Appeal from the United States District Court for the Northern District of Indiana, South Bend Division. No. S-77-C-125 -- Allen Sharp, Judge.
Before Pell and Tone, Circuit Judges, and Van Dusen, Senior Circuit Judge.*fn*
This is an appeal from a judgment which denied Prestige Casualty Company's (Prestige) action for a declaration that it need not defend and/or indemnify the appellee, Pearl M. Mashburn, under the terms of her automobile liability insurance policy in a wrongful death action arising out of a fatal automobile accident. The trial court held that an alteration in Mashburn's policy, which resulted in the termination of coverage of Mashburn's car involved in the accident, had been the result of the negligence of Prestige's insurance agents. The court imputed that negligence to Prestige and estopped Prestige from denying coverage under Mashburn's automobile insurance policy. We affirm on grounds to some extent different from those given by the district court.
On June 4, 1976, Mashburn purchased a liability insurance policy covering her 1967 Ford through George Payne, an insurance agent. Payne had submitted her application for coverage to the Ott and Heying Insurance Agency (Ott and Heying), which accepted the coverage and submitted the insurance contract to Prestige for issuance of a policy. During October of 1976, Mashburn and Payne discussed the addition to the existing policy of coverage for a 1970 Ford. Mashburn did not authorize the transfer of liability coverage from the 1967 Ford to any other vehicle. However, on October 29, 1976, Payne submitted a written memorandum to Ott and Heying requesting a transfer of coverage under the Mashburn policy from the 1967 Ford to the 1970 Ford. Ott and Heying subsequently wrote Prestige requesting this transfer of coverage.
Prestige responded to Ott and Heying's request for transfer of coverage by returning the letter with a stamp on it reading, "Endorsement Completed, Prestige Casualty Company, 11-2-76." Although Ott and Heying received this notice on November 7 or 8, 1976, neither such notice nor any other correspondence confirming the transfer was forwarded to Mashburn. Accordingly, no notice of the transfer of coverage from the 1967 Ford to the 1970 Ford was ever communicated to Mashburn, either in writing or orally, before November 11, 1976, when the fatal accident involving the 1967 Ford occurred.
Prestige contends that on the date of the accident, no coverage was afforded for the 1967 Ford because the transfer of coverage to the 1970 Ford had been completed when Prestige returned the stamped form to Ott and Heying. We disagree, as the failure of Prestige or its agents to deliver the endorsement to Mashburn prevented the transfer from taking place under the terms of the insurance policy.
The insurance policy printed by Prestige states under condition 14, entitled "Changes":
" . . . nor shall the terms of this policy be waived or changed, except by endorsement issued to form a part of this policy."
The language of this clause is straightforward. All parties agree that the description of the insured vehicle is a term of the policy. The policy clearly contemplates that an endorsement is a writing stating the insurance company's approval of a modification in the policy.*fn1 The only unclear word in the clause important to the resolution of this case is "issued." According to Webster's New International Dictionary of the English Language (2d ed. Unabridged, 1948), the definition of "issue" is the "act of sending out, or causing to go forth; delivery." In light of this definition, it is only logical to conclude that condition 14 of the policy requires that the issuance be to the party not making the endorsement, that is, to the insured or the insured's agent. See American Family Mutual Insurance Co. v. Bach, 471 S.W.2d 474, 479 (Mo.1971).
In our case, Prestige mailed the stamped form to Ott and Heying. The form was never forwarded by Ott and Heying to Mashburn. This action can only constitute an issuance to Mashburn if Ott and Heying was the agent of Mashburn for the purpose of receiving delivery of the endorsement. However, Ott and Heying was the agent of Prestige.
Prestige asserts that Automobile Underwriters, Inc. v. Hitch, 169 Ind. App. 453, 349 N.E.2d 271, 276 (Ind.App.1976), requires this court to reverse the district court's holding that Ott and Heying was the agent of Prestige. However, the Hitch case is factually distinguishable from the case at bar. In Hitch, the agreement between the insurance agency and the insurer specified that the insurance agency was an independent contractor. Additionally, the insurance agency represented several different insurance companies. Relying on these facts, the court held that the insurance agency was a "broker" and, therefore, the agent of the insured. Although the same two facts exist in the case at bar, other factors are present here which distinguish the cases. The Agency Agreement between Ott and Heying and Prestige provided that:
"(T)he Agency can solicit, receipt, and accept applications and proposals for insurance, endorsements, modifications, or other evidences of agreements of insurance; further the Agency can review, assess, and evaluate prospective risks, and where such risks are determined to be in the best interest of Prestige submit applications to Prestige Casualty Company for the purposes of the issuance of an insurance policy.
"(T)he Agency can collect, receive, and receipt for premiums on all policies solicited by the Agency.
"(T)he Agency shall comply with Prestige Casualty Company's rules and regulations governing the Agency's operations, and the Agency must strictly comply with all instructions from Prestige, and further the Agency must use those ...