Case Title: Tripp, Inc. v. Kenneth A. Murray Ins., Inc.

Citation: 

Docket Number: 

State: alaska

Court: Alaska Supreme Court

Date: 1979-10-12T00:00:00Z

Document:
Tripp, Inc. v. Kenneth A. Murray Ins., Inc.  600 P.2d 1361 (1979) TRIPP, INC., Appellant, v. KENNETH A. MURRAY INSURANCE, INC., Appellee. No. 3743. Supreme Court of Alaska. October 12, 1979. *1362 James A. Parrish, Parrish Law Office, Fairbanks, for appellant. Stephen D. Cramer, Merdes, Schaible, Staley and DeLisio, Inc., Fairbanks, for appellee. Before RABINOWITZ, C.J., and CONNOR, BOOCHEVER, BURKE and MATTHEWS, JJ. OPINION RABINOWITZ, Chief Justice. The central question presented in this appeal is whether the superior court improperly denied Tripp, Inc.'s motions for summary judgment, directed verdict, and judgment notwithstanding the verdict. These motions all were founded on the same ground, namely, that as a matter of law Murray Insurance was negligent in failing to advise the insured, Tripp, Inc., concerning the method of calculation of premiums under its insurance policy. Tripp, Inc. was a business in Fairbanks which was involved in the sale, service, rental and lease of office furniture, equipment and supplies. A fire occurred on the premises of Tripp, Inc.'s business on the night of February 5, 1975, which resulted in a complete loss of inventory valued in excess of $230,000. At the time of the fire, Tripp, Inc. was insured through Murray Insurance, an independent broker, by a policy purchased from the Home Insurance Company. The insurance policy provided for recovery from loss by fire on the full inventory contained on the premises of the Tripp, Inc. business up to the policy maximum of $125,000. Thus, at the time of the fire, Tripp, Inc. was substantially underinsured. Tripp, Inc. subsequently brought an action alleging negligence by Murray Insurance in failing to maintain adequate fire insurance coverage on the Tripp, Inc. property which resulted in Tripp, Inc. sustaining losses far in excess of the indemnification provided in the insurance policy. The original theory of liability alleged was that pursuant to several telephone conversations and a meeting between Wilmer Preising, the owner of Tripp, Inc., and Murray Insurance several months prior to the fire, Preising requested, and Murray Insurance agreed, to obtain additional coverage for *1363 the increasing inventories of Tripp, Inc. to a $300,000 maximum policy coverage. Tripp, Inc. later alleged alternatively in its motion for summary judgment, that even if the factual issue of whether Preising ever actually requested the increase in coverage was decided against Tripp, Inc., Murray Insurance should be held liable as a matter of law because it failed to inform Tripp, Inc. that under the terms of the insurance policy Tripp, Inc. was required to pay premium dollars based on the amount of insurance shown on the monthly inventory value report forms, even though the actual amounts of inventory reported exceeded the maximum coverage allowed under the policy. Tripp, Inc. asserted that if it had known it was required to pay the same premium whether or not it increased its maximum coverage, it certainly would have taken steps to secure the extra coverage needed to protect its increasing inventory levels. The superior court denied the motion for summary judgment on the ground that there were unresolved factual issues in the action, and the case then proceeded to trial by jury. At the close of Murray Insurance's case, Tripp, Inc. moved for directed verdict on the issue of liability based on the same legal theory as was set forth in the motion for summary judgment. The superior court denied the motion for directed verdict. After the jury found in favor of Murray Insurance on the liability issue and judgment was entered on its behalf, Tripp, Inc. moved for judgment notwithstanding the verdict. This motion was also denied by the superior court and the appeal followed. The claim of error in the denial of the motion for summary judgment, the motion for directed verdict, and the motion for judgment notwithstanding the verdict in this case can be resolved by reference to the standard of review for denials of the latter two motions, since it is established that a court should not grant summary judgment where it could not properly direct a verdict or enter a judgment notwithstanding the verdict.[1] The role of this court in reviewing the denial of motions for a directed verdict and for a judgment notwithstanding the verdict is "to determine whether the evidence, when viewed in the light most favorable to the nonmoving party, is such that reasonable men could not differ in their judgment."[2] Thus, the primary inquiry here is whether the evidence is such that, according all favorable inferences to Murray Insurance, reasonable persons nevertheless could not differ in their judgment as to the liability of Murray Insurance for failing to inform Preising concerning the details of the premium structure in Tripp, Inc.'s policy of insurance.[3] Tripp, Inc. argued in its motions below and in its appeal to this court that, based on the undisputed facts in this case, Murray Insurance should be found to be negligent as a matter of law for failing adequately to advise Tripp, Inc. as to the nature of the premium structure.[4] The significance of the allegedly omitted advice is better appreciated *1364 against a detailed explanation of the method of calculation of premiums. The type of policy employed for Tripp, Inc.'s inventory coverage was a standard stock-reporting form policy.[5] The premiums for this type of policy are calculated in a two-stage process. First, before the start of the period covered by the insurance policy, an advance deposit or "down-payment" is submitted by the insured. The deposit is calculated by applying a set insurance rate to 75% of the coverage limit which has been chosen by the insured at the inception of the policy. The insured then submits monthly inventory value report forms during the period of the policy which report the actual fluctuating amount of inventory on hand during each month. At the end of the policy period, the second stage of premium calculation occurs. At that time a computation is made based on an average of the actual amounts of inventory reported each month on the forms submitted by the insured. The final premium is calculated by applying the insurance rate to the actual value of inventory averaged over the period of coverage. If the average inventory on hand turns out to be greater that 75% of the coverage limit, the insured is required to pay the difference in premiums between the rate applied to the actual inventory and the rate calculated at the beginning of the policy period. If the actual average monthly inventory is less than 75% of the coverage limit, the insured receives a refund from the insurance company at the end of the policy period. The obvious advantage to the insured of this type of premium calculation is that, in the end, the insured pays for coverage of only the actual inventory that was insured by the policy. There is a corresponding disadvantage to the premium structure. Since the premium is calculated on the average actual inventory value, which may exceed the coverage limit at times, the insured in such situations ends up paying a premium on insurance coverage which it does not receive under the set limits of the policy. Thus, there is a considerable incentive for an insured to increase its coverage whenever the actual inventory value begins to rise above the coverage limit, because the insured has to pay premiums on that inventory value, whether or not it is covered under the policy. Although there is some dispute in the record as to whether an increase in coverage limits requires an outlay by the insured of an additional advance deposit, Murray Insurance's expert insurance broker testified at trial that the rules of the "insurance rating office" require a deposit upon an increase in insurance coverage limits. However, the practice of charging an additional advance premium when the limits are increased would have no effect whatsoever on the final premium to be paid, since the final premium is still based on the actual inventory reported. Tripp, Inc. contends that the record is undisputed that Preising did not understand that if he submitted actual inventory values in excess of the policy limits he would be charged a premium based on the total values submitted, even though they were in excess of the policy coverage limits. Under these circumstances, Tripp, Inc. further argues that an insurance broker has a duty as a matter of law to inform the insured as to the method of calculating premiums when, as in this case, the evidence is also undisputed that the broker is aware that the insured is repeatedly exceeding its coverage limits on the monthly inventory value report forms.[6] Tripp, Inc. asserts that as a result of the negligent *1365 breach of its duty to inform in the present case, Murray Insurance is liable as a matter of law for the damages incurred by Tripp, Inc. as a result of the underinsurance of its inventory at the time of the fire.[7] Our study of the record has led us to the conclusion that the superior court did not err in denying Tripp, Inc.'s motions for summary judgment, directed verdict and judgment notwithstanding the verdict, because we are persuaded that a factual dispute existed with regard to the actual knowledge of the owner of Tripp, Inc., Wilmer Preising, regarding the premium structure of Tripp, Inc.'s stock-reporting insurance policy. Knowledge of the method of calculation of the premium is important because if the triers of fact were convinced the Preising had actual knowledge of the method of calculating premiums, then reasonable person might differ as to whether Murray Insurance's actions could still be deemed to have been the proximate cause of the damage in such a case.[8] Moreover, the jury could have concluded that Murray *1366 Insurance knew Preising had such knowledge, thus relieving it of its duty to advise him of the nature of the premium structure.[9] In our view, the following facts in the record support an inference that Wilmer Preising had actual knowledge that Tripp, Inc. was paying insurance premiums based on the actual value of the inventory reported regardless of the maximum limits of the policy of insurance and of the fact that recovery could not be obtained in excess of the maximum limits of the policy. Some of them also show that he demonstrated this knowledge to the defendant at the time he purchased insurance. First, the operative provisions of the policy indicate the method of calculating premiums.[10] Second, the reverse side of the monthly *1367 inventory value report form explains that the policy limit is the maximum amount that can be recovered, even though the actual inventory values which are reported by the insured are greater than the agreed upon policy limits.[11] Third, at the time Preising purchased the insurance policy for Tripp, Inc. through Murray Insurance, he was familiar with the monthly inventory value report forms, which were similar to ones he had been using for his previous insurance policy with a different company. Ken Murray, Jr. testified that at the time of purchase, Preising and he had a conversation pertaining to Preising's familiarity with the terms of monthly inventory reporting policies. Murray testified that a fair summary of the conversation was that Preising indicated that he was familiar with them. Preising indicated that at the initial conversation it was discussed, and he therefore was aware, that there was no overall premium penalty for setting a limit which was too high. Thus he testified concerning the meeting: A. I was told `yes, if you ever want to go over the 125,000' Ken said `make sure you get with us.' Q. Okay. Was that specifically mentioned here with Murray or was that a provision that you were familiar with before you.... A. It was said at the time of purchase. Q. By Ken Murray? A. Yes, because we were initially discussing how much should we set the limit. And then they said, `It doesn't cost you any more if you're under.' So my question always was, `Why not set it at a million dollars if it doesn't cost you any more,'.... Fourth, Preising testified at trial to certain relevant facts. When he allegedly requested Murray Insurance to increase the policy limit of Tripp, Inc.'s inventory value insurance (a fact in dispute),[12] he stated, "Well, make it the 300 [$300,000 policy limit]. It doesn't cost any more." (emphasis added) Further, on cross-examination Preising was asked and answered the following questions: Q. Were you familiar with the fact that on the reporting form insurance, the premium was adjusted at the end of the year? A. Yes. Q. And was that based upon the inventory that was reported for that for that entire year?*1368 A. Yes. Q. All right. Were you familiar with the fact that if you set your inventory limits high and your at the end of the year adjustment time, your averages didn't were less than the limit, that you wouldn't be charged for the additional? A. Yes. Q. And when did you first learn of that? A. I was always under the impression it's what I used on an average. Q. In other words, you'd be charged at the end at the adjustment time for what you used?A. Yes. Q. Okay. Regardless of what of what the limit was?A. Uh-huh.[13] [emphasis added] Fifth, officers of Murray Insurance testified that Preising gave them a reason for not increasing the policy limits, namely, that Tripp, Inc.'s inventory was coming in and going out quite rapidly and that it often would not be in the warehouse longer than overnight. Sixth, there was testimony that while insured by a different company under a similar inventory value reporting type of policy, Preising successfully initiated and obtained an increase in coverage limits.[14] On the basis of the foregoing, we have concluded that there was sufficient evidence in the record indicating that Preising knew how the premiums were calculated so that reasonable jurors could have differed on the question of Preising's actual knowledge, and thus differed as to whether or not Murray Insurance's purported negligence in failing to advise Tripp, Inc. of the premium calculation method was the proximate cause of the damages which resulted in this case.[15] In its remaining specification of error, Tripp, Inc. contends that the superior court's refusal to give the whole of a requested instruction was an abuse of discretion. The instruction which was proposed by Tripp, Inc. read: The jury is instructed that it is not necessary to support a finding of negligence that every act and omission charged against a person be proved. If by a preponderance of evidence it has been proved that any negligent conduct on the part of a party was a proximate cause of the injury and/or damage in question, such proof is sufficient to support findings against that party on those particular issues. Each juror need not agree that the same conduct was negligent and a proximate cause of the injury and/or damage. If the required number of jurors can agree that some negligent conduct on the part of a party has been proven by a preponderance of the evidence to have proximately caused injury and/or damage to the other party, such proof is sufficient to support findings against that party on those issues. *1369 While the superior court declined to give Tripp, Inc.'s entire proposed instruction, it did give the first paragraph, essentially unchanged, to the jury. Jury Instruction No. 10, given by the superior court, stated: The jury is instructed that it is not necessary to support a finding of negligence that every act and omission charged against a person be proved. If by a preponderance of the evidence it has been proved that any negligent conduct on the part of a party was a proximate cause of the damage in question, such proof is sufficient to support findings against that party on those particular issues. Tripp, Inc. takes the position that the superior court misunderstood the law as to the necessity for agreement by the jurors regarding which particular negligent act by Murray Insurance proximately caused the damages, and thus the superior court improperly declined to give the second paragraph of the requested instruction. Tripp, Inc., has not cited any decisional authority in support of its position. Moreover, the superior court is accorded broad discretion regarding its instructions to the jury on alternative theories of negligence. The case law in other jurisdictions establishes that even the first paragraph of Tripp, Inc.'s proposed instruction, which stated that the plaintiff need not prove each and every alleged act of negligence in order to recover, may be omitted in the discretion of the trial court.[16] The rule seems to be that if the general definition of negligence contained in the instructions adequately informs the jury as to the law, the principle of law included in the more specific instruction is deemed substantially covered by the instructions defining negligence generally.[17] Here there was no objection to any of the other instructions pertaining to negligence, and they appear to accurately reflect the law with regard to liability for negligence. Thus, we conclude that the superior court did not abuse its discretion in failing to give the entire instruction proposed by Tripp, Inc.[18] Affirmed.