No, 92-085
IN THE SUPREME COURT OF THE STATE OF MONTANA
1992
NAUTILUS INSURANCE COMPANY,
Plaintiff and Appellant,
FIRST NATIONAL INSURANCE, INC.,
d/b/a THE FNI GROUP,
Defendant and Respondent. L:/ S nt
r ii
C L E R K OF SUPREME COURT
STATE OF MONTANA
APPEAL FROM: District Court of the Fifth Judicial District,
In and for the County of Jefferson,
The Honorable Frank M. Davis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Barry G. OfConnell and ~ i n d y E. Younkin, Moore,
OrConnell, Refling & Manos, Bozeman, Montana
For Respondent:
Robert M. Carlson, Corette, Pohlman, Allen, Black &
Carlson, Butte, Montana
submitted on Briefs: July 30, 1992
Decided: September 3, 1992
Filed:
Justice Karla M. Gray delivered the Opinion of the Court.
Nautilus Insurance Company appeals from the granting of a
directed verdict, and the judgment entered thereon, in favor of
First National Insurance, Inc., by the Fifth Judicial District
Court, Jefferson County. We affirm.
The dispositive issue on appeal is whether the District Court
erred in directing a verdict for the defendant on the basis that no
duty was owed to the plaintiff.
Patty Crane (Patty), now known as Patty Flynn, contacted Rick
March (Rick) at First National Insurance, Inc. (FNI) in January,
1987, seeking fire and liability coverage for business property
owned by herself and Walter Crane in Helena, Montana. Rick
requested coverage through Sentinel General Agency (Sentinel) for
both property and liability insurance and received a quote which he
believed included the requested liability coverage. Sentinel sent
Rick binders identifying coverage through Nautilus Insurance
Company (Nautilus) and Aegon Insurance Company in the aggregate
amount of $L00,000 ($50,000 coverage by each insurer) for insuring
the premises only; the effective date of the policies was February
27, 1987.
The Cranes advised Rick that they also needed liability
coverage and he continued to seek coverage from other companies
while the Nautilus policy was in effect. As a result of their own
efforts, the Cranes obtained the coverage they desired from
Travelers Insurance Company effective April 2, 1987. On that date,
Patty told Rick about the new coverage and verbally requested FNI
2
to cancel the Nautilus and Aegon polices. Thereafter, via
telephone and several letters, ~ i c k
advised the Cranes that in
order to cancel the policies they must either return the policies
or sign a cancellation request/policy release form. The Cranes did
neither; nor did Rick inform Nautilus during this time that the
Cranes desired to cancel or that they had obtained alternative
coverage.
FNI paid the Nautilus premium on the Cranes1 behalf on May 13
under its contract with Sentinel requiring payment of all premiums
within 45 days of receiving an invoice; under the contract, the
payment was due on or before May 15. Under the Nautilus policy,
the Itunearned premiumM which could be recouped upon cancellation
was prorated by quarters of the coverage year. In other words,
once the coverage was effective on February 27, the maximum
unearned premium which could be recovered on cancellation was 75%;
the premium for the first three months1 coverage--from February 27
to May 27--could not be recouped even if the policy were canceled
prior to May 27. The Cranest building and its contents were
totally destroyed by fire on May 23, 1987.
The Nautilus policy was in effect on the date of the fire and
the Cranes made a claim for their loss under the policy. Nautilus
ultimately paid the $50,000 policy limit.
Nautilus filed suit against FNI in the First Judicial District
Court, Lewis and Clark County. The complaint alleged that FNI Is
negligent failure to procure cancellation of the Cranes' Nautilus
policy resulted in damage to Nautilus in t h e amount of $50,000 plus
interest, Upon motion by .FNI, venue was changed to the Fifth
Judicial District Court, Jefferson County. A jury trial was held
on January 15 and 1 6 , 1 9 9 2 . After Nautilus completed its case-in-
chief, FNI moved for a d i r e c t e d v e r d i c t on the b a s i s t h a t it owed
no duty to Nautilus to procure cancellation. The motion was
granted, judgment was entered and Nautilus appeals.
Did the District Court err in directing a verdict for the
defendant on the basis that no duty was owed to the plaintiff?
A directed verdict may be granted only when it appears as a
matter of law that the nonmoving party could not recover upon any
view of the evidence, including the legitimate inferences to be
drawn from it. Hash v. State (1991), 247 Mont. 497, 500, 807 P.2d
1363, 1365; milkerson v . Sch. ~ i s t .No. 15, Glacier Cty. (19851,
216 Mont. 2 0 3 , 211, 7 0 0 P.2d 627, 622. On appeal, this Court must
view a motion for a directed verdict in a light most favorable to
the nonmoving party. Stout v. Montana Power Co. (3.9881, 234 Mont.
303, 305, 762 P . 2 d 875, 876.
Here, the District Court directed a verdict f o r FNI. While it
did not state the basis for its decision i n so many words, it is
clear that the court determined that Nautilus could not prevail on
its negligence claims against FNI because, under the undisputed
facts of this case, FNI had no legal duty to Nautilus to procure
cancellation of the policy. We agree.
Negligence forms t h e basis f o r N a u t i l u s ' complaint a g a i n s t
FNI. There is no dispute that, absent a legal duty running from
FNI to Nautilus, Nautilus cannot prevail. Actionable negligence
arises only from the breach. of a legal duty. Thornock v. State
(1987), 229 Mont. 67, 72, 745 P.2d 324, 327; Krone v. McCann
(1982), 196 Mont. 260, 265, 638 P.2d 397, 400. Whether a legal
duty is owed from one party to another is a question of law for the
court. Roy v. Neibauer (1981), 191 Mont. 224, 226, 623 P.2d 555,
556. Thus, the question before us, as it was before the District
Court, is whether a legal duty to procure cancellation of the
policy was owed to Nautilus by FNI.
The parties agree, and the record supports the fact, that no
contract or agency agreement existed between Nautilus and FNI.
Margaret Crook, senior property examiner for ~autilus,testified
that Sentinel was Nautilus' agent under a written agency contract
and t h a t FNI and R i c k March were agents of the Cranes. She
testified that FNI and Rick could neither bind Nautilus nor cancel
the policy without the Cranes' cooperation.
Nautilus argues, however, that an implied agency relationship
exists between an independent insurance broker and a carrier with
whom caverage placement is made as to certain particulars. On the
b a s i s of this implied agency relationship, Nautilus asserts t h a t
FNI had a duty, under the facts of this case, to procure
cancellation of the policy. Nautilus cites no cases or other
authority directly on point in support of the existence of such a
duty.
An insurance broker is usually regarded as the agent of the
insured. 3 Couch on Insurance 2d (Rev. ed.), 25:93 (1984).
Nautilus witness Crook testified that FNI and Rick were the Cranes
agents, not the agents of Nautilus.
Nautilus argues that, while an insurance broker acts for the
insured in making the application and procuring the policy, he acts
for the insurer in delivering the policy and in collecting and
remitting premiums. Couch, 25:94. While negligence in
performing these specific acts on behalf of the insurer may result
in liability absent a contractual agency relationship, Nautilus
does not allege negligent performance by FNI of these acts.
Instead, Nautilus seeks expansion of these acts by a broker on
behalf of the insurer to include a duty to procure cancellation of
the policy. However, the determination of which party a broker is
acting for as to a particular matter depends on which party
requested him to do the particular thing. Couch, § 25:94. Here,
the Cranes requested the cancellation. "A broker is the agent of
the insured where he is employed by the insured . , . to cancel and
receive the unearned premium on a policy which had been obtained by
him. ... Couch, 5 25:95.
In t h e face of these accepted principles and the testimony of
its own witness, Nautilus relies on our decision in Thayer v. ~ i c k s
(1990), 243 Mont. 138, 144-47, 793 P.2d 784, 788-90. Thayer
addressed the extent to which an accountant owes a duty of care to
third parties with whom he is not in p x i v i t y . There the accountant
had misrepresented financial information in a corporate audit to
the subsequent detriment of the purchaser of the corporation.
Under those facts, we adopted and applied 5 552 of the Restatement
of Torts, which provides in pertinent part:
(1) One who, in the course of his business,
profession or employment, or in any other transaction in
which he has a pecuniary interest, supplies false
information for the guidance of others in their business
transactions, is subject to liability for pecuniary loss
caused to them by their justifiable reliance upon the
information, if he fails to exercise reasonable care or
competence in obtaining or comrnunicatingthe information.
(2) Except as stated in Subsection ( 3 ) , the
liability stated in Subsection (1) is limited to loss
suffered
(a) by the person or one of a limited group of
persons for whose benefit and guidance he intends to
supply the information or knows that the recipient
intends to supply it; and
(b) through reliance upon it in a transaction that
he intends the information to influence or knows that the
recipient so intends or in a substantially similar
transaction.
Restatement (Second) of Torts 5 552 (1977). Nautilus asks us to
apply g 552 to FNI in this case. We decline to do so.
Purporting to apply Thaver to the case before us, ~autilus
focuses on subsection (2) of § 552 of the Restatement (Second) of
Torts. However, Thayer involved misrepresented information. It is
clear that subsection (1) of Restatement (Second) of Torts 552
premises liability on the supply of f a l s e information. The
case before us contains neither allegations nor proof of false
information or misrepresentation. Thus, 552 is totally
inapposite here.
Here, FNI placed the coverage and obtained the premium set by
Nautilus. The Cranes requested FNI to cancel the policy and FNI
took steps, pursuant to that request, to accomplish the
cancellation. Notwithstanding, cancellation did not occur prior to
destruction of the insured property and Nautilus ultimately paid
t h e p o l i c y limits for the risk for which it had accepted a premium.
Under these circumstances, FNI had no legal duty t o take additional
steps on Nautilus1 behalf. W e hold that the District Court did not
err i n d i r e c t i n g a v e r d i c t for the defendant.
Affirmed.
We concur:
September 3, 1992
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Barry G. O'Connell
Moore, O'Connell, Refling & Manos
P.O. Box 1288
Bozeman, MT 59771-1288
Robert M. Carlson
Corette, Pohlman, Allen, Black & Carlson
P.O. Box 509
Butte, MT 59703
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA