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WELLS PETROLEUM CO. v. FIDELITY-PHENIX FIRE INS. CO.

June 10, 1954

WELLS PETROLEUM CO.
v.
FIDELITY-PHENIX FIRE INS. CO. OF NEW YORK ET AL.



The opinion of the court was delivered by: LA Buy, District Judge.

This is an action upon policies of fire insurance issued by the defendants to the plaintiff seeking the recovery of damages for loss by fire on November 9, 1950, to a certain building owned by the plaintiff and described in defendants' policies of insurance. Copies of the policies are attached to plaintiff's complaint, and it is alleged in the complaint that they were in force and effect on November 9, 1950, the date of the fire. Each of the defendants have filed a separate answer to the plaintiff's complaint and therein denied that their respective policies of insurance were in force and effect on November 9, 1950, the date of the fire, and affirmatively allege that said policies of insurance were cancelled on August 3, 1950, by virtue of replacement and substitution of the insurance by the plaintiff.

The plaintiff is a corporation organized under the laws of the State of Illinois, with its principal office and place of business located in the State of Illinois; and each of the defendants is a corporation organized under the laws of States other than the State of Illinois, and each is authorized to do business in the State of Illinois.

The amount in controversy, as between the plaintiff and each of the defendants, is in excess of the sum of $3,000, exclusive of interest and costs.

Now at the close of all of the evidence offered in the case on behalf of the plaintiff, each of the defendants has filed a motion for directed verdict. This necessitates a summary of the facts as they appear from the plaintiff's evidence and a review of the law which, in the opinion of the Court, is applicable thereto.

The property owned by the plaintiff and described in the defendants' policies of insurance was located at the junction of Highway 66 and 66A in Will County, Illinois, and consisted of a hollow concrete block and frame building used for automobile filling station and restaurant purposes.

In September of 1946 the plaintiff appointed B.E. Baal to act as its insurance broker in the placing of fire and extended coverage insurance upon the property involved in this suit. In this appointment Baal was instructed and empowered by the plaintiff to obtain a gross amount of insurance, approximately $32,000, upon the property and to do all that was necessary to keep the property insured in that amount. Baal was not instructed or limited in any manner as to the identity of the companies issuing such insurance, nor as to the specific amount of insurance to be placed in any particular company.

Baal was, and is, a licensed insurance broker in the State of Illinois and in 1946, and for some time prior thereto, he officed in the office of Homer Gwinn & Company, a general insurance agency licensed by the State of Illinois. Pursuant to the direction and authority given to him by the plaintiff, he placed the insurance coverage requested through the Homer Gwinn & Company agency in six companies, including the four defendant companies, as follows:

Company                 Policy No.                 Amount
  Equitable Fire
    & Marine              209558                   $7,150.00
  Home Insurance          6874                       6,300.00
  Fidelity-Phenix Fire    OCWDB 6827                 4,200.00
  National Fire           OC 282150                  5,000.00
  Provident Fire          BK 22542                   5,000.00
  Rhode Island            15-25016                   3,150.00
                                                   ----------
                                                   $30,800.00

There was a small additional amount of coverage placed in certain of these companies covering shrubbery and the like, not material here, but which brought the total coverage to the approximate figure of $32,000.

Baal continued his office arrangement with Homer Gwinn & Company until June 23, 1950, when, as the result of a disagreement not material here between him and Mr. Homer Gwinn of the agency, he left that agency and moved his office to the American Insurance Agency, Inc. Thereafter, on August 7, 1950, Baal addressed a letter to Homer Gwinn & Company in which he stated that he had replaced all business which he had written through the Homer Gwinn & Company agency as of August 3, 1950, and that the policies would be forwarded through the clearing house for cancellation on a prorata basis. The pertinent portion of this letter is as follows:

    "Furthermore, as I construe your threat of serving
  cancellation notices to my clients, tantamount to a
  notice to me that you will not further service my
  business my only recourse, to protect my business and

  safeguard the interest of my clients, is to pick up
  all policies written by or through your agency and
  return them to you for cancellation prorata as of
  August 3, 1950, the day on which I received your
  notice and on which day I arranged for replacement
  coverage." (Emphasis supplied.)

On August 15, 1950, the Homer Gwinn & Company agency replied to Baal's letter of August 7, 1950, by stating that should Baal elect to cancel all business written through the agency, as stated in his letter, the short rate basis of premium return would be insisted upon. Baal's reply to the Homer Gwinn & Company letter of August 15, 1950, on the following day, August 16, 1950, stated, in part, as follows:

    "So far as other business is concerned, I have
  consulted authorities who have sustained my position
  that your action in your letters of August 2nd and
  3rd in truth and in fact called for the cancellation
  of my business and a prorata credit is in order as of
  August 3rd, the day on which I covered all exposures.
  The policies are going through the clearing house as
  fast as I pick them up." (Emphasis supplied.)

As appears from this exchange of correspondence, Baal did on August 3, 1950, replace all of the insurance which he had placed through the Homer Gwinn & Company agency with policies of insurance placed in other companies through the American Insurance Agency, Inc. With specific reference to the policies obtained for the plaintiff through the Homer Gwinn & ...


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