Case Name: SECURITY INSURANCE AGENCY, INC., and Maryland Casualty Company of Baltimore, Maryland v. Wallace B. COX and wife, Mrs. Molly W. Cox
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1974-08-19
Citations: 299 So. 2d 192
Docket Number: No. 47620
Parties: SECURITY INSURANCE AGENCY, INC., and Maryland Casualty Company of Baltimore, Maryland v. Wallace B. COX and wife, Mrs. Molly W. Cox.
Judges: RODGERS, P. J., and PATTERSON, INZER, ROBERTSON and WALKER, J J., concur.
Reporter: Southern Reporter, Second Series
Volume: 299
Pages: 192–198

Head Matter:
SECURITY INSURANCE AGENCY, INC., and Maryland Casualty Company of Baltimore, Maryland v. Wallace B. COX and wife, Mrs. Molly W. Cox.
No. 47620.
Supreme Court of Mississippi.
Aug. 19, 1974.
Snow, Covington, Temple & Watts, Meridian, W. D. Moore, Philadelphia, for appellants.
Alford & Mars, Philadelphia, for appel-lees.

Opinion:
SUGG, Justice:
Wallace B. Cox and wife sued Security-Insurance Agency, Inc. and Maryland Casualty Company in the Circuit Court of Neshoba County, Mississippi and alleged that defendants negligently failed to renew a $3,000 policy of fire insurance covering plaintiff's rental house which was destroyed by fire on November 27, 1971. A trial resulted in a jury verdict and judgment against both defendants in the amount of $3,000 and both defendants appeal.
Security is a local insurance agency and handled insurance for the Coxes. In addition to the rental house, plaintiffs owned a home in which they resided which was insured for $20,000 under a policy procured by Security from Maryland. The first policy on the home property was for a 3 year period beginning October 4, 1968 and ending October 4, 1971; the second policy was for the 3 year period beginning October 4, 1971 and ending October 4, 1974.
Security also placed insurance with Highlands Insurance Company on the rental home owned by the plaintiffs in the amount of $3,000 for a one year period from June 24, 1968 to June 24, 1969. Highlands did not renew the policy on the rental home because they ceased doing business in Neshoba County. Mr. Har-bour, Manager for Security, was informed by Mrs. Cox that they desired insurance on the rental house and that if he could not insure the rental house they would not keep the insurance on their home with Security unless Security could secure insurance on both houses. Pursuant to this conversation Security placed $3,000 insurance on the rental property with Maryland for the period July 12, 1969 to July 12, 1970. The policy was renewed by a second policy from Maryland running from Tuly 12, 1970 to July 12, 1971.
Mr. Harbour testified that he told Mrs. Cox before July, 1971 that he had a notice from Maryland that it would not accept renewal of insurance on the rental house, but that Security represented other companies known as surplus line companies which would probably insure the rental house at a higher premium. He testified that Mrs. Cox told him that they would think about it and that they might not insure the rental house. '
Both plaintiffs denied that such conversation took place and stated without equivocation that they relied on Security to send them notices in advance of the expiration of their fire policies; and, that they always paid upon receipt of such notices. Plaintiffs both testified that had they been advised that Maryland was not going to renew the policy they would have secured insurance on the rental house.
Mr. Harbour testified that it was Security's custom and practice to send renewal notices 30 to 40 days before expiration dates of policies when it could and that it was done "most of the time." He was then asked if he was not supposed to send the notices before expiration and his answer was: "If we can; that's our business."
Plaintiffs presented the case in circuit court on the theory that Security was their agent to procure insurance for them on both houses; that since Security agreed to procure a policy on the rental house in order to retain plaintiffs' insurance business on the home place, Security was under a duty to procure and keep insurance on both houses; and, further that Security was under a duty to notify them when the policies were to expire, but negligently failed to notify them that the policy on the rental house would not be renewed by Maryland.
We are of the opinion that this case is controlled by Citizens' Bank v. Frazier, 157 Miss. 298, 127 So. 716 (1930) where the bank solicited the cotton account of Frazier and in response thereto Frazier proposed that he would do business with the bank provided it would keep the cotton insured up to the aggregate amount of all loans made by him. The bank agreed to this provision. Frazier then borrowed $2,500 from the bank for the cotton account and the cotton was insured for $3,000. He later borrowed an additional sum of $3,000 and secured it with a deed of trust on 41 additional bales of cotton, but insurance was not secured by the bank on the cotton.
Upon granting the second loan the bank immediately requested its bookkeeper, who was a subagent for an insurance agency in Starkville, Mississippi to procure insurance for the additional loan. The subagent attempted to get into communication with the insurance agency by telephone but was unsuccessful. He wrote a letter to the insurance agency which was mailed after the close of business on Saturday night, but it did not reach the insurance agency until Monday morning following. On Sunday night following the loan, the warehouse and all the cotton was burned. The bank collected $3,000 in insurance, credited the proceeds on the two notes and demanded payment of Frazier of the balance which payment Frazier refused on the ground that the bank had agreed to keep the cotton insured up to the full amount of both loans and had failed to do so.
The Court noted that the case was tried on the theories that the contract between Frazier and the bank made the bank the insurer of the cotton and that all hazards to procure the insurance were at the risk of the bank. The bank responded that under either view the contract was ultra vires in respect to the bank. The Court determined there was no issue of ultra vires for the reasons stated in the opinion and concluded that the contract did not reasonably bear the construction as contended for under either theory.
In an opinion by Justice Griffith, the Court then stated:
It is the duty of courts to give to a contract that construction or interpretation, if possible, which will square its terms with fairness and reasonableness, each party toward the other, and, moreover, that its terms shall be construed, if possible, so as to make it legal, rather than take another course of construction which would make it either absolutely illegal or else would seriously endanger it on that issue.
With all these considerations in view, and having carefully and minutely examined this entire record, we are of opinion that the only reasonable and just view that can be taken of this transaction is that the contract made between the parties, and its effect, was one by which the bank agreed to act for appellee in procuring the insurance, and to use that degree of diligence and care therein about which a reasonably prudent man would ordinarily exercise in the transaction of his own business of a like nature, and this includes, of course, the obligation, if the facts of the case raise such an obligation, of furnishing to the principal the proper and pertinent information concerning the progress of the business thus intrusted. Our view is that the obligation of the bank to appellee in respect to the procuring of the insurance was that of agent and principal, and that the case should be submitted to the jury, with proper instructions, under the well-understood rules which govern that relation. (157 Miss, at 302, 127 So. at 717).
It is our view under the holding of Citizens' Bank, Security was agent for plaintiffs for the purpose of procuring insurance on the rental home. When the plaintiffs entrusted their insurance business to Security for the purpose of securing insurance on the rental house in addition to that in force on the home place and relied on Security to give them renewal notices, Security owed plaintiffs the duty to use that degree of diligence and care with reference thereto which a reasonably prudent man would exercise in the transaction of his own business. Security was not thereby absolutely required to procure the insurance, but was required to furnish its principal, the plaintiffs, proper and pertinent information as to. such insurance which would include the duty to inform plaintiffs that Maryland was not going to renew the insurance on the rental house.
Security claimed that it notified the plaintiffs that Maryland was not going to renew the policy. This was denied by the plaintiffs and this question was decided by the jury adversely to Security on conflicting evidence. We therefore affirm the judgment against Security on the theory that they were negligent in failing to notify the plaintiffs that the policy on the rental house would not be renewed by Maryland.
We reverse the judgment as to Maryland because the policy of insurance expired by its own terms and Maryland was not a party to the agreement between Security and the plaintiffs.
Affirmed in part, reversed in part and rendered.
RODGERS, P. J., and PATTERSON, INZER, ROBERTSON and WALKER, J J., concur.
GILLESPIE, C. J., and SMITH and BROOM, JJ., dissent.