Zeff Distributing Co. v. Aetna Casualty and Surety CompanyZeff Distributing Co. v. Aetna Casualty and Surety Company
Action in two alternative counts, the first seeking recovery of $25,000.00 against Aetna Casualty and Surety Company, Inc. (hereinafter called Aetna) on a claimed insurance contract for loss from theft. The second count sought, if there was no insurance contract in effect, to recover the same amount from plaintiff’s insurance agent, Swade Insurance Company (hereinafter called Swade), for failure to keep insurance in effect. The court directed a verdict for Aetna and the jury’s verdict was for Swade. Plaintiff has appealed from the judgment entered for both defendants.
We first will rule on plaintiff’s claim of error for directing a verdict for Aetna but some of the facts stated on this issue will be material to plaintiff’s claims of error in the trial on the second count. Swade had for several years prior to 1959 handled about half of plaintiff’s insurance, while another agency had handled a substantial part. In 1959, Max Swade, president of Swade, told plaintiff’s president, Carl Zeff, that he could get plaintiff better rates on policies in a package deal including a jeweler’s block policy insuring against theft. Zeff told him to do so and on August 4, 1959, Swade obtained an oral agreement of Aetna, confirmed by letter of August 5, 1959, for coverage of $25,000.00 on jewelry stock of plaintiff in accordance with Aetna’s standard jeweler’s block policy. Plaintiff had not previously had this kind of theft policy but other insurance included replaced some policies plaintiff already had. Swade did not obtain and send in plaintiff’s completed application for this policy to Aetna until September 28, 1959, and before a policy was issued plaintiff sustained a loss by theft on October 1, 1959, in excess of $25,000.00. That loss was paid by Aetna and this suit is for a second theft loss on December 10, 1959, for which plaintiff claims another $25,000.00 due from Aetna. Carl Zeff, plaintiff’s president, said he did not know what companies had plaintiff’s insurance but relied on Swade, or other agencies, to keep his insurance in force and that it was their custom to pay all insurance premiums at the end of each year.
On October 8, 1959, a week after the first theft, Aetna’s Kansas City agent called Max Swade and told him Aetna wished to cancel the Zeff binder in view of the loss sustained, asking him to call as soon as the risk was replaced in another company. On October 23, 1959, Aetna’s agent again called Max Swade and told him Aetna would not cover beyond October 30, 1959, and that a binder would be sent for the period of October 1 to October 30 instead of issuing a policy. Plaintiff’s evidence was that none of its officers or employees knew anything about these conversations. However, a written binder (designated Binder
Plaintiff claims it made a submissible case against Aetna, considering the evidence most favorably to it. Plaintiff says burden of proof of cancellation was on Aetna; that Binder No. 4 even if timely received was not proper notice of cancellation; that Binder No. 4 was not effective because not accepted by plaintiff (because not signed by plaintiff on line for signature of insured); and that proof of loss signed by plaintiff did not establish cancellation prior to the second loss. Plaintiff also argues that cancellation could only be by the notice as stated in Aetna’s standard jeweler’s block policy (although none was ever issued) ; that the proof of loss was not notice of cancellation and was inadmissible because of Aetna’s admission that the only communication of termination was Binder No. 4; and that the significance of the proof of loss was for the jury to determine, saying the expiration date therein stated may have been inserted after it had been signed. However, there was no testimony that the proof of loss was not complete when executed by plaintiff; and David Zeff, plaintiff’s vice president, said when he signed it he saw the statement on it that it “has been carefully read and is a full, complete and true warranty,” and that he took it to' another office to be notarized. See Kirk v. Metropolitan Life Ins. Co.,
Aetna says this is not a cancellation case but rather a case where the insurance expired by its terms, prior to the second loss sustained by plaintiff; but plaintiff contends the written binder was intended to be a method of cancellation. The insurance began on a temporary basis (an oral binder confirmed by letter) pending written application which was delayed almost two months so that no policy was ever issued. It is said: “Such temporary insurance constitutes insurance for a reasonable time considering all the attendant conditions.” 29 Am.Jur. 595, Insurance, Sec. 205; see also annotation,
On the binder only, we do not consider the present case to be as strong a case as the Seiderman case (because here insurance began with an indefinite oral binder) but considering Binder No. 4 with the acknowledgment of termination in the Proof of Loss, we find the situation to be just as conclusive. Therefore, our view is that the court correctly directed a verdict for Aetna. Carl Zeff, while saying he never saw Binder No. 4 until long after the second theft, did say in his deposition that he thought it was received by Zeff in October 1959 because it was written in October. However, there is no doubt that the proof of loss, based on this binder and specifically referring to it, was executed on November 12, 1959, almost a month before the second theft, and stated an expiration date prior to that time. Although the date of the binder was given erroneously as its expiration date rather than the expiration date stated in the binder, this proof of loss was a clear acknowledgment that the insurance had expired prior to the date the proof of loss was executed. Since it was an acknowledgment of termination rather than a communication of termination, plaintiff’s contention concerning Aetna’s admission cannot be sustained. No policy was ever issued and under the circumstances the issuance of the written binder excluded any idea of issuance of a policy. Plaintiff knew that its application for a policy had been signed only three days before the first burglary so, when without the issuance of a policy, plaintiff’s vice president executed the proof of loss, referring to the written binder and showing an expiration date of the binder prior to the date of his execution of the proof of loss, plaintiff must be held to have acknowledged its insurance was under the binder and to have known that its temporary insurance had then expired by its terms. In Bernblum v. Travelers Insurance Co.,
On plaintiff’s claim against Swade, its evidence was that Swade had handled a substantial part of its insurance for about nine years prior to 1959, when Swade got the jeweler’s block insurance from Aetna; that plaintiff authorized Swade to place its insurance where Swade thought proper; that companies would be changed from time to time but plaintiff would not learn of the change until a new policy was received; and that plaintiff paid all insurance premiums to Swade once each year near the end of the year. Plaintiff’s evidence also showed that, prior to the second loss, plaintiff was never told by Swade, prior to October 30, 1959, that Aetna intended to cancel
October 1, 1959 — First theft occurred
October 8 Aetna notified Swade that Aetna wanted to cancel and wanted to be told when Swade had obtained insurance for plaintiff elsewhere.
October 23 Aetna notified Swade Aetna would not cover beyond October 30.
October 27 First action by Swade. Its office manager, Stern, mailed request to Frost of Sayre & Toso to seek insurance for plaintiff.
October 28 Frost received request from Swade.
October 30 Aetna’s deadline to Swade.
November 2 Frost mailed proposal to London without inspection report.
November 9 Frost received cable from London requesting inspection report.
December 4 Frost mailed London inadequate inspection report (applicable to fire insurance not theft).
December 10 Second theft occurred.
December 12 London cabled Frost “unable proceed without inspection report requested.” „
December 21 Plaintiff sent check to Swade for $4650.84 for premiums due on all insurance for the year 1959.
December 23 Frost forwarded inspection report to London.
Thereafter, during the month of December, plaintiff obtained jeweler’s block insurance through another agency on a binder which was replaced by a policy within five weeks.
Both thefts were very much alike. There was no breaking into plaintiff’s building from the outside. It was assumed that someone had been hiding in the building when it was locked for the night. Each time there was a breakout from inside which set off the burglar alarm. Each time diamonds and watches were missing and many watch boxes were left piled on the floor. Other facts will be mentioned later in the opinion.
Swade contends that it was entitled to a directed verdict claiming (1) that plaintiff did not prove that failure (which it does not concede) to exercise reasonable skill, care and diligence was the proximate cause of plaintiff not having a policy which would have covered the second theft loss; (2) that plaintiff had notice on November 12, 1959, when it executed the proof of loss, that it was not covered by theft insurance of Aetna and there was no evidence that Swade had any duty to plaintiff which it breached prior to the second theft; and (3) that the proof of loss conclusively showing plaintiff had such notice, plaintiff’s evidence showed it could have avoided the second theft loss by applying for such a policy to
Our view is that plaintiff made a submissible jury case. Swade knew on October 8, 1959 that Aetna would not continue to carry the insurance and was asked to notify Aetna as soon as the risk was replaced in another company. Plaintiff’s evidence showed that plaintiff was never informed of this, and even when on October 23rd Swade was told that Aetna would not continue its insurance beyond October 30th not only was plaintiff not informed but Swade did nothing to replace the insurance until October 27th when it wrote a letter to Sayre & Toso (received by them on October 28th) to get a policy from London. Moreover, Swade did not tell Sayre & Toso that Aetna would go off the risk on October 30th, nor inform plaintiff about this. “[A] broker or agent who, with a view to compensation for his services, undertakes to procure insurance for another, and, unjustifiably and through his fault or neglect, fails to do so, will be held liable for any damage resulting therefrom.” 29 Am.Jur. 561, Insurance, Sec. 163; see also Couch on Insurance 2d, Sec. 25:37. “An agent or broker who undertakes to procure insurance in accordance with instructions impliedly undertakes to give notice to the owner in the event of his failure to procure such insurance.” 29 Am.Jur. 562, Insurance, Sec. 164; see also Couch on Insurance 2d, Sec. 25:47. “An insurance broker, particularly one who acts as general agent for insured and who undertakes to keep the property insured from year to year, is under a duty to exercise good faith and reasonable dili= gence to procure the insurance on the best terms he can obtain; and in this connec tion proper diligence requires him to canvass the market and have adequate knowledge as to the different companies and terms available.” 44 C.J.S. Insurance § 172, p. 861; see also annotation,
Even so Swade contends this could not have been the proximate cause of plaintiff’s loss because plaintiff did not prove that the underwriters at Lloyds, London would have issued a jeweler’s block policy which would have covered plaintiff’s second burglary loss. Swade says the situation is the same as in the Rayden case, in which the court said (
Swade’s other contentions (2), (3) do not require a directed verdict. Although plaintiff had notice of the expiration of the Aetna insurance on November 12th when the proof of loss was executed, nevertheless it was a jury issue as to whether plaintiff had notice that Swade had not procured insurance to replace it or would not do so very soon. At least, according to plaintiff’s evidence they were given no such notice or warning.
Plaintiff’s principal complaint is that Instruction No. 5, given at Swade’s request, was erroneous. Instruction No. 1, given at plaintiff’s request, was as follows: “The Court instructs the jury that if you find and believe from the evidence that on or about August 4, 1959, defendant Swade Insurance Company agreed for a valuable consideration to procure for plantiff and keep in effect Jeweler’s Block insurance in the amount of $25,000.00 on a stock of jewelry, including diamond rings and watches, belonging to plaintiff and located at the premises of plaintiff at 306 West 9th Street, Kansas City, Missouri; and if you further find and believe that said defendant did procure temporary Jeweler’s Block insurance in the amount of $25,000.00 on said stock aforesaid; and if you further find and believe that said temporary insurance terminated or was cancelled before December 10, 1959; and if you further find and believe that said defendant failed to exercise reasonable skill, care and diligence in failing to keep Jeweler’s Block insurance in effect for plaintiff on said stock aforesaid; and if you further find and believe that on or about December 10, 1959, a number of diamond rings and watches belonging to plaintiff were stolen from said premises and have never been recovered by plaintiff; and if you further find and believe that plaintiff suffered a loss from said theft due to the failure of said defendant to exercise reasonable skill, care and diligence to keep such insurance in effect, then your verdict shall be for the plaintiff.”
Instruction No. 5 was as follows: “The Court instructs the jury that if you find and believe from the evidence that following the cancellation by Aetna Casualty & Surety Company, defendant Swade Insurance Company attempted to place said Jeweler’s Block insurance through Sayre & Toso in the London Market and was attempting to do so on December 10, 1959, and that in so attempting, if you so find, defendant Swade Insurance Company was in the exercise of reasonable skill, care and diligence, and if you further find that the failure to keep said Jeweler’s Block insurance in effect was not a failure on the part of Defendant Swade Insurance Company to exercise reasonable skill, care and diligence, then your verdict must be in favor of defendant Swade Insurance Company and against the plaintiff.” (Emphasis ours.)
Plaintiff says the limitation “following the cancellation by Aetna” erroneously assumes an incorrect time when Swade’s duty arose; and also that the instruction erroneously assumes Swade’s sole duty was to attempt to place the insurance in the Lon
Swade also says plaintiff’s contentions overlook the last five lines of Instruction No. 5 beginning “and if you further find.” While this part alone could have been a converse of the principal finding required by Instruction No. 1, it does not cure the error in assuming that Swade’s duty only commenced following the cancellation by Aetna and that Swade could be relieved of its duty by relying solely on Sayre & Toso thereafter. Neither is it harmless as assuming an unnecessary burden because connected with the first part of the instruction by the conjunctive “and.” The trouble is that this instruction gives the jury an erroneous standard, as to the time when Swade’s duty began and what it was, for the purpose of determining whether Swade did exercise reasonable skill, care and diligence.
Swade further contends plaintiff has not properly preserved for appellate review the claim that Instruction 5 incorrectly stated the time when Swade’s duty began because not raised in the motion for new trial as required by Civil Rule 79.03, V.A. M.R. However, the motion for new trial does set out this entire opening part of Instruction 5 and says it is not a proper converse of Instruction 1 and also that it “minimizes the further duties and obligations with regard to keeping said insurance in effect.” The failure to act promptly on notice that the Aetna insurance would be can-celled and the sole reliance on Sayre & Toso without regard to their lack of promptness after the insurance had expired are so closely related in determining Swade’s duty that they should be considered together as one claim of error. Moreover, assuming either one as the extent of Swade’s duty gave the jury a false standard for determining reasonable skill, care and diligence. If the case is retried, it should be submitted on instructions which do not have such defects.
Other claims of error involve alleged improper questions, cross-examination and argument concerning moral element of the risk, prior losses in other companies in which plaintiff’s officers were interested, and previous cancellation of insurance of one such company, as well as claimed misstatements of the law in argument and injection of improper and derogatory issues. As to some of these no objection was made, as to some others objections were sustained and some were not raised in the motion for new trial. If the case is retried, the parties should consider these claims and conduct the trial to avoid anything improper. However, we point out that plaintiff has the burden of proving the theft and the loss (as it recognized in its requested Instruction 1); and that matters reasonably affecting the risk involved are material to the issue of whether Swade could have obtained the insurance by the exercise of reasonable skill, care and diligence and thus the issue of proximate cause.
The judgment in favor of Aetna on Count I is affirmed and the judgment in favor of Swade on Count II is reversed and the cause remanded.