Home's third and final contention is that a "general" duty to inform exists in the trade. Undisputed expert testimony shows, however, that no such general duty to inform does exist. Mr. Kenneth Ashton, responsible for all general agency insurance sales for the Floyd E. Davis Company of Washington, D.C., testified as the only expert and the only non-party witness at the trial. Ashton stated that he had been in the business of selling liability insurance for approximately twenty-five years and was currently representing a number of liability insurance carriers as a general agent. Ashton testified that he had placed annually numerous business owners policies which included business interruption coverage. He further stated that, in his experience, any duty which might otherwise exist for an insured or a general agent to obtain prior approval of the carrier for extension of business interruption coverage, is eliminated where, as here, negotiation and agreement between a carrier and its agent in themselves extend coverage to specified sites. He further stated that if receipt of such information were to be considered a condition precedent to the extension of business interruption coverage to any location, such a requirement would be explicitly spelled out by the carrier.
The Court therefore finds that there is no assumed, admitted or general duty to inform which Wolman could have breached: Wolman was acting within the scope of its authority as a general agent. The agent disclosed its principal, Home, to the plaintiffs, and, as far as the Court can discern, acted under a fair assumption when it represented to the plaintiffs prior to November 1, 1972, that business interruption coverage would extend to every newly-acquired Emersons location as soon as Wolman received notice. Home, as the principal, has not carried its legal burden of showing that Wolman, its agent, exceeded its authority.
Submission by an agent to a carrier of a location's projected sales figures or opening date would be important only in determining the amount of business interruption coverage for a given location and the premium to be charged under the contract. It would not be important in determining whether coverage at a previously agreed-on site would actually be in force under the contract. Such was the testimony of Kenneth Ashton at the trial. The Court therefore turns to the question of liability under the contract.
V. THERE IS NO CONDITION PRECEDENT TO THE CONTRACT WHICH REQUIRED THAT HOME RECEIVE THE ALLEGED INFORMATION BEFORE THE POLICY WOULD TAKE EFFECT.
Emersons, in Count I of the complaint, and Wolman, in its cross-claim against Home, contend that the contract must prevail because all the parties had contractually-defined relationships. Both Emersons and Wolman argue that the mutual intent of the parties to the contract, as reflected by the written terms and endorsements of the policy, and the evidence concerning the negotiation and effectuation of the policy, must govern with regard to all obligations arising thereunder. This theory is sound, and the Court adopts it.
Home responds, however, that receipt of projected sales figures and opening date information was a condition precedent to the contract, and that under the contract, business interruption coverage would not extend to a given location until this condition had been met as to each specific location.
Courts traditionally refuse to interpret ambiguous conditions in contracts as "conditions precedent", Edmund J. Flynn Co. v. Schlosser, 265 A.2d 599 (D.C. Ct. App. 1970); Bergman v. Parker, 216 A.2d 581 (D.C. Ct. App. 1966), and courts regularly resolve ambiguities in insurance contracts against the insurer. See American Cas. Co. of Reading, Pa. v. Shefferman, 193 A.2d 428 (D.C. Ct. App. 1963); Nationwide Mutual Ins. Co. v. Schilansky, 176 A.2d 786 (D.C. Mun. Ct. App. 1961). Here, the only condition which might be considered "ambiguous" is not even in the contract.
There is an absolute absence in both the insurance policy and the agency agreement of a contract provision referring to the conditions precedent alleged by Home. Emersons and Wolman each claim to have had no knowledge of such conditions precedent and argue that no parties to either contract contemplated such conditions. Furthermore, according to the evidence adduced at trial, Home regularly provides all other types of business insurance without attaching any conditions precedent as to receipt of estimated sales figures or opening dates. The Court therefore holds that there is no condition precedent to the contract which required that Home receive the alleged information before the policy would take effect.
Home insists, however, that it could have re-insured itself against eighty per cent of Emersons' loss had it received the information in question before the fire. This may be true, but if re-insuring itself against possible loss were such an important aspect of the carrier's financial security as to require it to demand that certain information be submitted before it would extend coverage, then that demand should have been included in a provision of its contract with either Emersons or Wolman. Since it was not, and there is no evidence of any agreement to this effect beyond the contract, this Court cannot rewrite the contract to provide Home with the kind of protection it should have demanded during the original contract negotiations.
VI. HOME IS SOLELY LIABLE TO EMERSONS UNDER THE INSURANCE POLICY AND MUST INDEMNIFY WOLMAN FOR THE COST OF THE SUIT.
As held above, Emersons may recover under the terms and conditions of the insurance policy. An insurance agent, acting on behalf of a disclosed carrier principal in procuring insurance policies for a client, does not become a party to the insurance contract and may not be liable for damages caused by breach of the insurance contract by the insurance company. Hodgson v. Dexter, 12 F.Cas 283, 1 Cranch, C.C. 109, 1 D.C. 109, Fed. Cas. No. 6, 565, aff'd, 5 U.S. 345, 1 Cranch 345, 2 L. Ed. 130 (Cir. Ct. D.C. 1802); Resnick v. Abner B. Cohen Advertising, 104 A.2d 254 (D.C. Mun. Ct. App. 1954). Home, therefore, is solely liable under the contract.
Furthermore, Home's cross-claim against Wolman for contribution must fail, as Wolman was under no duty, contractual or otherwise, to forward the alleged requisite information to Home. Wolman at all times acted within the scope of its authority as a general agent to its disclosed principal, Home. See Middle Atlantic Conference v. U.S., 353 F. Supp. 1109 (D.D.C. 1972).
On the other hand, Wolman's cross-claim against Home for indemnification does have some merit. The general agency agreement between Home and Wolman included, among other provisions, an indemnification and hold-harmless clause, protecting Wolman against claims by insureds resulting from errors committed by Home, and also providing that Home would assume the costs of defense for which the agent might become obligated.
Wolman has sustained real damages in the loss of a large and valued client, and the costs of preparing for the defense of this case. It therefore is appropriate to invoke the terms of the agency agreement. The Court directs that the costs to Wolman of the defense of this claim, including reasonable legal fees, be assessed against Home.
VII. EMERSONS IS NOT ENTITLED TO PREJUDGMENT INTEREST.
Emersons' final contention is that the Court in its award of damages should include interest, commencing ninety days after the fire, on the stipulated amount of the business earnings loss.
Plaintiffs argue that under the circumstances ninety days was a reasonable period of time within which Home should have paid the claim, and that failure to pay amounted to an "unjust detention" of the funds.
The stipulated loss of business earnings was $244,069.58, and Emersons claims that it has been paying fourteen per cent interest on all its loans over $250,000 since the fire.
It is fair to assume, as Wolman argues, that the parties undertook the stipulation on the assumption that the figure of $244,069.58 would reflect the entire amount of exposure to damages; the matter of interest as an element thereof was never perceived as an additional risk factor by the Defendants. Had interest been raised by Plaintiffs' counsel, the stipulation may never have been entered into.
Clearly, the issue was not argued at trial, nor was any evidence submitted on the question. It is therefore inappropriate at this point in time for the Plaintiffs to seek interest in some heretofore unspecified sum. In fairness, the Court will not allow such interest to be levied against the Defendant Home except from the date of judgment herein.
For the reasons discussed hereinabove, this Court holds: that the Defendant Home Insurance Company is solely liable under the insurance contract to the Plaintiff Emersons for the stipulated amount of $244,069.58; and that the Defendant Home Insurance Company must indemnify the Defendant Max Wolman Company for reasonable counsel fees incurred by it in defense of the claims against it herein, plus court costs as are allowable by the Clerk and the Rules of this Court.
This opinion shall constitute the Court's findings of fact and conclusions of law. A judgment of even date herewith is being filed with the Clerk of this Court today.
January 27, 1975
Charles R. Richey
UNITED STATES DISTRICT JUDGE
JUDGMENT AND ORDER
This cause came on for trial on the merits before this Court, sitting without a jury, and was heard on the 26th and 27th days of November, 1974; and after the close of all the evidence, and upon consideration thereof, and in accordance with the findings of fact and conclusions of law as set forth in the Court's memorandum opinion of even date herewith, it is by the Court this 27th day of January, 1975,
ORDERED, that the Plaintiffs Emersons, Ltd. and Emersons Ltd. of Cinnaminson, Inc., be and the same are hereby granted JUDGMENT against the Defendant Home Insurance Company in the amount of $244,069.58, with interest thereon as provided by law from the date hereof; and that said Plaintiffs have execution therefor against the said Defendant, Home Insurance Company, as at law, together with the costs of this action as are allowable by the Clerk and the Rules of this Court; and it is
FURTHER ORDERED, that the Defendant Home Insurance Company's crossclaim against Defendant Max Wolman Company be and the same is hereby dismissed, with prejudice; and that the Defendant Max Wolman Company's cross-claim against the Defendant Home Insurance Company be and the same is hereby dismissed, with prejudice, except that the Defendant Max Wolman Company shall recover from the Defendant Home Insurance Company and hereby is granted reasonable counsel fees incurred by it in defense of the claims against it herein, plus such court costs as are allowable by the Clerk and the Rules of this Court.
Charles R. Richey
UNITED STATES DISTRICT JUDGE