Court Opinion

ID: 9444505
Source: CourtListenerOpinion
Date Created: 2023-08-03 21:02:55.858395+00
Date Added: 2024-06-11T17:29:53.762597
License: Public Domain

DAWKINS, District Judge
(dissenting).
While I recognize, of course, that we are bound by the law of Georgia in this case, I cannot agree that Georgia law requires reversal. The trial judge, who is familiar with the law of that State and whose opinion indicates thorough study of the principles involved here, held that the appellant, through its duly authorized agent acting in the scope and pursuing the duties of his agency, was guilty of a tort for which the appellee could recover; and I think his decision is sound.
Proper presentation of my views requires the statement of facts not contained in the majority opinion. The evidence discloses, and the trial court found, that appellee was engaged in the business of buying and selling used chicken feed bags, and of processing and cleaning such bags for others. More than a year before the loss involved here, he contacted appellant’s agent for the purpose of obtaining insurance coverage on the bags in his place of business; and the agent wrote a reporting form policy providing fire coverage on the inventory, up to a limit of $8,500, dated January 16, 1952. During the ensuing year, notwithstanding the provisions of the Georgia statute, and of the policy itself requiring written reports and endorsements, oral reports of inventory were made; and on three occasions, pursuant to oral discussions, the policy was endorsed to change the limit of coverage. This was in accordance with the custom followed by appellant’s supervised agent.
When the first policy expired at the end of a year, a new policy (the one involved here) was written — again pursuant to oral discussion — with limits of $10,500; but it is not clear whether the policy was delivered to appellee or kept by appellant’s agent. In the meantime, appellee had entered into a contract to clean and process bags for J. D. Jewell, Inc. (called Jewell), and had accumulated quite a large stock of Jewell’s bags. He thought at first that those bags would be covered by Jewell’s insurance and did not report them under his own policy; but when Whaley (the employee of the agency who handled appellee’s insurance business) called upon him on January 23, 1953, appellee asked if such bags should be reported on his form. Whaley was not certain, and conversations followed with Jewell’s attorney. It developed that contractual provisions required appellee to insure the bags while in his possession; appellee told Whaley to increase the limits on the new policy to $25,000; and Whaley, who had participated in the discussions, told him the bags were covered as of that time. On February 8, 1953, a fire destroyed all bags in appel-lee’s establishment, and it was discovered that no endorsement increasing the limits of the policy had ever been written. Appellant paid the original policy limits, but refused to meet appellee’s demands for the payment of the remaining sum up to $25,000.
Appellant does not, indeed, could not under the evidence, contest these findings; yet it argues, and the majority holds, that because its duly constituted agent failed to carry out his duties, it owes appellee nothing beyond the written policy limits. With such a conclusion, so patently contrary to the right of the case, I cannot agree.
The agent here had full authority to issue the policy, and to endorse it in any way consistent with its purpose and the relationship of the parties. It has been shown that the custom during the entire *46existence of the relationship had been to arrange all matters orally without reference to the formality of reducing agreements to writing. It can hardly be denied that the agent and appellee had never given serious thought to that formality; and I believe it is fair to state that appellant must have known of the manner in which the business was being handled. It is well known that few insurance companies write policies by direct negotiations, but rely upon resident agents whom they supervise through company employees.
There is nothing novel or unjust in the theory that contractual relationships can create a situation wherein one party may, because of that relationship commit a tort upon the other party. In other words an act or omission which would ordinarily be lawful or harmless may well become unlawful and give rise to damages in tort because of the peculiar relationship between the parties. Such is the situation here.
After finding that the oral contract could not be enforced because of the statute discussed in the majority opinion, the trial judge found that under Georgia law this was a proper case for holding the company liable for the negligent omission of its agent, citing Seabrook v. Underwriters’ Agency, 43 Ga. 583; Roberts v. Germania Fire Ins. Co., 71 Ga. 478. To these cases, I would add Corporation of Royal Exchange Assurance of London v. Franklin, 158 Ga. 644, 124 S.E. 172, 38 A.L.R. 626, which recognizes the rule' that the company is estopped to deny the authority of an agent who promises to effect the writing required by law.
I believe these eases furnish sound authority for the view that Georgia law recognizes the distinction in such cases between enforcing an oral contract of insurance and holding an insurer liable for the negligence of its agent; and it seems significant to me that appellant cites no cases wherein the distinction was presented and rejected.
It is true that this view, if maintained, would result in the same amount-of liability on the part of appellant which would have existed if the written endorsement had been made. However, this result would flow from the fact that the damages are the amount appellee would have collected had the tort not been committed, not from the enforcement of an oral contract. The majority view overlooks the fact that the appellee had done all he could reasonably be expected to do to protect himself against loss and that his loss resulted from the negligent or willful failure of appellant’s-agent to take the final, formal action. It imposes upon the insurance customer in Georgia the affirmative duty to prevent or avoid the effect of negligence on. the part of the company and its agents. I respectfully dissent.