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Omni Overseas Freighting v. Cardell Ins.





APPEAL from the Circuit Court of Cook County; the Hon. JOHN J. HOGAN, Judge, presiding.


The plaintiff, Omni Overseas Freighting Co., Inc., (Omni) filed an action against the defendants, Cardell Insurance Agency (Cardell) and Carmen Raguso, alleging failure to procure liability insurance in accordance with the plaintiff's instructions. The defendants appeal from a judgment in the plaintiff's favor which was entered following a trial without a jury in the circuit court of Cook County. On appeal, the defendants argue the trial court erred (1) in finding that Omni proved a breach of an agreement with Cardell and Raguso to procure insurance coverage; (2) in holding that Omni was not obliged to read its policy and is not bound by its terms; (3) in finding that Omni had met its obligation to tender the defense of claims against it to defendants; and (4) in admitting into evidence the unpaid invoices of Omni's attorneys without proof of the reasonableness of the charges.

The testimony given at trial revealed the following facts. Omni is engaged in the business of handling and distributing containerized cargo from the Orient. In August 1973, Clarence J. Calabria, president of the plaintiff company, met with the defendant Raguso to discuss insurance coverage. Calabria testified that he told Raguso he wanted coverage which would protect him if his dock personnel damaged something during handling. Raguso testified that Calabria originally told him that he wanted comprehensive general liability, workmen's compensation and possibly group hospitalization insurance. The defendants' answer to the complaint admitted that the plaintiff hired them to obtain insurance coverage for the plaintiff for any liabilities which the plaintiff might incur for damage to cargo, belonging to others, while such cargo was in the plaintiff's custody.

Raguso told the Hartford Insurance Group (Hartford) what the plaintiff had told him concerning the desired coverage. When he got the policy from Hartford he mailed it to the plaintiff. On cross-examination Raguso said he did not remember if he delivered the Hartford policy to Omni. Calabria said he received an insurance policy from Hartford and was charged a premium for it. Calabria also testified that he never received a copy of the Hartford policy; that he only received a booklet. In June of 1974, Raguso told Calabria that the Hartford coverage consisted of marine insurance. The policy was subsequently cancelled, the premiums were returned, and Hartford refused to issue the type of policy requested by the plaintiff. Calabria testified that Raguso then told him he would procure the type of insurance requested by Omni.

The plaintiff introduced into evidence two Transamerica Insurance Company (Transamerica) policies which were procured by Raguso for the plaintiff following the discovery that the Hartford policy was for marine insurance. One was a "Mercantile Open Stock Burglary" policy and the other was an "Inland Transit" policy. The plaintiff also introduced into evidence a letter dated October 27, 1975, from Transamerica to Raguso, indicating that the burglary policy did not cover a cargo damage loss. Also introduced was a "return premium notice," dated August 27, 1974, from Transamerica to Raguso, covering the inland transit policy. The notice showed that the cancellation method was "flat," and contained a handwritten note saying "cargo policy issued in error." The policy was cancelled effective July 17, 1974, the date of issuance, according to the notice.

Calabria testified that he had never seen the return premium notice. He also said he did not know if he had a receipt for the payment of the premium on the inland transit policy. He did not read that policy when he received it. He does not know if he was billed for it; he paid every invoice that Raguso sent him.

Raguso testified that the plaintiff never paid the premium on the inland transit policy. However, on cross-examination he admitted it was possible that he never billed the plaintiff for it. At his deposition Raguso said he had paid Transamerica the premium on the inland transit policy.

The plaintiff also introduced into evidence a "cancellation receipt for all cancellations including lost policies" showing receipt of the cancellation of the inland transit policy and signed by "Bud Calabria" with Raguso as witness. Calabria testified he never saw the document until it was received from Transamerica during the course of the litigation and that it was not his signature on the document. He testified that his nickname is "Bud." He also testified that he never authorized the cancellation of the inland transit policy and that he was never notified that the policy had been cancelled.

Raguso identified his own signature on the inland transit cancellation notice. He said he did not recognize the other signature. Raguso admitted receiving the notice of cancellation from Transamerica and said he did not send the notice to Omni. On redirect, Raguso testified that he is familiar with insurance company practices and that the usual procedure of such companies is to send notice of termination to both the insured and the broker.

Following closing arguments the court entered judgment for the plaintiff and against the defendants in the amount of $9,613.43 plus costs.

The defendants argue the plaintiff failed to carry its burden of proving the defendants had breached an agreement to procure insurance coverage. The defendants state they did in fact procure the Transamerica inland transit policy, which did provide the desired coverage, and that, according to Raguso's testimony, the policy was never paid for. The plaintiff takes issue with defendants' assertion that the inland transit policy provided the proper coverage. The defendants argue they acted in good faith and with reasonable care, skill and diligence to place the insurance in compliance with the plaintiff's directions, and are thus not liable for any damages.

• 1, 2 In Pittway Corp. v. American Motorists Insurance Co. (1977), 56 Ill. App.3d 338, 370 N.E.2d 1271, this court wrote:

"As a general rule an insurance broker is bound to exercise reasonable skill and diligence in the transaction of the business entrusted to him and will be responsible to his principal for any loss resulting from his failure so to do. [Citation.] * * * [W]e observe that the primary function of an insurance broker as it relates to an insured is to faithfully negotiate and procure an insurance policy according to the wishes and requirements of his client. [Citations.] * * *

The law places a particular burden on an insurance broker to exercise competence and skill when he renders the service of procuring insurance coverage." 56 Ill. ...

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