Case Name: COLLEGIATE MANUFACTURING COMPANY, Appellant, v. McDOWELL'S AGENCY, INC., and Alfred L. Stoll, Appellees
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1972-09-19
Citations: 200 N.W.2d 854
Docket Number: No. 55102
Parties: COLLEGIATE MANUFACTURING COMPANY, Appellant, v. McDOWELL’S AGENCY, INC., and Alfred L. Stoll, Appellees.
Judges: All Justices, concur except Mc-CORMICK, UHLENHOPP and REYN-OLDSON, JJ., who dissent.
Reporter: North Western Reporter 2d
Volume: 200
Pages: 854–862

Head Matter:
COLLEGIATE MANUFACTURING COMPANY, Appellant, v. McDOWELL’S AGENCY, INC., and Alfred L. Stoll, Appellees.
No. 55102.
Supreme Court of Iowa.
Sept. 19, 1972.
Thoma, Schoenthal, Davis, Hockenberg & Wine, Des Moines, for appellant.
Jones, Hoffman & Davison, Des Moines, for appellees.

Opinion:
LeGRAND, Justice.
This is a suit by which plaintiff seeks to recover $114,000 from defendants for their alleged failure to provide adequate fire insurance to cover loss to plaintiff's building and contents. Trial to a jury resulted in a defendant's verdict, and plaintiff appeals on the sole ground there was error in the instructions submitting the case to the jury. We affirm the trial court.
No claim is made against Travelers Insurance Company, which issued the policy in question. Plaintiff asks recovery only against the agency which secured the insurance from Travelers and against Alfred L. Stoll, its controlling stockholder and managing officer. For convenience we refer to Mr. Stoll as though he were the sole defendant.
Plaintiff is a manufacturing company located in Ames, Iowa, engaged principally in processing high school and college specialty items — sportswear, T-shirts, gym shorts, sweat shirts, jackets, pennants and banners. The company is a wholly owned subsidiary of Littlefield, Adams & Company of Patterson, New Jersey. For many years defendant (and his predecessors) had handled most of plaintiff's insurance problems. There is evidence that plaintiff relied heavily on defendant Alfred L. Stoll's "expertise to handle all the insurance affairs of the company and placed complete confidence" in him.
On various occasions Mr. Stoll contacted plaintiff with suggestions for additional or expanded coverage. These -suggestions were usually followed. In 1963 defendant advised plaintiff to protect itself against fire loss by an inventory reporting policy, which shortly thereafter he placed for plaintiff with Travelers Insurance Company.
This type of policy is widely used to provide coverage for those who have fluctuating inventories. It affords coverage as needed and avoids payment of premiums based on values not representative of the property on hand. Such coverage is often said to be favorable to the insured. The policies are variously described as "provisional reporting," "fluctuating inventory," "monthly reporting," "value reporting," and "reporting form" insurance. All mean substantially the same. E. S. Harper Co. v. General Insurance Co. of America (1967), 91 Idaho 767, 430 P.2d 658, 659; Anderson Feed & Produce Company v. Moore (1965), 66 Wash.2d 237, 401 P.2d 964, 965; Ben-Hur Manufacturing Company v. Firemen's Insurance Company of New Jersey (1962), 18 Wis.2d 259, 118 N.W.2d 159, 164; Commonwealth Insurance Co. of New York v. O'Henry Tent & Awning, 7 Cir., 1961, 287 F.2d 316, 319; Albert v. Home Fire & Marine Insurance Co. of California (1957), 275 Wis. 280, 81 N.W.2d 549, 554; Annotation, 13 A.L.R.2d 713-727.
Even though the values reported fluctuate from month to month, such policies customarily state a maximum limit of liability. In this case plaintiff's loss was $394,000. It received payment of $280,000, which is claimed to be the maximum due under the policy. Plaintiff now demands $114,000 — the excess of the loss over the payment — from defendant because of his alleged negligent failure to provide adequate coverage.
The case was brought and tried by plaintiff on the theory defendant was negligent in discharging his obligation as plaintiff's agent. It is charged the loss was proximately caused by such negligence. Plaintiff asserts it relied on defendant for "the degree of skill and knowledge and expertise requisite to the position of insurance agent and broker and to procure and provide insurance that best suits its requirements" and that defendant was "negligent in exercising that degree of good faith, reasonable skill, care, diligence and expertise required of said agents or brokers."
Defendant denies any negligence and alleges as a defense plaintiff's contributory negligence in failing to advise itself of the protection afforded under the policy. Defendant also asserts the additional insurance which plaintiff now says was to have been provided was not available from Travelers Insurance Company or any other company plaintiff represented and alleges plaintiff was so advised. Defendant further insists he was an agent for Travelers Insurance Company and not for the plaintiff.
A jury trial resulted in a verdict for defendant. Plaintiff appeals on the single issue its theory of the case — that it had placed its insurance program entirely with defendant and relied completely on his "expertise" to handle it properly — was not presented to the jury.
This involves two instructions — one which plaintiff alleges was given incorrectly and one which was requested and refused. We discuss them together.
Plaintiff objects to Instruction 9 which was submitted as follows:
"You are instructed that there is a duty upon the owner of insurable property to familiarize himself with the quantity and value of such property, its insurability, the kinds and amounts of insurance available, and in general the terms and conditions of the insurances issued upon his property.
"As applied to this case, it was the duty of the plaintiff to advise Stoll, generally, as to the quantity and Value of the property to be insured and the kinds and amounts of insurance desired, and then it was the duty of Stoll to use due diligence to procure the insurance and at all times to keep the plaintiff advised and informed as to the insurances available and procured.
"The failure of either party to perform the duties herein stated would not be chargeable to the neglect of the other party."
Objection to this instruction was made on the following grounds:
(1) That it fails to advise the jury that an insured may rely upon an agent to properly perform the responsibilities he has undertaken;
(2) That an agent who holds himself out as a skilled insurance adviser upon whom a customer may rely for advice concerning his insurance needs owes the customer a duty to properly advise him concerning such needs;
(3) It fails to advise the jury that a failure to read an insurance policy does not constitute contributory negligence but that one may rely upon the agent to properly perform his responsibility;
(4) That it improperly advises the jury that plaintiff had a duty to familiarize itself with the quantity and value of its property and the general type and extent of insurance coverage afforded by the policy when, in fact, plaintiff was justified in delegating this duty to defendant as its agent.
The requested instruction raises substantially the same issue and asked for a specific instruction that under circumstances alleged to exist here plaintiff "was not obligated to examine and read the policy to ascertain the coverage provided."
Before discussing the merits of the issue raised, we dispose of defendant's insistence plaintiff has no claim against him because he was Traveler's agent, not plaintiff's. Under the circumstances here we hold defendant was acting as plaintiff's agent and was obligated to perform his duties toward plaintiff with reasonable care and diligence. Wolfswinkel v. Gesink, 180 N.W.2d 452, 456 (Iowa 1970) and citations; 43 Am.Jur.2d, Insurance, section 175; Cf. American Eagle Fire Insurance Co. v. Burdine, 10 Cir., 1952, 200 F.2d 26, 30, and Swift v. White, 256 Iowa 1013, 1020, 129 N.W.2d 748, 752 (1964).
This brings us to the nature and extent of defendant's duty to plaintiff. Generally an agent owes his principal the use of such skill as is required to accomplish the object of his employment. If he fails to exercise reasonable care, diligence, and judgment in this task, he is liable to his principal for any loss or damage occasioned thereby. 3 Am.Jur.2d, Agency, section 202, page 583; 3 C.J.S. Agency § 162, page 46; Restatement (Second) of Agency, section 401 (1957); Dombeck v. Chicago, Milwaukee, St. Paul & Pacific R. R. Co. (1964), 24 Wis.2d 420, 129 N.W.2d 185, 194; Wolfswinkel v. Gesink, supra, and citations.
This general rule may be altered, either to limit or enlarge the ordinary duties, by agreement of the parties. 3 C.J.S. Agency § 155 a, b, pages 34, 35; 3 Am.Jur.2d, Agency, section 198, pages 579, 580.
A review of the record discloses no evidence to sustain plaintiff's position there was any agreement or arrangement which would enlarge defendant's duty beyond the general duty an agent owes his principal. It is true plaintiff relied on defendant, had great confidence in him, and frequently followed his advice on insurance matters; but this is usually the case. There is no evidence of any agreement, express or implied, that defendant was to assume responsibility far beyond that which would normally attach to his conduct as plaintiff's agent. The principal-agent relationship cannot be so drastically expanded unilaterally. Fowler v. Berry Seed Co., 248 Iowa 1158, 1166, 84 N.W.2d 412, 416 (1957); E. S. Harper Co. v. General Insurance Co. of America, supra, 91 Idaho 767, 430 P.2d at 662.
We hold the defendant owed plaintiff that duty which an agent ordinarily owes his principal — the duty to use reasonable care, diligence, and judgment. With that in mind, we move to the sole issue before us: Do the instructions adequately and properly present plaintiff's theory of the case to the jury ? We believe they do.
The general principles by which we must test the instructions are well settled.
Instructions must be read together and not considered piecemeal. Berhow v. Kroack, 195 N.W.2d 379, 385 (Iowa 1972); Robeson v. Dilts, 170 N.W.2d 408, 414 (Iowa 1969).
The instructions must submit only those pleaded issues which have support in the record. Wroblewski v. Linn-Jones F.S. Services, Inc., 195 N.W.2d 709, 711 (Iowa 1972); Bradt v. Grell Construction, Inc., 161 N.W.2d 336, 340 (Iowa 1968); Walker v. Sedrel, 260 Iowa 625, 632, 149 N.W.2d 874, 878 (1967); Flentie v. American Community Stores Corporation, 8 Cir., 1968, 389 F.2d 80, 82.
The sufficiency of the evidence to warrant submission of a pleaded issue to the jury is decided by giving the evidence the most favorable construction it will reasonably bear in favor of the party urging submission. Wroblewski v. Linn-Jones F.S. Services, Inc. and Bradt v. Grell Construction, Inc., both supra.
Using these principles as our guide, we hold the instructions present no reversible error. Instruction 9 must be considered in the light of what was said in Instructions 7 and 8. We set out the pertinent parts of each:
Instruction 7
"You are instructed that where the owner of property expressly or impliedly authorizes an agent to procure additional insurance thereon, and the agent agrees to do so and is free to do so, the effect of such an arrangement is to obligate the agent to use reasonable diligence to procure the additional insurance and to seasonably notify the owner of the property in the event of the failure of such attempt to procure additional insurance. In this case, if you believe from the preponderance of the evidence that defendant Stoll did agree to procure additional insurance, as claimed by plaintiff Collegiate Manufacturing Company, and he failed to do so from want of reasonable diligence, or having used reasonable diligence and failing to procure additional insurance he failed to notify the plaintiff of the fact that he was unable to obtain additional insurance, then your verdict will be for the plaintiff."
Instruction 8
"You are further instructed that where an insurance agent agrees to procure additional insurance, over and above that which was originally issued, and is free to do so, the effect of such an arrangement is to obligate the agent to use reasonable diligence to procure the additional insurance and to keep the property owner advised as to his efforts, and to notify the property owner of his failure to procure such additional insurance. In this case, if you believe from the preponderance of the evidence that defendant Stoll did agree to procure additional insurance, as claimed by the plaintiff, and that he used reasonable diligence and having used reasonable diligence was unable to procure the additional insurance, for reasons beyond his control, and the plaintiff was seasonably notified by the agent he was unable to procure the additional insurance, defendant Stoll would not be negligent and your verdict will be for the defendants."
Following these instructions, Instruction 9 placed upon plaintiff the duty to know the quantity and value of its property and in general the terms and conditions of the insurance covering it. While we do not approve the wording of this instruction, any possible prejudice was removed by the portion which specifically limited plaintiff's duty as applied to this case to knowing the quantity and value of the property to be insured and advising defendant what kind of insurance was wanted and how much.
This was not error. We agree there could have been delegated to defendant the burden of deciding for plaintiff both the type and amount of insurance to be provided; but there is no evidence to sustain such a contention. It would have been improper to so instruct the jury.
As we have frequently said, most recently in Rosenau v. City of Estherville, 199 N.W.2d 125, filed June 29, 1972, the ultimate test is whether an instruction is likely to confuse or mislead the jury. We are convinced this one was not.
It is argued the instructions demanded plaintiff must read the policy or be guilty of contributory negligence as a matter of law. We do not so interpret them. They do nothing more than require plaintiff to know what insurance he wants and to instruct defendant to obtain it. From that time on, the instructions place all responsibility on defendant. Taken as a whole, they were at least as favorable — perhaps more so — than plaintiff was entitled to.
What we have said also disposes of plaintiff's complaint that its requested instruction 5 was refused.
Having found no reversible error, we affirm the judgment of the trial court.
Affirmed.
All Justices, concur except Mc-CORMICK, UHLENHOPP and REYN-OLDSON, JJ., who dissent.