Reserve Insurance v. Duckett

Barnes, J., delivered the opinion of the Court. This case presents a second appeal by Reserve Insurance 'Company (Reserve), the plaintiff below and appellant in this Court, which had filed an action at law for a declaratory judgment in the Circuit Court for Prince George’s County against Reserve’s policyholder George Francis Duckett (Duckett), one •of the appellees, to determine whether its policy covered an accident occurring on September 7, 1961, at approximately 6:05 ■p.m. between the motor vehicle operated by Duckett and a vehicle operated by Samuel G. Cornblatt and owned by Celeste Garp Cornblatt. The Cornblatts were also parties defendant individually, and Celeste Carp Cornblatt to her own use and to the use of Nationwide Mutual Insurance Company (Mrs. Cornblatt’s insurance carrier) was also a party defendant. The Un■satisfied Claim and Judgment Fund Board (the Board) later intervened and was made a party defendant.

Nationwide and the Board are the other appellees. In the first appeal, Reserve Insurance Company v. Duckett, 240 Md. 591 , 214 A. 2d 754 , decided on December 7, 1965, we remanded the case without affirmance or reversal in accordance with Maryland Rule 871 a, so that additional evidence ■could be taken in the trial court on whether the Davis & Davis Insurance Company (Davis) had apparent authority to bind Reserve on the policy, or was an agent by estoppel, and whether Reserve was bound by the insurance policy to defend Duckett ¹¹¹ in the pending action and to pay any judgment recovered against him up to the limits of the policy. At the trial on the remand the parties, at the close of all of the evidence, waived a jury verdict and, by agreement, referred the evidence taken to the trial court for determination. The trial court (Bowie, J.) made findings of fact and signed an order declaring that Reserve must defend Duckett in the pending Cornblatt case, pay any judgment recovered against him up to the policy limits, and that, so far as the Board was concerned, Duckett was and is an insured motorist with respect to the accident.

The facts are interesting and substantially undisputed. Duckett, in 1958, had an automobile accident, one result of which was that he had to obtain insurance pursuant to the provisions of Code (1957), Article 66]/2, Section 122 which generally requires the obtention of security following an accident unless there is evidence of insurance. Shortly after that accident Duckett received a letter from Davis in which it was stated that it would insure him. Duckett went to the Davis office in Baltimore and Davis obtained insurance for him through the Leonhart Agency for a Maryland Form SR22 compliance from American Security Insurance Company, effective July 31, 1959.

On that day an SR22 form was filed with the Maryland Department of Motor Vehicles certifying that Duckett had obtained the necessary insurance. Davis acted as an insurance broker and also as an insurance agent for fifteen companies, Reserve not being one of those fifteen companies. The St. Paul Agency, Inc. (St. Paul), which had offices in Baltimore City, was the insurance agent for Reserve in Maryland duly authorized to write policies for Reserve under an oral agency which did not prohibit St. Paul from establishing branch offices or agencies in Maryland. Reserve issued blank policies in quantity to St. Paul, which signed a number of these policies in blank as “authorized Representative” and gave them to Davis to issue directly to an insured.

Davis accounted to St. Paul monthly for premiums for the policies of Reserve thus issued by it. On these Reserve policies, already signed by St. Paul as we have indicated, Davis typed “Davis & Davis” under the word “Agent” at the top right hand side of the policy, just opposite ¹¹² the typed in name of the “named insured and address.” In addition to the typed name of “Davis & Davis” under the word “Agent,” a red and white gummed label with the notation “Davis & Davis INSURANCE,” with the address and telephone number, was pasted under the word “Agent.” Duckett, who was a farm laborer, living at Croom in Prince George’s County, had dealt with Davis for several years. Called as a witness for the plaintiff, Reserve, he testified that the usual way he dealt with Davis in paying premiums was either to carry cash or send money orders. He testified that he considered Davis to be the agent for Reserve because he had paid his money to Davis and Davis had “always issued me the policy.” In March, 1961, Davis issued a Reserve combination automobile policy with policy limits of $10,000 for each person and $20,000 for each accident for bodily injury liability and $5,000 for each accident for property damage liability.

Under the heading “Policy Period” there is typed “(6 Months)” and the words “From March 7, 1961 To September 7, 1961” followed by the printed words “12:01 A.M. standard time at the address of the named insured as stated herein.” This policy, although dated and effective March 7, 1961, was issued by Davis on March 9, 1961, as appears opposite the words “Date of Issue” on the policy. In accordance with the usual practice, Davis sent Duckett a letter 30 days prior to the expiration of the Reserve policy with a request for payment of a renewal premium, and, payment not having been received, another letter of the same nature 15 days prior to the expiration of the Reserve policy. Self-addressed envelopes were enclosed in these letters for the use of the insured in making payment of the renewal premium. Duckett was uncertain in regard to the exact time he mailed the money order for the premium, prior to the expiration date of the Reserve policy, stating “I would say four or five days.” He also testified that theretofore the policy would be sent to him by Davis the day or day after he had sent the money for it, the longest period of time being “not more than three days.” Duckett had an accident, as we have indicated, on September 7, 1961, at approximately 6:05 p.m.

He went to the Davis office in Baltimore City the following day, September 8, to report the ¹¹³ accident. He spoke to a Mrs. McAllister, the underwriter for Davis, and explained the happening of the accident to her. She told Duckett that “she would file it with Reserve Insurance.” He inquired of Mrs. McAllister as to whether he was covered at the time of the accident and she told him that he was covered. Meyer Davis, one of the partners of Davis & Davis, called as a witness for the plaintiff, Reserve, testified in regard to sending the 30 day and 15 day letters already referred to, but stated that he did not retain copies of those letters.

He stated that they were “form” letters, but no copy of the “form” or other evidence showing the precise language of those letters was introduced into evidence. He testified that for this class of business he operated on a cash basis and that Duckett was a “good payer,” and was “all right.” On September 8, 1961, a policy in the same form as the March 7, 1961, policy and marked as a “Renewal” of the March 7, 1961, policy (the March 7 policy was marked “New”) was issued. The figures “12 :01” were stricken out and the figures “10:00” were inserted on the typewriter. The renewal policy was also a six month policy ending March 8, 1962.

The date of issuance was also given as September 8, 1961. Mr. Davis could not recall any instance in which a renewal policy did not take effect immediately upon the expiration time of the expiring policy and stated that a renewal policy “should” do this. He stated that one-half of the Davis business was of sub-standard production and that the Reserve business was about one-half of his volume in that area. Davis had written a total of 1011 Reserve policies in the period 1960 to 1962.

Mr. Davis admitted that it took time to issue policies and that apparently it had taken the Davis staff two days to issue the new Reserve policy to Duckett as it was effective on March 7 but was issued on March 9, 1961. In that case, the Davis records indicated that Duckett had paid the premium on March 3, 1961. The envelope in which Duckett sent the money order for the renewal premium was not kept. Although he did not open the mail, Mr. Davis testified that the policy was issued on “September 8th, the day we received the money.” Kenneth Francis Cook, vice-president of Reserve in charge ¹¹⁴ of sales, testified that St. Paul was the agent of Reserve and that Reserve supplied policies to the St. Paul Agency which had authority to bind Reserve, issue policies and issue SR22 financial responsibility certificates.

There was no written agreement between Reserve and St. Paul and the agency was terminated by Reserve on March 13, 1962. He testified that Reserve ■“didn’t care how many branch offices or places of business they [St. Paul] had;” it would be perfectly possible that St. Paul could have an office in every section of Baltimore and that the St. Paul Agency was terminated because of “adverse loss rates and credit problems.” He stated that as long as Reserve was getting premiums in the Baltimore area, Reserve was not paying any attention to whose name appeared on the policy, although a copy of the policy was returned to the home office. He further stated that he presumed that Reserve knew that the name of “Davis & Davis” was listed as an agent on the Reserve policies within a few days after the copy of the policy was returned to the home office. In the accident report sent to the Department of Motor Vehicles Duckett stated, on the detachable form which is a part of the accident report, that Reserve insured him on September 7, 1961.

This form was sent to Reserve by the Department on September 8, 1961. It was not returned to the Department by Reserve until August 9, 1962. After this disclaimer, returned approximately eleven months after the notice was sent to Reserve by the Department, a suspension notice was sent by the Department to Duckett on August 21, 1962, advising him that an order of suspension of license would be imposed upon him on September 5, 1962, unless he “posted a certified check, money order, et cetera, in the amount of $23.50.” A form SR21 was thereafter filed on behalf of Reserve alleging coverage for Duckett which was received on August 30, 1962. Thereafter, by a letter dated September 28, 1962, Free State Adjusters (who had been employed by Reserve to investigate the Duckett accident and the accident was investigated by them) stated that the SR21 form submitted by them on behalf of Reserve was a mistake and they were withdrawing it.

Then, on October 2, 1962, a letter was received by the Department from Reserve stating that “Mr. Prodoehl is not authorized to sign SR 21’s for ¹¹⁵ the Reserve Insurance Company.” It asked that his signature on any such forms of record be deleted. John H. Bosley, an employee of the Department of Motor Vehicles, in addition to supplying the various records already mentioned, testified that a delay in returning an original disclaimer for almost a year was “not normal procedure by any means,” and further that the purpose of sending the tear-off sheet from the bottom of the report was to determine whether to apply penalties under the Financial Responsibility Section of the Motor Vehicle Daw and that suspension is to take place 90 days after the accident unless the motorist involved in the accident is insured. The trial court found that there was an actual agency between Reserve and Davis; that in any event, there was an agency by estoppel, and that since Duckett had mailed his renewal premium payment money order to Davis prior to the expiration of the original policy and was told by a Davis representative that he was covered for the accident of September 7, 1961, Reserve was liable and must defend Duckett in the accident of September 7, 1961, and pay any judgment within the policy limits. We are of the opinion that the evidence supports the trial court’s conclusion that there was an agency by estoppel.

As we stated in the opinion in the first appeal in this case, Reserve Insurance Co. v. Duckett, supra, quoting with approval from Hobdey v. Wilkinson, 201 Md. 517, 526 , 94 A. 2d 625, 629 (1953): “One who knowingly permits another to act for him as though authorized, inducing third persons to rely to their disadvantage on the seeming authority, is es-topped from later asserting the lack of authority of his apparent agent.” Reserve was aware that Davis appeared on the face of its policies as agent and from this was charged with knowledge that Davis was issuing its policies as agent. Although in a two-year period, 1960-1962, Reserve received 1011 copies of its policies with Davis appearing as agent, it never repudiated Davis or denied the validity of the issued policies. Even now, ¹¹⁶ in this case Reserve does not attempt to repudiate the validity of the renewal policy, but rests its claim upon the premise that the effective date of the renewal policy depends upon the alleged receipt date of the premium payment. Davis solicited the Reserve renewal policy by mailing the notice envelopes to Duckett who used them in reliance upon Davis.

Davis represented to Duckett that he was covered by Reserve insurance by a renewal policy. Duckett has suffered a disadvantage resulting from the gap in insurance coverage at the time of the accident in view of his mailing the money order for the renewal