Court Opinion

ID: 9857799
Source: CourtListenerOpinion
Date Created: 2023-09-24 16:01:50.729241+00
Date Added: 2024-06-11T09:46:15.920689
License: Public Domain

McCORMICK, Justice
(dissenting).
The majority apparently agrees with plaintiff that if an agent negligently fails in an undertaken duty to insure he cannot be excused by the insured’s failure to familiarize himself with the actual terms and conditions of the policy obtained. However, the majority not only forgives trial court for having wrongly told the jury the opposite, but refuses to find error in trial court’s denial of plaintiff’s requested instruction embodying the correct rule. I respectfully dissent.
This appeal presents a much narrower question than whether plaintiff’s theory of the case was submitted. Plaintiff simply claims trial court erred in instructing that defendant’s undisputed duty to use reasonable care, diligence and judgment was qualified by a requirement plaintiff know the terms and conditions of policies on its property. The correct rule, crucial to the case but not stated by the majority, is that an insurance agent cannot be relieved from breach of duty to procure insurance with terms and conditions specified by his principal by the principal’s failure to read and understand the policy obtained. This is because the principal “is entitled to rely upon the agent having performed his duty.” Hampton Roads Carriers v. Boston Insurance Company, 150 F.Supp. 338, 343 (D.Md.1957). See also Ursini v. Goldman, 118 Conn. 554, 173 A. 789 (1934); Progress Laundry Company v. Schweik, 332 Ill.App. 408, 75 N.E.2d 390 (1947); Harris *860v. A. P. Nichols Investment Company, 25 S.W.2d 484 (Mo.App.1930); Barton v. Marlow, 47 N.J.Super. 225, 135 A.2d 670 (1957); Israelson v. Williams, 166 App. Div. 25, 151 N.Y.S. 679 (1915), appeal dismissed, 215 N.Y. 684, 109 N.E. 1079; Elam v. Smithdeal Realty & Ins. Co., 182 N.C. 599, 109 S.E. 632 (1921); Franklin v. Western Pacific Insurance Company, 243 Or. 448, 414 P.2d 343 (1966); 43 Am.Jur. 2d Insurance § 176 at 233-234; annot. 29 A.L.R.2d 171 at 196.
As the majority opinion recognizes, plaintiff’s petition claimed defendant breached his duty as plaintiff’s insurance agent to secure adequate insurance coverage and thereby caused the loss for which recovery is sought. An insurance agent owes his principal a duty of reasonable care, diligence and judgment, and the majority rightly decides, contrary to defendant’s contention, that defendant was plaintiff’s agent. The majority also acknowledges, at least implicitly, there was a jury question as to whether plaintiff actually delegated responsibility to defendant to secure sufficient insurance coverage to include the loss involved. Instructions 7 and 8 outline defendant’s duty in the event the jury finds there was such delegation; no one complains about them. However, the defense took at least three paths in response to plaintiff’s claim, alleging: (1) there was no request to obtain greater coverage than was obtained; (2) defendant kept plaintiff advised that its coverage was inadequate on the inventory that burned; and (3) his duty in either respect could not be found breached since plaintiff had the policy and it showed the actual coverage. This appeal only concerns the issue raised by the third argument, which is somewhat like a defense of confession and avoidance. Plaintiff countered this third approach by saying it did not know the actual coverage afforded by the policy because it relied upon defendant doing what he was asked rather than upon study of the policy.
It therefore became important to plaintiff to have the jury told plaintiff could rely upon its agent, and the agent’s duty was not lessened or altered by plaintiff’s failure to familiarize itself with the policy. This concept is inherent in the fiduciary relationship involved. Instruction 9 purports to amplify defendant’s duty but errs in saying an owner of insurable property has a duty “not chargeable to [his agent’s] neglect” to familiarize himself in general with “the terms and conditions of the insurances issued upon his property.” The majority seems to acknowledge this error but finds it is not “reversible” for two main reasons. The first is because Instructions 7 and 8 are not wrong, and the second is because “any possible prejudice was removed by the portion [of Instruction 9] 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 reasoning begs and does not answer the question whether plaintiff had a right in view of the evidence and issues to have the jury affirmatively given the correct rule on the issue of reliance.
The record reveals great controversy on this issue. Indeed, it is much of what the lawsuit was about. Defendant knew in 1963 that plaintiff’s business was growing steadily and that plaintiff wanted adequate insurance protection of its growing inventory. Defendant learned of the inland fire and marine policy and recommended it to plaintiff as appropriate for its needs. The policy was sold on the basis it would solve an existing coverage problem, including the site of the loss here, and would base premiums upon monthly reports of inventory value. Coverage was to fluctuate with inventory. Defendant testified the supposed advantage to the insured is he thereby pays only for the coverage he gets. What plaintiff claims defendant failed to disclose was that coverage was limited by the policy to $280,000 at the location involved here, even though premiums were to be paid as if inventory was fully protected. Plaintiff had its inventory in eight build*861ings in several different locations. Coverage was separately limited on each building. Two buildings were at the site of the fire, a hollow block building with inventory coverage to $80,000 and a wood frame building with coverage to $200,000 ($120,000 prior to increase by enforcement in May 1966). The fire destroyed the entire inventory in these buildings and it is the uninsured portion of that loss for which recovery is sought here.
Defendant acknowledged the peculiarity of requiring premium payment as if the inventory was insured to full value:
“ * * * I agree that there’s a certain amount of injustice in there, because it does create an adverse penalty on that insured who happens to have more goods than he has limits, but he still has to pay premiums on the whole amount.”
Is it surprising that plaintiff claims it believed it was fully covered? Plaintiff’s position gains credence from the fact its inventory value at the site involved frequently exceeded $280,000. Every month from 1965 until the June 9, 1968, fire, plaintiff reported and paid premiums based upon substantially higher inventory values. These reports included figures ranging from $321,000 to $496,000 and on the date of the fire $395,000. Plaintiff’s president testified he thought the policy figures limiting liability only represented the basis upon which a deposit premium was computed and actual values insured were determined from the monthly reports with an annual invoice for premium deficit. The premiums were in fact paid upon substantially that basis. After the loss defendant must have had some feeling plaintiff’s belief as to coverage was genuine because he said:
“I had entertained the thought at one time I might try to make a case for the benefit of Collegiate that their acceptance of the premium beyond that would give them coverage beyond that,' in an effort to try to reimburse them for the amount paid. I just presented it to Travelers as a way of looking at this thing, and they wouldn’t agree to it.”
The record is also replete with examples of defendant’s insurance services over the years, lending support to plaintiff’s claim his agency was like a department of the company. Although disputed, there is substantial evidence plaintiff relied upon defendant to provide it with a policy which would assure its inventory was fully protected against fire loss. There is also evidence plaintiff did not know and understand the coverage limitations of the policy.
Thus, not only was the principle of law upon which plaintiff requested the jury be instructed correct, but also there was substantial evidence in the record to support an instruction on it. In such circumstances a correct instruction on the issue was required. We have said, “ * * * [Instructions should fairly and completely present the jury with those issues they are to decide. [They] are the jury’s only source of guidance for the correct application of the law to the facts.” Lovely v. Ewing, 183 N.W.2d 682, 684 (Iowa 1971), and citations. The jury needed and was entitled to know the law on the issue of reliance. Plaintiff’s right to an accurate instruction on the principle is especially clear because its requested Instruction 5 embodied the applicable rule. Even if the requested instruction was not framed so trial court could give it literally, it alerted the court to a pertinent legal principle not otherwise covered by the instructions and on that basis alone should have been appropriately communicated to the jury. See Henneman v. McCalla, 260 Iowa 60, 69, 148 N.W.2d 447, 452 (1967), and citations. The requested instruction called trial court’s attention to the issue so that the misstatement of law in Instruction 9 cannot be viewed as inadvertent.
Apart from this, the reasoning of the majority in holding trial court’s error somehow neutralized by Instructions 7, 8 and the remainder of Instruction 9 is mistaken. Instructions 7 and 8 do not even *862reach the issue of reliance and could hardly purge the record of error on a subject they do not discuss. Even if they did include the correct rule they could not cure the error. “Giving an incorrect instruction is not obviated by giving a correct one on the same issue since it is impossible to tell whether the jury followed the correct guide or the incorrect one.” Wheatley v. Heideman, 251 Iowa 695, 713, 102 N.W.2d 343, 354 (1960).
As a matter of fact, Instructions 7 and 8 shed no light on the issue of reliance. That is why Instruction 9 was necessary. As to it the majority takes an untenable position when it first concedes disagreement with trial court’s positive statement that an owner has a duty to know the terms of his insurance policies and then finds it nonprejudicial because omitted from the immediately subsequent recital of what plaintiff was to advise Stoll in applying the rule to this case. There is no problem reconciling what is first and later said in the instruction. The first statement is a general statement of plaintiff’s purported duty as owner of insurable property. The second simply tells the jury what plaintiff must advise its agent. There is no inconsistency and the second statement does not in any way limit, modify, or change the first. In fact it is built upon the first and entirely consistent with it. It would not serve any purpose to repeat plaintiff’s alleged duty to familiarize itself with terms and conditions of insurance policies issued on its property in a paragraph of the instruction telling what plaintiff must advise its agent before it is obtained. The interpretation placed on the instruction by the majority is strained, hy-pertechnical and unjustified. Moreover, “The real test of the meaning and effect of an instruction for the purpose of review * * * is, the idea which the language objected to is fairly calculated to convey to the minds of jurors drawn from the ordinary walks of life * * Law v. Bryant Asphaltic Paving Co., 175 Iowa 747, 753, 157 N.W. 175, 178 (1916); see also Leaders v. Dreher, 169 N.W.2d 570, 575 (Iowa 1969). This principle is as applicable when an instruction is defended as when it is attacked. The meaning imputed to Instruction 9 by the majority flunks the test. Its reasoning belies the plain meaning of what trial court said on perhaps the most significant issue in the case. I believe lay jurors from ordinary walks of life would take the court’s statement to mean plaintiff could not recover if it did not know the coverage limitations of its policy before the fire and am confident that is what defense counsel argued. The briefs show that is how counsel on both sides understood it.
I would reverse and remand for new trial.
UHLENHOPP and REYNOLDSON, JJ., join in this dissent.