Morse Bros. Inc. v. Desmond & Payne, Inc.

CourtSuperior Court of Maine
DecidedApril 22, 2005
DocketCUMcv-02-365and03-249
StatusUnpublished

This text of Morse Bros. Inc. v. Desmond & Payne, Inc. (Morse Bros. Inc. v. Desmond & Payne, Inc.) is published on Counsel Stack Legal Research, covering Superior Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Morse Bros. Inc. v. Desmond & Payne, Inc., (Me. Super. Ct. 2005).

Opinion

STATE OF MASE STATE OF MAINE CUMBERLAND, $5 CUMBERLAND, ss. CLERK’S GF rile 205 APRE2 A & tb MORSE BROS. INC., ET AL,

Plaintiffs Vv.

DESMOND & PAYNE, INC.,

Defendant and

MORSE BROS. INC., ET AL,

ONE BEACON INSURANCE COMPANY,

Defendant

SUPERIOR COURT CIVIL ACTION

DOCKET Nos. (Consolidated) CV-02-365 and CV-03-249!

Hho. + ot i:

ok

DECISION AND ORDER

These consolidated matters were tried before the court on (a) the plaintiffs’

complaint in CV-02-365 against the defendant Desmond & Payne, Inc.,

(“Desmond”) alleging breach of contract (Count I), malpractice/negligence (Count

I) negligent misrepresentation (Count III), and breach of fiduciary duty (Count

IV); (b) the plaintiffs’ complaint in CV-03-429 against the defendant One Beacon

' On July 22, 2003, Cumberland Cty. Super. Ct. Doc. No. CV-02-365 Morse Bros, Inc., v. Desmond & Payne, Ine., was consolidated with Androscoggin Cty. Super Ct Doc. No. CV-03-68 Morse Bros, Inc. v. OneBeacon Ins. Ce, As a result of the consolidation, the Androscoggin case was assigned Cumberland

Cty. Super Ct, Doc, No, CV-03-429.

Insurance Company (“One Beacon”) alleging breach of contract (Count I), wrongful termination of insurance contract (Count II), and vicarious liability (Count IIT); and (c) the counterclaim of One Beacon in CV-03-429 against the plaintiffs for rescission of the insurance contract.

At the conclusion of the trial, the defendants each moved for judgment as a matter of law. M.R. Civ. P. 50(d). In CV-02-365, Desmond’s motion was granted as to Count II alleging malpractice/negligence. In CV-03-429, OneBeacon’s motion was granted as to all counts of the complaint and, as a consequence, the court found for the plaintiffs on OneBeacon’s counterclaim for rescission.

Accordingly, this decision is directed to the remaining claims by the plaintiffs against Desmond in CV-02-365 for breach of contract (Count I), negligent misrepresentation (Count IID, and breach of fiduciary duty (Count IV).

BACKGROUND

The plaintiffs owned and operated a manufacturing facility in Windham, Maine.” The plaintiff Ben Hawkins was responsible for making the plaintiffs’ insurance decisions. Hawkins has an MBA degree and is an experienced

businessman. Although he does not have any particularized training or special

* The evidence does not clearly describe the intersecting interests of each plaintiff. However, it appears that the corporate plaintiffs Morse Brothers, Inc. and MB Bagging, Corp. (collectively, “MB-Plaintiffs”) operated the manufacturing business in Windham and owned the related equipment; that the plaintiff T&B Associates owned the Windham facility and real estate; and that ali of those business entities were owned by the individual plaintiffs Ben Hawkins and Tim Morse. Unless otherwise indicated in this decision, the court will simply refer to these parties, collectively, as the plaintiffs.

knowledge about insurance policies and coverages, for many years he has been involved in many business-related insurance issues and decisions.

Desmond was an insurance agency and from 1997 through 1999 placed business insurance coverage for the plaintiffs through Commercial Union York Insurance Company (“Commercial Union’), which included a blanket coverage limit of $1,485,000, an agreed-value endorsement, and replacement cost provisions.” These coverages meant that in the event of a fire loss to all or any part of the plaintiffs’ property, the entire limit of $1,485,000 was available to cover the loss.

During this period, Dana Dresser was Desmond’s exclusive account representative for the plaintiffs. Dresser and Hawkins met several times each year to discuss the plaintiffs’ insurance matters, which centered primarily on workers compensation issues.

In 1999, Commercial Union determined that it no longer wanted to insure the plaintiffs because their loss ratio was unacceptable and because the carrier no

longer wanted to cover their type of business. On November 8, 1999, Wendy

* Blanket property coverage means that one aggregate tallied amount of coverage is applied to several locations or to several types of property at those locations and, when a loss occurs, the entire blanket limit is available to cover any individual loss. Agreed-amount coverage means that the insured’s stated property values satisfies the insurer’s requirements and that there will be no deduction for co-insurance in the event of a loss.

* A loss ratio of 60% or less of the total policy premium for a commercial insured was considered acceptable by Commercial Union. As of 1999, the plaintiffs’ five-year property

Melvin, a Commercial Union underwriter, notified Desmond of the carrier’s intention not to renew the plaintiffs’ policy for calendar year 2000. On November 16, the insurer issued a notice of non-renewal. Commercial Union was not asked by Desmond to reconsider its non-renewal decision. In mid-December 1999, Dresser did not inform Hawkins of the insurance company’s non-renewal decision. Rather, he told Hawkins that the insurer was reluctant to renew the plaintiffs’ policy.

Dresser searched for replacement coverage and Commercial Union agreed to extend its policy for a few weeks while alternative coverage was sought.’ To assist in marketing the plaintiffs’ account, Desmond asked for and received, “shopping- around” numbers from Commercial Union. These figures were for illustrative purposes — that is, to give the insurance agency an idea of what policy pricing for the specified coverages might be in the marketplace based on the plaintiffs’ loss history — and did not constitute an offer to renew the Commercial Union policy.

Desmond’s account manager Stacy Dunning marketed the plaintiffs’ account by sending out commercial insurance applications for competitive pricing to

various carriers with whom Desmond did business. Among other things, the

package loss ratio was 427% ~- meaning, for every dollar of premium that the company received from the plaintiffs, it paid out $4.27 in claims against the policy. As of that same year, the plaintiffs’ five-year overall loss ratio history was determined to be 239%.

>The Commercial Union coverage was extended to January 21, 2000, the date that a policy written by Evanston Insurance Company went into effect.

applications solicited coverages similar to the Commercial Union policy, including blanket, agreed-value and 100% co-insurance coverages.° The applications also included statements of values previously prepared by the plaintiffs.

Desmond could not find a standard carrier willing to offer blanket and agreed-values coverages to the plaintiffs. At Dresser’s request, on December 29, 1999, Dunning prepared a summary of the insurance options available to the plaintiffs based on responses to the applications. The summary included Commercial Union’s “shopping around” numbers, which reflected a premium approximately three times that paid by the plaintiffs for 1999. See Plaintiffs’ Exh. 6. The summary did not clarify that Commercial Union was not offering to renew its policy.

On December 29, 1999, Dresser met with Ben Hawkins to review the summary prepared by Dunning. Although the Commercial Union quote was not an actual proposal, Dresser presented it as a policy renewal offer, which Hawkins accepted even though the premium was substantially higher than the previous

7 year.

* Interestingly, an agreed-value coverage negates any co-insurance requirement in a policy.

7 Generally, Desmond had authority to bind coverage on behalf of Commercial Union.

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