COURT DECISIONS

Rough Notes, Nov 2006

Digested from case reports published in Westlaw, West Publishing Co., St. Paul, MN

Did exclusive agent act as "broker"?

In October 1999, Brandon Windom, a minor, broke his femur while he was participating in a football practice with the Capital Trail Football League, a football program for minors. At the time of the accident, the League did not have commercial liability insurance. Prior to the date of the accident, and back to 1986, the League had been covered by an insurance policy issued by Nationwide Insurance Company and procured through Nationwide agent Michael T. Alpaugh. On May 25, 1999, Nationwide informed Alpaugh and the League's president, Chris Verucci, that it would not renew the League's policy when it expired on September 1, 1999. Alpaugh told Verucci he could not procure alternative coverage because he dealt exclusively with Nationwide. However, he said he would "check around" to try to find a general agent to help Verucci. Shortly after his conversation with Verucci, Alpaugh ran into William lingerer at a local bank. He knew Ungerer ran a general insurance agency, so he told Ungerer about the League's need for new insurance. Ungerer sent Verucci a proposal for comprehensive general liability insurance, and Verucci orally accepted the proposal.

Verucci and the League's treasurer met with Alpaugh on September 29. They signed the Insurance application and gave Alpaugh a $600 initial premium payment to be delivered to Ungerer. Alpaugh again stressed his exclusive relationship with Nationwide, noted that the application was being placed through Ungerer's agency, and explained that any questions were to be directed to Ungerer. He then delivered the application and payment to Ungerer. Ungerer gave Alpaugh a temporary certificate of insurance from Pawtucket Mutual Insurance Company to give to the League. The certificate was dated September 29, 1999, and it listed the policy number as "Pending / Binder."

On October 7, 1999, Ungerer received a fax from Pawtucket indicating that it would not issue the policy. He also received a letter, five days later, declining to issue the policy and returning the $600 premium payment. According to Ungerer, he then mailed the uncashed check and a letter to the League's property address listed on the application for insurance. (The League's mailing address was also listed in the application.) The League claimed that it never received the letter and that, as a result, it had no reason to believe it did not have insurance on the date of Windom's accident.

Windom filed a complaint against the League, Ungerer, Alpaugh, and Pawtucket. When the League failed to defend itself against his complaint, a default judgment was entered against it. The League then assigned its rights, if any, under the Pawtucket insurance policy to Windom. Windom then claimed that Alpaugh and Ungerer were negligent. The lower court found in favor of both Alpaugh and Ungerer. Windom appealed.

On appeal, Windom argued that Alpaugh had a duty to notify the League that Pawtucket had denied coverage because he had acted as a "broker" when he contacted Ungerer on behalf of the League. The Supreme Court of Delaware disagreed. The Delaware Insurance Code defines "broker" as "a licensee who, for compensation, negotiates on behalf of others contracts of insurance from companies to whom he or she is not appointed." The court found that because Alpaugh did not solicit Pawtucket, negotiate with Pawtucket, prepare the League's application, or receive any compensation, he acted as a "messenger" between Ungerer and the League. Furthermore, the insurance certificate listed Ungerer Insurance Agency as the producer. Alpaugh told the League he was exclusively working for Nationwide and he explained that questions needed to be directed to Ungerer. Thus, Alpaugh was not a "broker," and he did not owe a duty to the League to notify it of Pawtucket's decision not to issue the policy.

Windom also claimed that there was an issue of fact regarding whether or not Ungerer sent a letter informing the League that Pawtucket was not issuing the policy. If there was still an issue of fact, a jury needed to make that determination, not the lower court. The Supreme Court agreed with Windom on this issue. The law generally requires that notice be actually received in order to be effective. However, it is presumed that a mailed letter, correctly addressed, stamped, and mailed, is received by the party to whom it was sent. In this case, however, Ungerer sent the letter to the League's property address, not the mailing address provided in the application. In addition, the League claimed it never received the letter. Under these circumstances, the presumption of receipt did not apply, and there was an issue of fact to be decided by a jury. Therefore the decision of the lower court in favor of Ungerer was reversed.

The lower court's judgment in favor of Alpaugh was affirmed. The court's judgment in favor of Ungerer was reversed, and the case was remanded for trial.