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Country Mutual Insurance Co. v. Adams

OPINION FILED JUNE 25, 1980.

COUNTRY MUTUAL INSURANCE COMPANY, PLAINTIFF-APPELLANT,

v.

GEORGE F. ADAMS, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Kane County; the Hon. MARVIN D. DUNN, Judge, presiding.

MR. JUSTICE LINDBERG DELIVERED THE OPINION OF THE COURT:

Rehearing denied July 24, 1980.

Plaintiff, Country Mutual Insurance Company (Country Mutual), appeals from a judgment entered on a jury verdict in favor of its agent, defendant George F. Adams, in Country Mutual's suit alleging breach of contract and the wrongful advising of an insured.

Adams entered into an agent's agreement with Country Mutual in 1967 to solicit and sell insurance. The instant action grew out of a policy sold by Adams to Gerald Schweigert in 1970 to insure his pickup truck and landscaping business. After the policy had been issued by Country Mutual, Schweigert asked Adams if his homemade trailer was covered and Adams responded that it was. Thereafter Schweigert was involved in an accident when his trailer became unattached from his truck and crossed the center line and collided with an oncoming vehicle. The occupants of that vehicle filed suit against Schweigert.

The insurance policy issued to Schweigert did not in fact cover trailers. Country Mutual filed a declaratory judgment action in the circuit court of Kane County to determine if it had any liability as a result of Schweigert's accident. The court reformed the policy to cover the collision in question and to require Schweigert to pay Country Mutual any additional premiums regularly charged for trailer coverage. Country Mutual thereafter settled the claims growing out of the accident and then filed this action seeking reimbursement from Adams.

In the instant action, Adams testified that he knew he lacked authority to alter or amend contracts of insurance. He further testified that while he had access to the services of an underwriter, he did not check to see if trailers were covered when asked by Schweigert about such coverage. Much of the testimony at trial concerned the insurability of the trailer. Schweigert testified, over plaintiff's objection, that after the accident he was able to insure the trailer with a different company. The agent who had obtained this subsequent trailer coverage testified, again over objection, that he believed he could have also placed the trailer coverage with a number of other companies. Employees of Country Mutual testified concerning trailer coverage; one such witness stated that it was his belief that Country Mutual would not have insured the trailer in question as it was unsafe for road use. Adams testified that it was his belief that Country Mutual would have insured the trailer at the time of the original application.

After the close of all evidence, the jury was instructed as to the elements of plaintiff's case. Over plaintiff's objection, the following instruction was given as to "defendant's burden":

"That the plaintiff would have issued its commercial automobile policy to cover the two-wheeled trailer in question had an application for such been submitted to plaintiff at the time it received and approved the application for a commercial automobile insurance policy on the 1970 Chevrolet truck owned by Gerald Schweigert.

If you find from your consideration of all the evidence that this proposition has been proved, then your verdict should be for the defendant, but, if, on the other hand, you find from you consideration of all the evidence that this proposition has not been proved then your verdict should be for the plaintiff."

The jury returned a verdict in favor of defendant Adams. Country Mutual's post-trial motion was denied and this appeal followed.

The parties have discussed four issues on appeal: (1) whether Adams breached his contract or violated any duty owed Country Mutual, (2) whether in an action for damages by an insurer against an agent the question of the agent's liability or the amount of damages is controlled by the question of whether the insurer would have issued the coverages at issue had it been given the opportunity to do so, (3) whether irrelevant evidence with respect to whether Country Mutual would have accepted coverage of Schweigert's trailer was admitted at trial, and (4) whether the jury's verdict was against the manifest weight of the evidence.

I.

The major issue presented by this appeal is whether Adams' liability or the amount of damages is controlled by the question of whether Country Mutual would have issued the trailer coverage if it had been given the opportunity to do so. Country Mutual argues that the jury was improperly instructed in that this question is irrelevant. It is Country Mutual's position that Adams is unquestionably liable to it for its cost of settling the claim against Schweigert. An excellent discussion of this issue can be found in the recent case of United Pacific Insurance Co. v. Price (1979), 39 Or. App. 705, 593 P.2d 1214. In that case an insurance agent erroneously notified the insured of an incorrect starting date for coverage and an accident prior to the actual starting date exposed the insurer to liability. The court began its discussion by noting that the issue of an agent's liability based on facts such as this had not yet been decided in Oregon and then went on to review the key decisions from around the country before finding no agent liability. First discussed were cases like Michigan Mutual Liability Co. v. Shuford & McKinnon, Inc. (S.D. Miss. 1968), 292 F. Supp. 290, and Benner v. Farm Bureau Mutual Insurance Co. (1974), 96 Idaho 311, 528 P.2d 193, relied upon here by Country Mutual. The United Pacific court reasoned that "[b]roadly stated, these cases stand for the proposition that the breach of duty by the agent caused the insurance company to be liable for a ...


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