Hartford Casualty Insurance Co. v. Ronnie Bradford Insurance Agency 571 So. 2d 822

DOUCET, Judge.

This is an appeal from a judgment dismissing the third party demand of an uninsured motorist carrier against the insurance agent who wrote the policy, and his errors and omissions insurance carrier.

The relevant facts with regard to the issuance of uninsured motorist coverage are, for the most part, not in dispute. Ronnie Bradford is a stockholder in, and manager of, the Ronnie Bradford Insurance Agency (the Bradford Agency). For a number of years before opening his own agency, he wrote insurance for another agency. In that connection, he obtained insurance policies for the Pitts family for a number of years. In 1984, after the opening of the Bradford Agency, Ray Pitts, Sr. called Bradford for a quote on automobile liability insurance. Bradford quoted a rate based on $500,000 in single limit liability coverage per vehicle and $25,000 single limit uninsured/underinsured motorist coverage as well as a million dollar “umbrella” policy. Bradford went to Pitts, Sr’s, office to discuss the coverage and rate.

Bradford prepared an application for insurance and when, after several days passed without Pitts, Sr’s, coming in to the Agency to sign the application, Bradford had the application signed by his secretary, Linda James. There is some dispute as to his authority for this act. Pitts, Sr., in his deposition taken in February 1986, stated that he could not remember any discussions with regard to the policy, that too much time had passed. Bradford testified that Pitts, Sr. told him to “handle” the application so that coverage might be obtained.

The application was submitted to the Hartford Casualty Insurance Co. (Hartford). Insurance was issued as outlined above.

On August 23, 1985, Ray Pitts, Jr. was injured in an accident with Terry Bailes, while driving a vehicle belonging to his father, Ray Pitts, Sr. The Pitts sued Bailes for injuries sustained in the accident. *824The Pitts further brought suit against Pitts Sr.’s uninsured motorist insurer, Hartford. Hartford brought a third party demand against the Bradford Agency and its errors and omissions insurer, National Union Fire Insurance Co. (National Union). Hartford alleged that the negligent acts of the Bradford Agency in connection with the selection of lower UM limits on behalf of Ray Pitts, Sr. resulted in additional liability in the amount of $475,000 in uninsured motorist coverage over the $25,000 in coverage in the policy.

Hartford settled its claim with the Pitts and reserved its rights against Bradford and National Union. The third party demand was severed from the main demand.

A trial on the third party demand was held on August 16, 1988. The trial judge found no negligence on the part of the Bradford Agency and dismissed Hartford’s third party demand. Hartford appeals.

The first issue which must be disposed of is whether the Bradford Agency had authority to act on behalf of Ray Pitts, Sr. in signing the insurance application. Whether authority was given is a question of fact. Doll v. Russo, 7 So.2d 406 (La.App.Orleans 1942). As a result, the trial court’s decision in this regard will not be disturbed in the absence of manifest error. The trial judge found that Pitts, Sr. did, indeed, give the Bradford Agency authority to sign the application for insurance. After carefully examining the record, we find sufficient evidentiary support to furnish a reasonable factual basis for the trial judge’s determination. Therefore, finding no manifest error, we will not disturb this finding.

Having found that Pitts, Sr. did give authority to sign the application to the Bradford Agency, it must next be determined whether a sufficient written selection of lower limits of uninsured motorist coverage was made.

At the time the selection of lower limits was made in this case, La.R.S. 22:1406(D)(1)(a) read as follows:

“D. The following provisions shall govern the issuance of uninsured motorist coverage in this state.

(l)(a) No automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto, in not less than the limits of bodily injury liability provided by the policy, under provisions filed with and approved by the commissioner of insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom; provided, however, that the coverage required under this Subsection shall not be applicable where any insured named in the policy shall reject in writing the coverage or selects lower limits. Such coverage need not be provided in or supplemental to a renewal or substitute policy where the named insured has rejected the coverage or selected lower limits in connection with a policy previously issued to him by the same insurer. Any document signed by the named insured or his legal representative which initially rejects such coverage or selects lower limits shall be conclusively presumed to become a part of the policy or contract when issued and delivered, irrespective of whether physically attached thereto.”

While this statute has since been amended 1, our determination of this case is con*825trolled by the statute in effect at the time of the selection, and the case law interpreting it.

Under the above cited statute, it has been held that:

“In order to effect a valid selection of lower UM limits, the selection must be in writing and signed by the named insured or his legal representative. A document evidencing a selection of lower limits must be clear and unambiguous. Moreover, the statute imposes UM coverage “notwithstanding the language of the policy, the intentions of the parties, or the presence or absence of a premium charge or payment.” Roger v. Estate of Tad Moulton, 513 So.2d 1126 (La.1987), rehearing granted on other grounds, (La. June 24, 1987).8”

Giroir v. Theriot, 513 So.2d 1166 (La.1987). (Footnote omitted).

In this case the trial judge found that the selection was not sufficient because it was not made on a separate form as required by Hartford’s internal operating procedures and by Louisiana law.

However, at the time the selection was made in 1984, there was no requirement in our law that the selection be made on a separate form supplied by the insurer for that purpose.

In the case of McCall v. Nguyen, 509 So.2d 651 (La.App. 3rd Cir.1987), this court dealt with a case where, as here, the insured (here his representative) signed only an application for insurance and not a separate form selecting lower limits of UM insurance. In both eases, a blank was provided on the application form for a U.M. coverage amount to be filled in. In both cases, the amount was filled in by hand, in this case with the amount of $25,000.00. Also included in the applications was a space for the applicant to sign to reject UM coverage, which, in both cases, was left unsigned. In McCall v. Nguyen, it was held that the selection of lower limits was clearly indicated by the fact that the blank space was filled with handwritten figures, and that the application was signed. See also: Bird v. Daniels, 508 So.2d 611 (La.App. 2nd Cir.), writs denied, 513 So.2d 825 and 513 So.2d 828 (La.1987). No separate selection was required. The form of selection being exactly similar, we find no reason to rule differently in this case.

Since we have found that a proper selection of lower limits was made by one with authority to do so, there was no negligent act on the part of the Bradford Agency. We need not reach the issue of whether any action of the Bradford Agency caused Hartford to incur additional liability.

For the above stated reasons, the judgment of the trial court dismissing Hartford’s claim against the Bradford Agency is affirmed.

AFFIRMED.

KNOLL, J., dissents and assigns reasons.

KNOLL, Judge,

dissenting.

I agree with the majority that at the time the Bradford Agency prepared this insurance application, Louisiana law did not re*826quire the insured to select UM coverage on a separate form. See LSA-R.S. 22:1406(D)(l)(a) set forth in the majority-opinion. In the case sub judice, the insurance application under the designated “Uninsured Motorists Insurance” has limits of $25,000 per accident handwritten into the available space. The application also contains the signature of the agent, Ronnie Bradford, verifying that the insurance application was properly completed, and the purported signature of Pitts, Sr., verifying that the statements in the insurance application are complete and true to the best of his knowledge. On these facts, I find that within its four corners, the insurance application complied with Louisiana law. Accordingly, even though Hartford’s internal underwriting policy called for the execution of a separate form for the rejection/selection of uninsured motorists coverage, it was not legally required to secure any additional documents. Therefore, I do not find merit to the Bradford Agency's argument that Hartford would have been liable for the maximum amount of uninsured motorists coverage (equal to liability coverage) regardless of Pitts’ unauthorized signature.

However, for reasons hereinafter stated, I do not agree with the majority’s disposition of the pivotal issue of the principal/agent relationship which purportedly existed between the Bradford Agency and Pitts, with regard to the affixing of Pitts’ signature to the insurance application.

I do not find the record supports that Pitts gave the Bradford Agency authority to select lower limits of uninsured motorists coverage and sign his name on the insurance application. Pitts testified unequivocally that he gave no one permission to sign his name on any insurance forms. Pitts also stated that no one from the Bradford Agency ever discussed his various options of uninsured motorists coverage. Additionally, Ronnie Bradford testified that usually the insured signs the application. However, Bradford freely admitted that, at his direction, his secretary, Linda James, signed Pitts’ name on the insurance form.

The existence of a principal-agent relationship is not presumed, and such a relationship must be clearly proven by the party alleging its existence. Powell v. Shedd, 523 So.2d 924 (La.App. 4th Cir.1988). Based upon the record evidence, I do not find that the Bradford Agency was authorized to select lower uninsured motorists limits for Pitts, and to authorize its secretary to sign Pitts’ name to the application. Therefore, I find that the trial court was manifestly erroneous in its determination to the contrary.

Once it is determined that no agency relationship existed between Pitts and the Bradford Agency with regard to the signing of the insurance application, it is clear that the selection of lower uninsured motorists coverage was invalid since the named insured in the policy did not reject in writing the coverage or select lower limits. LSA-R.S. 22:1406D(l)(a) (1977); Chiasson v. Whitney, 427 So.2d 470 (La.App. 5th Cir.1983), writs denied, 433 So.2d 179, 180, 183 (La.1983). Accordingly, the question of the Bradford Agency’s fault must be addressed. Therefore it is necessary to explore the legal relationship which existed between the Bradford Agency and Hartford.

Ronnie Bradford became a licensed Louisiana insurance agent in 1973 and started working as an agent for Louisiana Farm Bureau. In 1982 he purchased an independent insurance agency in Ferriday, and incorporated the new business under the name Ronnie Bradford Insurance Agency, Inc. Bradford was a part owner and manager of the Bradford Agency. As an independent agency, the Bradford Agency wrote insurance for the Hartford Group, Insurance Company of North America, Fireman’s Fund Group, International Service, and several other surplus line companies.

As an agent for Louisiana Farm Bureau, Bradford wrote various policies of insurance for Ray Pitts, Sr. In January 1984, Pitts contacted the Bradford Agency for the renewal of his business automobile insurance policy. As a result of this inquiry, the Bradford Agency submitted an application for a business auto policy to Hartford on February 2, 1984; the application form *827was provided by Hartford. The application, purportedly signed by Pitts, requested $500,000 single limit liability coverage per vehicle and $25,000 single limit uninsured motorists coverage per vehicle. The application was received at Hartford’s Metairie office, and in due course the policy was issued as requested in the application with a policy period of 1/27/84 to 1/27/85.

LSA-R.S. 22:1162 defines an insurance broker as “... an individual, partnership or corporation who or which shall, for a commission or brokerage consideration, act for or aid in any manner in negotiating contracts of insurance, or in placing risks or soliciting or effecting insurance as agent for an insured or prospective insured other than himself or itself, and not as a licensed agent of an insurer, and not as an insurance solicitor employed by a licensed agent.”

After carefully reviewing the record, I find that the Bradford Agency was obviously an insurance broker who negotiated between Pitts, Sr. and Hartford. Therefore, I find that under LSA-C.C. Art. 3003 and 3018 potential liability exists on the Bradford Agency’s part for its fault or neglect regarding the submission of Pitts’ application for insurance.

The jurisprudence has held that the elements of a cause of action brought under the provisions of LSA-C.C. Art. 3003 and 3018 are identical to those of a cause of action brought under the provisions of LSA-C.C. Art. 2315. Batiste v. Security Ins. Group, 416 So.2d 279 (La.App. 3rd Cir.1982), writ denied, 421 So.2d 909 (La.1982). Therefore it is necessary to examine the questions of cause-in-fact, existence of a duty owed, breach of that duty, and injury falling within the scope of protection afforded by the duty breached. Ardoin v. Hartford Accident & Indemnity Co., 360 So.2d 1331 (La.1978).

The first inquiry in making a determination of liability is whether any causal relationship exists between the harm suffered and the alleged negligent conduct. Thus if plaintiff can show that the injuries it suffered would not have occurred but for the defendant’s conduct, he has carried his burden of proof relative to cause-in-fact. Charpentier v. St. Martin Parish School Bd., 411 So.2d 717 (La.App. 3rd Cir.1982). In resolving the question of whether an act or acts of defendant were a cause-in-fact of the harm suffered, we determine only whether defendant’s actions were a substantial factor without which the harm would not have occurred. Id.

In the case sub judice, I find, as elaborated earlier herein, that- “but for” Pitts’ unauthorized signature, Hartford would not have been liable for the additional sum of $475,000. Therefore, I find that the Bradford Agency’s actions were a substantial factor without which the harm suffered by Hartford would not have occurred.

I next consider the question of whether the Bradford Agency owed a duty to Hartford. LSA-C.C. Art. 3016 provides that “[t]he broker or intermediary is he who is employed to negotiate a matter between two parties, and who, for that reason, is considered as the mandatory of both.” A broker must observe the same fidelity toward both represented parties, the potential insured as well as the insurer, and not favor one or the other. LSA-C.C. Art. 3017. Because of this double representation the broker is a fiduciary to both parties. Naulty v. Oupac, Inc., 448 So.2d 1322 (La.App. 5th Cir.1984).

In the case sub judice, I find that the Bradford Agency owed a duty to properly submit Pitts’ application of insurance to Hartford. At the end of the insurance application supplied by Hartford, the unauthorized signature of Pitts appears after the following statement:

“I hereby certify that the statements [in the insurance application] are complete and true to the best of my knowledge and belief and are offered as an inducement to the [Hartford] Company to issue the policy for which I hereby apply.”

On the front page of the application, Bradford on behalf of the insurance producer, the Ronnie Bradford Agency, Inc., signed the following statement:

“To the best of my knowledge the Applicant has properly completed and signed this application.”

On the basis of these provisions, it is clear that since the application was submitted as *828an inducement to Hartford for the issuance of the policy, the Bradford Agency owed a duty to Hartford to comply with the certifications required on the Hartford-supplied application of insurance.

The next question, the breach of a duty, is easily addressed. Ronnie Bradford candidly admitted that the signature of Ray Pitts, Sr. which appears at the end of the insurance application was not signed by Pitts; he forthrightly stated that Pitts’ signature was affixed by the secretary employed by the Bradford Agency pursuant to his instructions; Pitts’ signature at the end of the application was crucial to the issuance of the insurance policy. Furthermore, Bradford’s signature on the application, certifying that the applicant signed the application, when it was known to be false, constitutes a breach of the duty owed Hartford.

The last element, damages which fall within the scope of protection afforded by the duty breached, is likewise answered affirmatively. Because of Pitts’ unauthorized signature, see Chaisson, supra, Hartford’s liability was increased from $25,000 to $475,000.

For these reasons, I respectfully dissent, finding the Bradford Agency and its errors and omissions carrier, National Union Fire Insurance Company, liable to Hartford for the increased sums of UM coverage Hartford paid to the Pitts.