State ex rel. Long v. Beacon Insurance

PHILLIPS, Judge. The first question for determination is whether the court erred in concluding that Beacon issued the 1983 policy to Precision on a claims made basis and that no oral or written representations by any person converted this to occurrence basis coverage. Precision argues that it was never notified that the agency relationship between E & S and Beacon was terminated and that E & S, as managing general agent for Beacon, orally created a valid and enforceable contract between Precision and Beacon for occurrence basis products liability insurance. There is, however, a conflict between the testimony of Bates’ employees and Garrison of E & S as to whether Garrison orally promised to provide occurrence basis coverage or that he had the authority to even write such coverage. The trial judge, accepting the testimony of Garrison (that he did not orally promise occurrence basis coverage) over that of Bates’ employees (that Garrison did), found that the policy was written on a claims made basis, Knutton v. Cofield, 273 N.C. 355, 160 S.E.2d 29 (1968), and since the findings are supported by substantial evidence, they are conclusive. Davison v. Duke University, 282 N.C. 676, 194 S.E.2d 761 (1973). The written endorsements to the policy further support the trial court’s finding that Garrison only broadened Precision’s coverage but never changed it to occurrence ■ basis. The second question presented is whether the trial court erred in concluding that Precision was bound by Bates’ knowledge that [148] the 1983 policy as written was a claims made policy. Precision argues that the 1983 policy was never delivered to it and therefore Precision is not bound by the terms of the policy; but delivery to Bates, the agent for Precision, was sufficient to bind Precision. Under Alabama law, an independent insurance agent who places coverage with various companies is a “broker” and not an agent of the insurance company. Northington v. Dairyland Insurance Co., 445 So.2d 283 (Ala. 1984). Where the broker is the agent of the insured, the insured is bound by the acts of the broker within the scope of his authority as in the case of any other agent. And where a broker, employed by an insured to procure insurance, receives, reads and accepts a policy, the broker’s knowledge is imputable to the insured, 3 G. Couch, Couch on Insurance 2d Sec. 25:99 (1984), as is the failure of a broker to ascertain that a policy did not contain the provisions requested. 16C J. Appleman, Insurance Law and Practice Sec. 9145 (1981). Sec. 27-7-l(a)(2) of the Alabama Insurance Code further provides that: “Brokers cannot bind the insurer and all business produced must be countersigned by a resident agent of the insurer accepting the risk.” The document which Bates forwarded to Precision was not countersigned by an agent of Beacon. Precision also argues that Garrison of E & S orally promised to procure occurrence basis coverage, but even if it did so, and the court found otherwise, neither Beacon nor any other insurer that E & S obtained policies from would be bound thereby for the reasons already stated. 4 G. Couch, Couch on Insurance 2d Sec. 26A:25 (1984). Precision next contends that the trial court erred in determining that the Cox lawsuit filed in April, 1985 was outside the policy period and not covered by the 1983 claims made policy. The thrust of the argument is that the incident was reported to Beacon within the 1983 policy year, Beacon hired an investigator to investigate it during the policy period, and Beacon’s own internal documents show that Beacon recognized during the policy period that “[sjhould there be any liability in this case, it very well could exceed our $500,000 limit.” But notice of an incident that can give rise to a claim for damages is not the same thing as making a claim. A “claim” is “made,” so it has generally been held, only when an affirmative demand for recompense or payment is made, Katz Drug Co. v. Commercial Standard Insurance Co., 647 S.W.2d 831 (Mo. App. 1983); Phoenix Insurance Co. v. Sukut Construction Co., Inc., 136 Cal. App. 3d 673, 186 Cal. Rptr. 513 (1982), and the first [149] demand for relief in connection with the incident reported was in the lawsuit filed after the policy period expired. A demand for relief, if sufficient to constitute a claim, does not have to be in the form of a lawsuit. Although the Alabama courts apparently have not determined this precise issue, it seems likely that they would reach the same result, as the Alabama Supreme Court in Langley v. Mutual Fire, Marine and Inland Insurance Co., 512 So.2d 752 (Ala. 1987), overruled on other grounds, Hickox v. Stover, 551 So.2d 259 (Ala. 1989), implied that notice of an incident from which liability could arise was not the triggering event under a claims made policy. In view of our holding that the Cox lawsuit was not covered by Beacon’s policy, Precision’s remaining contention that the trial court erred in evaluating the Cox claim is immaterial to the appeal and we will not discuss it. Affirmed. Judges Johnson and Parker concur.