Court Opinion

ID: 9859252
Source: CourtListenerOpinion
Date Created: 2023-09-24 19:28:54.118301+00
Date Added: 2024-06-11T10:18:21.967605
License: Public Domain

REES, Justice
(dissenting).
As I am unable to agree with the majority I must respectfully dissent. I would reverse the trial court and hold plaintiff is not entitled to reformation.
The defendant insurance company contends its agent Lutes was acting beyond the scope of his authority in his representations at the initial meeting with the Johnsons and therefore the company was not bound thereby. The record shows Lutes was a soliciting agent for the company and was not empowered to write policies as his agency contract and the application forms signed by Merlin Johnson indicated. It is also abundantly clear from the record that Johnson could not have obtained double indemnity coverage such as the plaintiff contends for in this case from either the defendant company or any other company in the insurance industry. I agree with the majority that aviation accidents were within the primary coverage of the policy and that Johnson could have obtained primary coverage for $200,000, but that double indemnity could not have been secured by him in any amount under any conditions. I cannot agree with the trial court’s conclusion that even though Lutes did not have authority to change the terms and conditions of defendant’s contract that such fact would not prevent the reformation of the policy.
We have spoken heretofore on the question of the authority of an agent to bind its principal in connection with attempts to reform insurance contracts. In Den Hartog v. Home Mutual Insurance Association of Iowa, 197 Iowa 143, 146-147, 196 N.W. 944, 945, we said, “the insurer will not be permitted to avoid the policy by taking advantage of a misstatement in the application material to the risk which is due to mistake or negligence of its agent, and not to fraud or bad faith on the part of the insured.” However, in cases in which the insurer has been held to be bound by the knowledge of its agent, the insurance company, if it had known the facts, would have agreed to issue the policy coverage which through mutual mistake the insured thought he had. In Quinn v. Mutual Benefit Health & Accident Association, 244 Iowa 6, 55 N.W.2d 546, cited by the majority, the trial court merely held that the policy should be reformed to cover a condition the company would cover if in possession of facts. See also Green v. Phoenix Insurance Company, 218 Iowa 1131, 253 N.W. 36 (policy reformed to cover *777mortgagee’s interest irrespective of the identity of the real owner of property); Smith v. National Fire Insurance Company of Hartford, Connecticut, 201 Iowa 363, 207 N.W. 334 (policy allowed to be reformed to allow additional insurance); and Fitchner v. Fidelity Mutual Fire Association, 103 Iowa 276, 72 N.W. 530 (policy reformed to increase amount of allowed concurrent insurance).
Unlike the cases cited immediately above where it was apparent the insurance company would have issued a policy for the requested coverage if it had been apprised of the desires of the insured and which the insured mistakenly thought he had in this case even if the insurer had known what the insured wanted, the company would not have issued the desired coverage. It is also clear from the record that no company in the insurance industry would have provided the desired coverage which the plaintiff contends for in this case. Therefore, unlike the cases cited immediately above in which the insurance companies were trying to avoid liability to the insured solely because the agent was negligent in filling out the application, the matter before us here involves a defendant denying liability under the policy because it would not have issued the policy coverage desired in any case. The precedent cited above in which knowledge of the agent was imputed to the insurer is not, in my judgment, determinative of the issue in the matter before us now. I do not believe, as does the majority, that the rule relied on by the defendant company is inapposite.
We are required to determine whether Lutes, the agent of the defendant, had authority to bind the defendant company with his misrepresentations to the plaintiff’s husband that the insurance policy provided double indemnity coverage if Johnson came to his death accidentally while piloting an airplane, contrary to the express terms of the policy as written.
I would hold that Lutes had no power to bind the defendant company by his representations to the insured which would have altered the terms and conditions of the defendant’s policy. I do not feel it necessary to restate the principles of agency in detail as such principles were recently set out in State v. Sellers, 258 N.W.2d 292, 296-297 (Iowa 1977). It is clear to me Lutes had no express or implied authority to waive one of the terms in the double indemnity provision of the policy excluding recovery for accidental death while piloting an airplane, since such a limitation on the agent’s authority was contained in the agency contract between the company and Lutes, as well as on the application form signed by the insured. It is also patently obvious to me that Lutes had no apparent authority to alter the terms of defendant’s policy since it was clear to the insured that Lutes was a soliciting agent for the defendant and was empowered only to fill out the application form for the coverage desired. Such limited authority proceeding from the defendant to Lutes was apparent to the insured at the January 4, 1973 meeting when Lutes filled out the application form for the insured, which in and of itself revealed Lutes’ limited authority. Any mistake of Lutes is not imputable to the defendant company with the result that the company was not a party to a mutual mistake between Lutes and the Johnsons, and it therefore follows plaintiff did not establish by clear and convincing evidence the existence of a mutual mistake between Merlin Johnson and the defendant company which would permit or allow reformation of the insurance contract to eliminate the exclusionary clause therefrom. Further, since Lutes acted beyond his authority, any inequitable conduct or fraud committed by him as agent of the defendant is not imputable to the defendant so reformation of the contract is not available to plaintiff on such grounds. Since there is no ground for a reformation of the contract, I would hold the decree of the trial court granting such reformation should be reversed under our de novo review of the record.
I would reverse the trial court.
LeGRAND, J., joins this dissent.