No, 92-085 IN THE SUPREME COURT OF THE STATE OF MONTANA 1992

NAUTILUS INSURANCE COMPANY, Plaintiff and Appellant,

FIRST NATIONAL INSURANCE, INC., d/b/a THE FNI GROUP, Defendant and Respondent. 

### L:/

### Srniti CLERKOFSUPREMECOURT STATEOFMONTANA

APPEAL FROM: District Court of the Fifth Judicial District, In and for the County of Jefferson, The Honorable Frank M. Davis, Judge presiding.

COUNSEL OF RECORD: For Appellant: Barry G. OfConnell and ~indy E. Younkin, Moore, OrConnell,Refling & Manos, Bozeman, Montana

For Respondent: Robert M. Carlson, Corette, Pohlman, Allen, Black & Carlson, Butte, Montana

Filed: submitted on Briefs: July 30, 1992 Decided: September 3, 1992

### Justice Karla 

### M. Gray delivered the Opinion of the Court. Nautilus Insurance Company appeals from the granting of a directed verdict, and the judgment entered thereon, in favor of First National Insurance, Inc., by the Fifth Judicial District Court, Jefferson County. We 

### affirm. The dispositive issue on appeal iswhether the District Court erred indirecting averdict for thedefendanton thebasis thatno duty was owed to the plaintiff. Patty Crane (Patty),now known as Patty Flynn, contacted Rick March (Rick) at First National Insurance, Inc. (FNI) in January, 1987, 

### seeking fire and liability coverage for business property owned by herself and Walter Crane in Helena, Montana. Rick requested coverage through Sentinel General Agency (Sentinel) for both property and liability insuranceand received a quotewhich he believed included the requested liability coverage. Sentinel sent Rick binders identifying coverage through Nautilus Insurance Company (Nautilus) and Aegon Insurance Company in the aggregate amount of $L00,000 ($50,000

### coverage by each insurer) for insuring the premises only;the effective date of the policies was February 27, 1987. 

### The Cranes advised Rick that they also needed liability coverage and he continued to seek coverage from other companies while the Nautilus policy was in effect. As a result of their own efforts, the Cranes obtained the coverage they desired from Travelers InsuranceCompany effectiveApril 2, 1987. 

### Onthatdate, Patty told Rick about the new coverage and verbally requested FNI 2to cancel the Nautilus and Aegon polices. Thereafter, via telephone and several letters, ~ick advised the Cranes that in order to cancel the policies they must either return the policies or signa cancellationrequest/policy release form. TheCranesdid neither; nor did Rick inform Nautilus during this time that the Cranes desired to cancel or that they had obtained alternative coverage. FNIpaid theNautilus premium on the Cranes1behalf onMay 13 under its contractwith Sentinel requiring payment of all premiums within 45 days of receiving an invoice; under the contract, the payment was due on or before May 15. Under the Nautilus policy, the ItunearnedpremiumM which could be recouped upon cancellation

was prorated by quarters of the coverage year. In other words,

once the coverage was effective on February 27, the maximum unearned premium which could be recovered on cancellationwas 75%; the premium for the first threemonths1coverage--from February 27 to May 27--could not be recouped even 

### if the policy were canceled prior to May 27. The Cranest building and its contents were totally destroyed by fire on May 23, 1987. TheNautilus policy was in effect on the date of the fire and the Cranes made a claim 

### for their loss

### under thepolicy. Nautilus ultimately paid the $50,000 policy limit. Nautilus filed suitagainst FNI in the First Judicial District Court, Lewis and Clark County. The complaint alleged that FNIIs negligent failure to procure cancellation of the Cranes' Nautilus 

### policy resulted in

### damage

### toNautilus 

### in the

### amount of $50,000 plusinterest, Upon motion by .FNI,venue was changed to the Fifth Judicial District Court, Jefferson County. A jury trial was held

on January 15 and 16, 1992. After Nautilus completed its case-inchief, 

### FNI moved for a directed verdict on the basis that 

### it owed

no duty to Nautilus to procure cancellation. The motion 

### was granted, judgmentwas entered and Nautilus appeals.

Did the District Court err in directing a verdict for the defendant on the basis that no duty was owed to the plaintiff? A directed verdict may be granted only when it appears as a matter of law that the nonmoving party could not recover upon any view of the evidence, including the legitimate inferences to be drawn from it. Hashv. State (1991), 247 Mont. 497, 500, 807 P.2d 1363, 1365;milkerson v. Sch. ~ist. No. 15, Glacier Cty. (19851, 216 Mont. 203, 211, 700 P.2d 627, 622. On appeal, this Court must view a motion for 

### a directed verdict in a light

### most favorable to the nonmoving party. Stout v. Montana Power Co. (3.9881, 234 Mont. 303, 305, 762 P.2d 875, 876. Here, the

### District Court directed averdict for

### FNI. While it did not state the basis for 

### its decision 

### in so many words, it is clear 

### that the court determined thatNautilus could not prevail on 

### its negligence claims against FNI because, under the undisputed facts of 

### this case, FNI had no legal duty to Nautilus to procure cancellation of the policy. We agree. Negligence forms the basis for Nautilus' complaint against FNI. There is no dispute that, absent a legal duty running from 

### FNI 

### to Nautilus, Nautilus cannot prevail. Actionable negligencearises only from the breach.of a legal duty. Thornock 

### v. State (1987), 229 Mont. 67, 72, 745 P.2d 324, 327; Krone v. McCann (1982)

## , 196 Mont. 260, 265, 638 P.2d 397, 400. Whether a legal duty is owed from one party to another is a question of law for the court. Roy 

### v. Neibauer (1981), 191 Mont. 224, 226, 623 P.2d 555, 556. Thus, the question before us, as it was before the District Court, 

### is whether a legal duty to procure cancellation of the policy 

### was owed to Nautilus by FNI. The parties agree, and the record supports the fact, that no contract or agency agreement existed between Nautilus and FNI. Margaret Crook, senior property examiner for ~autilus, testified that Sentinel 

### was Nautilus' agent under a written agency contract and that FNI and Rick March were agents of the Cranes. She testified that FNI and 

### Rick could neither bind Nautilus 

### nor cancel the policy without the Cranes' cooperation. Nautilus argues,however, that an implied agency relationship exists between an independent insurance broker and a carrier with whom caverage placement 

### is made 

### as 

### to certainparticulars. On the basis of this implied agency relationship, Nautilus asserts that FNI had a duty, under the facts of 

### this case, to procure cancellation of the policy. Nautilus cites no cases or other authority directly on point in support of the existence of such a duty. An insurance broker is 

### usually regarded as the agent of the insured. 3 Couch on Insurance 2d 

### (Rev. ed.), 25:93 (1984). Nautiluswitness 

### Crook 

### testified that

### FNI and 

### Rickwere the Cranesagents, not the agents of Nautilus. Nautilus argues that, while 

### an insurance broker acts for the insured inmaking the application

### and procuring thepolicy,heacts for the insurer 

### in delivering the policy and in collecting and remitting premiums. Couch, 25:94. While negligence in performing these specific acts on behalf of the insurer

### may result in liability absent 

### a contractual agency relationship, Nautilus does not allege negligent performance 

### by FNI of these acts. Instead, Nautilus seeks expansion of these acts by a broker on behalf of the insurer to include a duty to procure cancellation of thepolicy. However, the determination of which party a broker is acting for as to a particular matter depends on which party requested him to do the particular thing. Couch, § 25:94. Here, 

### the Cranes requested the cancellation. "A broker is the agent of the insuredwhere he is employed by the 

### insured 

# . , 

# .to cancel and receivetheunearned premium on a policywhich had been obtained by him. 

# . . 

# . Couch, 

### 5 25:95. In the face of these 

### accepted principles 

### and 

### the 

### testimony of 

### its ownwitness,

### Nautilus relies on our decision 

### inThayer

### v. ~icks (1990), 243 Mont. 138, 144-47, 793 P.2d 784, 788-90. Thayer addressed the extent to which an accountant owes a duty of care to third partieswith whom he is not 

### inpxivity. There the accountant had misrepresented financial information 

### in a corporate audit to the subsequent detriment of the purchaser of the corporation. 

### Under those facts,we adopted and applied 

### 5 552 of the Restatement 

### of 

### Torts,which provides 

### in pertinent part:(1) One who, in the course of his business, profession or employment,or in any other transaction in which he has a pecuniary interest, supplies false information 

### for the guidance of others 

### in their business transactions, 

### is subjectto liability 

### forpecuniary loss caused to them by their justifiable reliance upon the information, if he fails 

### to exercise reasonable care or competencein obtaining orcomrnunicatingtheinformation. (2) Except as stated 

### in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered (a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and (b) through relianceupon it in a transaction that he intends the informationto influenceor knows that the recipient so intends or in a substantially similar transaction. Restatement (Second) of Torts 

### 5 552 (1977). Nautilus asks us to apply g 552 to FNI in this case. We decline to do so. Purporting to apply Thaver to the case before us, ~autilus focuses on subsection (2) of § 552 of the Restatement (Second) of Torts. However,Thayer involvedmisrepresented information. It is clear that subsection (1) of Restatement (Second) of Torts 552 premises 

### liability

### on the supplyof false information. The case before us contains neither allegations nor proof of false information or misrepresentation. Thus, 552 is totally inapposite here. Here, FNIplaced the coverage and obtained thepremium setby Nautilus. The Cranes requested FNI to cancel the policy and FNI took steps, pursuant to that request, to accomplish the cancellation. Notwithstanding, cancellationdid not occur prior to destruction 

### of the insured property and Nautilus ultimately paidthepolicy limits for the risk forwhich 

### it had accepted a premium. Under these circumstances, FNI had no legal duty totake additional steps on Nautilus1behalf. Wehold that the District Court did not

err indirecting a verdict for the defendant. Affirmed.

We concur:September3, 1992 CERTIFICATEOFSERVICE 

### Iherebycertifythat thefollowingorderwas sentby United Statesmail,prepaid, to the followingnamed: Barry

### G.O'Connell Moore,O'Connell,Refling&Manos P.O. Box 1288 Bozeman,MT 59771-1288 RobertM. Carlson Corette,Pohlman, Allen,Black&Carlson P.O.Box509 Butte,MT 59703 EDSMITH CLERKOF

### THESUPREMECOURT STATEOFMONTANA