and (4) its conduct constituted unfair or deceptive acts or practices in the conduct of trade or commerce; General Statutes § 42-110b et seq. Counts five through eight made the same allegations on behalf of Zervos and Nyland. Count nine sought reformation of the Alves insurance policy to include the interests of the plaintiff mortgagees.
The plaintiffs have not appealed from the directed verdict on counts three, four, seven, eight and nine.
“Excess lines” or “surplus lines” insurance is “specialized property or liability coverage provided by a nonadmitted insurer in instances where it is unavailable from insurers licensed by the state.” Barron’s Business Guide, Dictionary of Insurance Terms (3d Ed. 1995).
General Statutes § 38a-324 provides in relevant part: “Cancellation of commercial risk insurance policies. Notice requirements. Applicable to surplus lines insurers, (a) After a policy of commercial risk insurance . . . has been in effect for more than sixty days, or after the effective date of a renewal policy, no insurer may cancel any policy unless the cancellation is based on the occurrence, after the effective date of the policy or renewal, of one or more of the following conditions: (1) Nonpayment of premium .... If the basis for cancellation is nonpayment of premium, at least ten days’ advance notice shall be given and the insured may continue the coverage and avoid the effect of the cancellation by payment in full at any time prior to the effective date of cancellation. . . .
“(b) No surplus lines insurer shall be deemed to be eligible to write coverage for risks as provided in sections 38a-741 to 38a-744, inclusive, 38a-
The timing of the actual notice distinguishes this case from Johnston v. American Employers Ins. Co., 25 Conn. App. 95, 592 A.2d 975 (1991). In that case, the insureds received actual notice of the pending cancellation of their automobile insurance policy from their own insurance agent before the date of its actual cancellation. Id., 97-98. At a time when presumably they could have reinstated the policy by paying the premiums on which they had defaulted, they chose to purchase alternate insurance. Id., 98.
For example, the Scottsdale policy was purchased for $5671 and covered the insured premises for $325,000, the term lasting November 3, 1989, through November 3,1990. In comparison, Hallas purchased the Mt. Hawley policy for $4544, obtaining $217,500 in coverage for a period lasting from July 9, 1990, through July 9, 1991.
In light of the new trial that we have ordered, we must address Dobosz’ claim that Hallas was obligated to present expert evidence to inform the jury about the duty owed by insurance agents to mortgagees. We reject this claim. As in Todd v. Malafronte, 3 Conn. App. 16, 19, 484 A.2d 463 (1984), on which Dobosz relies, Dobosz himself testified to the duties of an insurance agent. He acknowledged that these duties included obtaining proper insurance for mortgagees and ensuring that the mortgagees’ interests were fully protected. There was no testimony to the contrary. Under these circumstances, no further expert evidence was required.
Zervos and Nyland calculate the value of their liens by taking $103,214.24, the outstanding mortgage principal, and adding ten months interest at 14 percent.
Practice Book § 4051 permits a party to file a motion with the trial court seeking further articulation of a trial court decision. If Zervos and Nyland had deemed the court’s decision to be incomplete or ambiguous, it was their responsibility to invoke their rights under this section. See Barnes v. Barnes, 190 Conn. 491, 493, 460 A.2d 1302 (1983).
See footnote 8.
Section 38a-307 sets forth the standard form to be used for fire insurance policies. Pursuant to this section, the form must contain a paragraph that provides: "Mortgagee interests and obligations. If loss hereunder is made payable, in whole or in part, to a designated mortgagee not named herein as the insured, such interest in this policy may be cancelled by giving to such mortgagee a ten days’ written notice of cancellation. . . .”
The excess line affidavit that is an exhibit in this case indicates, as Connecticut law requires, that three licensed insurers, Aetna Casualty and Surety Company, Middlesex Mutual Assurance Company and General Accident and Indemnity Company, had declined to insure this risk. Even if Dobosz had authority to issue insurance on behalf of these companies, such agency does not establish that he had the authority to write excess liability insurance. Cf. General Statutes § 38a-794 (establishing licensing requirements for excess lines brokers).
The United States District Court cases cited in the plaintiffs’ reply brief do not. persuade us otherwise. See Passarelo v. Lexington Ins. Co., 740 F. Sup. 933, 937-38 (D. Conn. 1990); Teleco Oilfield Services, Inc. v. Skandia Ins. Co., 656 F. Sup. 753, 757 (D. Conn. 1987). In neither of these cases did all parties concede that the insurance broker was only accountable to an entity that was not an agent of the insurer. We decline, moreover, to hold that a broker may become an agent for an insurer simply by collecting and remitting premiums for the insurer’s ultimate benefit. To the extent that the language in Passarelo or Teleco Oil Field Services, Inc., adopts this proposition, we reject it as a matter of state law. To do otherwise would effectively make agents out of all independent insurance brokers.