Stock v. ADCO General Corp. , 96 N.M. 544 ( 1981 )

OPINION

WALTERS, Judge.

Floyd Stock owned a fleet of tractor-trailer units, one of which was destroyed in an accident on May 8, 1978. Following denial of his claim for collision loss, he instituted this suit against his insurance agent, Pierce Agency (Pierce); Pierce’s broker and Stuyvesant’s general agent, ADCO General Corporation (ADCO); and the insurer, Stuyvesant Insurance Company (Stuyvesant). This appeal by ADCO and Stuyvesant followed the trial court’s award of damages in favor of Stock against all three defendants, with judgment over in favor of Pierce against ADCO and Stuyvesant on Pierce’s cross-claim for indemnity and reformation of the policy, and recovery of Pierce’s attorney’s fees.

The facts upon which plaintiff complained are these: Stock, in August 1977, sought physical damage insurance for his fleet. After requesting and receiving bid proposals from several different insurance agencies, he obtained an application for insurance from Pierce, which had been furnished to the agency by ADCO. Stock completed it and submitted it to Mary Finley at Pierce Insurance Agency, Inc., providing with it a list of the drivers who would be operating the units. Subsequently, Pierce obtained coverage from two separate companies, Canal Insurance Company and Stuyvesant Insurance Company. The Stuyvesant policy was the one acquired through ADCO. Pierce had no agency agreement with Stuyvesant and had had no prior dealings with that company; in this transaction it dealt only with ADCO and had no direct contact with Stuyvesant.

The Stuyvesant policy, as issued, was not what was quoted to Pierce nor was it what the insured reasonably expected from the quotation. It contained a “named driver” endorsement which had not been requested or discussed, and the application form did not indicate the endorsement would be included in the contract of insurance. Knowing that the named driver endorsement is a departure from the usual provisions in policies, Stuyvesant furnished ADCO with a supply of special red stickers to be attached to the face page of the policy, which warned of the endorsement and its limited coverage. The sticker was not attached to Stock’s policy.

When the policy was received in the mail, neither Mary Finley nor Stock read it. Finley examined the declarations on the face sheet, and Stock simply placed the unopened policy in his office file. The premium for coverage was based on the value of the insured vehicles, not upon the driving records of the named drivers; therefore, neither Finley nor Stock was alerted to the endorsement by the amount of the premium charge. Consequently, neither Pierce nor Stock was aware of the named drivers limitation, nor that the name of one of Stock’s drivers, Joe Wisenbaler, was not added to the list of drivers. It was a tractor driven by Joe Wisenbaler that was destroyed, and upon which this suit arose.

By the date of the accident Stock had had the policy for approximately seven months. Following the loss, he read the policy and clearly understood the provisions of the named driver endorsement. Suit was filed after Stuyvesant refused to pay for loss of the unit because Wisenbaler’s name was not listed on the policy.

Stuyvesant and ADCO assert that the trial court erred in refusing to adopt requested findings relating to Stock’s acceptance and retention of the policy and his contributory negligence; in finding that Pierce acted as the agent-broker of Stuyvesant; and in finding Stuyvesant negligent. Stuyvesant appeals the judgment entered against it on Pierce’s cross-claim for attorney’s fees.

I.

Appellants, relying on Western Farm Bureau Mut. Ins. Co. v. Barela, 79 N.M. 149, 441 P.2d 47 (1968), argue that Stock received the policy prior to the accident, and had an opportunity to examine it for a reasonable time. Therefore, he had accepted its terms. They contend that the policy provisions were plain, clear, and free from ambiguity, and by his contributory negligence he is barred from recovery.

Stock admits the facts of receipt and retention and the clear language of the policy. Nevertheless, he points to Pribble v. Aetna Life Ins. Co., 84 N.M. 211, 501 P.2d 255 (1972), as support for his position that because he was never made aware of the existence of the named driver endorsement, and had reason to expect that the policy would be like others he had received insuring similar equipment against physical damage, he was required only to make such examination of the documents as would be reasonable under the circumstances.

In Pribble, supra, plaintiff’s employer obtained an accident-health policy from defendant company. After the plaintiff was seriously injured, company executives met with the insurer’s agent and were assured that the insurance policy would cover excess hospitalization and medical expenses beyond the workmen’s compensation benefits available to Pribble.

When plaintiff sought to recover medical and hospital expenses for treatments he would not have undertaken without this assurance, it was learned that the policy excluded occupational injury coverage. The company asserted that plaintiff had the obligation to read the policy. The Supreme Court refused to “mechanically charge” plaintiff with the duty of reading and understanding a contract of insurance, holding, instead, that under the facts of that case the insured was

. . . only bound to make such examination of such documents as would be reasonable for him to do under the circumstances; that he will only be held to that which he would be thereby alerted; and if the language is such that a layman would not understand its full ■ impact were he to attempt to plow through it, the documents will yield the maximum protection consistent with their language and the reasonable expectation of [the insured].

84 N.M. 211, 216, 501 P.2d 255.

Stock, like the plaintiff in Pribble, did not reasonably expect the insurance policy to contain a named driver provision. He thought he would receive a physical damage insurance contract like those he had received previously from other agents and other companies. He was not advised by Pierce that the Stuyvesant policy was different from policies he had received in the past. He was not bound to read the policy word for word. Accord Olszak v. Peerless Insurance Company, 119 N.H. 686, 406 A.2d 711 (1979); Batesville Insurance & Finance Co., Inc. v. Butler, 248 Ark. 776, 453 S.W.2d 709 (1970); Rider v. Lynch, 42 N.J. 465, 201 A.2d 561 (1964). See Stoes Brothers, Inc. v. Freudenthal, 81 N.M. 61, 463 P.2d 37 (Ct. App. 1969), and White v. Calley, 67 N.M. 343, 355 P.2d 280 (1960). “An insured has a right to presume that the policy received by him is in accordance with his application, and his failure to read it will, under this rule, not relieve the insurer or its agent from the duty of so writing it.” 17 Apple-man, Insurance Law & Practice 32, § 9406.

The trial court could properly refuse to adopt requested findings that Stock’s failure to read the policy constituted contributory negligence.

II.

Stuyvesant attacks Finding 7, that Pierce acted as agent and broker for ADCO and Stuyvesant. It argues that since there was no agency relationship between Stuyvesant and Pierce, liability could not be passed on to Stuyvesant.

We consider Finding 7 superfluous when all of the findings are read together. Findings 3 and 4 reflect negligence independent of any agency concept, i. e., ADCO failed to follow company practice to notify of a restrictive endorsement by red-flagging the policy, and Stuyvesant issued a policy different from the one quoted to Pierce.

ADCO’s liability rests upon its breach of an agent’s duty to “obey all reasonable instructions [of its insurer] and . . . [to] exercise reasonable care in carrying out its orders.” National Grange Mut. Ins. Co. v. Wyoming County Ins. Agency, 156 W.Va. 521, 195 S.E.2d 151, 154 (1973). Stuyvesant’s negligence resulted from the issuance of a policy at variance with the policy quoted; thus it breached company policy itself in failing to attach a red sticker or notifying ADCO of its obligation to do so. See Appleman, supra.

The liability of ADCO and Stuyvesant, therefore, need not be considered under agency concepts. Their liability is sufficiently rooted in negligence to support the court’s decision, regardless of Finding 7.

III.

As a kindred argument to the one above, Stuyvesant contends the trial court imposed a “duty to warn” upon the appellants. ADCO, in its brief, does not contest liability to Stock on any ground other than Stock’s contributory negligence. That issue was decided against defendants when the trial court refused their requested findings on contributory negligence, and we have found no error in the court’s denial of those instructions. The attack on Findings 2 and 4, therefore, relates only to Stuyvesant’s liability.

Stuyvesarit’s argument necessarily is based on Findings 2 and 4:

2. Issuing an insurance policy covering vehicles which contains a “named driver endorsement” is such a departure from the usual provisions of policies and is so restrictive that a warning or flag should have been used to call attention to the “named driver endorsement,” not only to alert or warn the insured, but to warn the insured’s agent of the restrictive endorsement.

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4. The policy as issued was not what was quoted to the Defendant, The Pierce Agency, Inc., nor was it what the insured reasonably expected from the quotation. It did not conform to the policy issued by Canal Insurance Company. Such a variance should have been called to the attention of The Pierce Agency, Inc., or Floyd Stock, by ADCO General Corporation or Stuyvesant Insurance Company.

When these findings are considered in the context of other findings, it becomes clear that rather than prescribing an affirmative duty to warn, the findings enunciate the appellants’ negligent conduct in issuing a policy which deviated from the one applied for, and in failing to follow the insurer’s policy of attaching the red-flag notification of the restrictive endorsement. See our discussion in Part II above. The practical effect of findings of negligence in this area of the law will be to encourage warnings of some kind when an insured is issued a policy different from that which he reasonably expects; it is not a specific duty which these findings establish or impose.

IV.

Stuyvesant also objects to the award of attorney’s fees made to plaintiff. The basis for such an award is found in § 39-2-1, N.M.S.A. 1978:

In any action where an insured prevails against an insurer who has not paid a claim on any type of first party coverage, the insured person may be awarded reasonable attorney’s fees and costs of the action upon a finding by the court that the insurer acted unreasonably in failing to pay the claim.

The trial court entered a finding that “Stuyvesant was at all times directly involved in decisions to deny payment of plaintiff’s loss, which decisions were unreasonable and unconscionable.” Stuyvesant contends the finding is totally unsupported and that it reasonably and in good faith interpreted its policy provisions.

The trial court could properly have found denial unreasonable and unconscionable. Stuyvesant was informed by Pierce Agency, both in a telephone call and by letter, that Pierce and Stock believed the policy covered the loss; that Pierce had never seen a named driver endorsement attached to a policy in its 27 years in the insurance business; that insurers should “by all means” point out [such restrictive endorsements] to the agent by “letter or by stamping in RED on the face of the policy that IT IS LIMITED — PLEASE READ.” Thus Stuyvesant was specifically informed that the' policy issued was not what Stock or Pierce ordered or expected. Stuyvesant knew also that the red sticker alerting its insured of the endorsement was not attached, contrary to its instructions, by its general agent ADCO. Under principles of agency, ADCO’s negligence was Stuyvesant’s. Stewart v. Potter, 44 N.M. 460, 104 P.2d 736 (1940).

Whether or not the trial court was correct in finding that Pierce was Stuyvesant’s agent and broker is not material. There was ample evidence to show that Stuyvesant adamantly refused coverage after learning it had issued a policy at variance with its insured’s wishes and without notice to the insured by it or its general agent of the variance. There is also sufficient evidence of the communications between plaintiff and the Pierce agency regarding the policy to support the finding that Stuyvesant’s denial was unreasonable and unconscionable.

The trial court did not err in assessing attorney’s fees for plaintiff against Stuyvesant.

V.

Both ADCO and Stuyvesant point to the finding of Pierce’s negligence as a proximate cause of plaintiff’s loss as a bar to the indemnity allowed Pierce on its cross-claim. Rio Grande Gas Company v. Stahmann Farms, Inc., 80 N.M. 432, 457 P.2d 364 (1969), recognizes the propriety of permitting indemnity to one tortfeasor against another who is primarily liable. The issue of indemnity is not concerned with a tortfeasor’s liability to the plaintiff; it is a remedy solely concerned with the equities existing among the tortfeasors. See discussion in Dessauer v. Memorial General Hosp., 96 N.M. 92, 628 P.2d 337 (Ct.App. 1981). Dean Leflar, in his article entitled “Contribution and Indemnity Between Tortfeasors,” at 81 U. of Pa.L.Rev. 130, catalogs a series of cases wherein a tortfeasor held proximately liable for his own negligence in failing to discover and remedy a dangerous condition created by another has been allowed indemnity. That result follows from a determination that the wrongdoers were not in pari delicto, that is, negligent in an equal degree, even though all may have been guilty of wrongdoing toward the plaintiff. See Harmon v. Farmers Market Food Store, 84 N.M. 80, 499 P.2d 1002 (Ct. App. 1972), for an analysis of indemnification in circumstances of negligence in creation of a dangerous condition vis-a-vis negligence in failing to discover and remedy that condition.

Thus, we acknowledge there exists in the law the principle of indemnity in certain instances. The frailty in this case is the absence of findings which indicate the basis relied on by the trial court for the indemnity award. We must remand that portion of the judgment for findings on that matter.

VI.

Finally, we consider Stuyvesant’s challenge to the court’s conclusion that the contract of insurance should be reformed to include the driver of the destroyed truck in the named driver endorsement. Stuyvesant refers us to Kimberly, Inc. v. Hays, 88 N.M. 140, 537 P.2d 1402 (1975), wherein reformation was held proper if (1) there has been a mutual mistake, or (2) a mistake by one party accompanied by fraud or other inequitable conduct by the other party. Kimberly cited Wright v. Brem, 81 N.M. 410, 467 P.2d 736 (Ct.App. 1970), and Morris v. Merchant, 77 N.M. 411, 423 P.2d 606 (1967), but overlooked Buck v. Mountain States Inv. Corp., 76 N.M. 261, 414 P.2d 491 (1966), which has never been overruled. That case held that where evidence disclosed that the policy issued did not conform to the order placed by the insured and the insured was never advised that the policy differed from what he expected, the evidence would be evaluated as establishing clear, convincing and satisfactory proof of inequitable conduct by one party accompanying the other party’s mistake. (76 N.M. at 265, 414 P.2d 491.)

Since, however, the policy was issued for only a one-year period, and expired long before this suit was tried, we see no prejudice to Stuyvesant in the judgment, which includes by reference the matter of reformation.

The judgment, in all respects except the award of indemnity to Pierce, is affirmed. That issue is remanded to the trial court for entry of findings showing the basis for the award, which findings, of course, are subject to further appellate proceedings in the discretion of the litigants.

Since § 39-2-1, supra, permits the award of attorney fees, and the statute does not appear to limit the allowance to success at trial only, Stock is awarded an additional fee for his attorneys’ defense on appeal in the amount of $2,500.00, against Stuyvesant.

It is so ordered.

WOOD, J., concurs. HERNANDEZ, C. J., dissents.