Appeal from the District Court of Natrona County The Honorable John C. Brooks, Judge.
The opinion of the court was delivered by: Golden, Justice.
Before VOIGT, C.J., and GOLDEN, HILL, KITE, BURKE, JJ.
[¶1] These three consolidated appeals arise out of W.N. McMurry Construction's (McMurry Construction) legal action to recover for two separate incidents involving two separate insurance policies. Both policies were issued to it by Ohio Casualty Insurance Company (Ohio Casualty). BW Insurance Agency (BW Insurance), an independent insurance agency, was the procuring agent for both policies.
[¶2] The first subject insurance policy is a "Builder's Risk" policy. McMurry Construction suffered a covered loss during the construction of a commercial building. McMurry Construction filed its claim with Ohio Casualty, only to discover its policy limits were precipitously lower than it had assumed had been procured. The underlying legal action proceeded to a bench trial on McMurry Construction's claim seeking reformation of the contract of insurance to reflect increased policy limits. The district court agreed with McMurry Construction and ordered the requested reformation of the builder's risk policy.
[¶3] In appeal number S-08-0163, Ohio Casualty appeals the district court's decision requiring reformation. We reverse this decision. In appeal number S-08-0164, McMurry Construction appeals the trial court's calculation of interest in its award under the builder's risk policy action. Because McMurry Construction is no longer the prevailing party in that underlying litigation, and therefore no longer entitled to damages, appeal number S-08-0164 is dismissed as moot.
[¶4] The second policy at issue is a "Business Auto" policy. A McMurry Construction employee was involved in a motor vehicle accident. Ohio Casualty denied the resulting claim under the business auto policy, stating the particular employee involved in the accident was expressly excluded from coverage. Although a written exclusion existed, McMurry Construction claimed BW Insurance, while acting as the agent for Ohio Casualty, explicitly stated the employee was a covered driver, thus binding Ohio Casualty to coverage.
[¶5] McMurry Construction brought certain tort and contract actions against BW Insurance. BW Insurance moved for summary judgment on these causes of action, which the district court granted on the grounds that they were barred by McMurry Construction's failure to read the policy.
[¶6] McMurry Construction also sought reformation of the business auto policy as against Ohio Casualty. After a bench trial, the district court found BW Insurance did represent to McMurry Construction that the driver at issue was covered under the business risk policy. The district court also, however, found that BW Insurance was not acting as Ohio Casualty's agent when it made this representation. The district court consequently declined to order reformation of the business auto policy.
[¶7] In appeal number S-08-0165, McMurry Construction appeals the district court's decision to not require reformation of the business auto policy. It also appeals the summary judgment granted to BW Insurance on contract and tort actions McMurry Construction had filed against BW Insurance in regard to BW Insurance's procurement of the policy. We affirm these decisions.
[¶8] Ohio Casualty presents the following issues:
A. Did the district court err in reforming this builder's risk policy to have $5.5M policy limits?
1. Did the district court err when it never analyzed the first element of reformation established in McMurry Const. v. Community First Ins., 2007 WY 96, 160 P.3d 71 (Wyo. 2007)?
2. Did the district court err when it confused BW and Ohio Casualty's mistake and miscommunication in reaching their antecedent agreement with the doctrine of mutual mistake?
3. Did the parties err in reaching their antecedent agreement or in drafting the written instrument?
4. Did the district court err when it found there was an antecedent agreement that the buildings be insured "for full value?"
5. Did the district court err when it ruled that the broker was acting on behalf of the insurer, not the insured, when the miscommunication and mistakes occurred?
6. Did the district court err when it found that the insurer called the broker into action and was controlling the broker's function when the miscommunication occurred?
[¶9] McMurry Construction reframes the issues thusly:
I. Whether the district court's finding that the parties reached an antecedent agreement is correct.
II. Whether Ohio Casualty is bound by the acts of its agent undertaken within the scope of its agency.
[¶10] Ohio Casualty filed a reply brief:
I. New issues and new arguments raised by McMurry in its brief which are addressed in this reply brief
A. Did BW make an antecedent agreement with McMurry, binding on Ohio Casualty, to insure these two buildings for $5.5M or for full value?
B. Was BW acting as McMurry's agent, or as Ohio Casualty's agent, when it made the alleged antecedent agreement?
C. Even if BW made an antecedent agreement for $5.5M, and even if this Court finds that BW was acting as Ohio Casualty's agent when it made that agreement, did BW act beyond its $1M binding authority when it made this alleged antecedent agreement for $5.5M?
[¶11] This is the second appearance of this dispute before this Court. In the earlier appeal, we summarized the context of the dispute:
Early in 2005, McMurry Construction obtained a contract from the State of Wyoming to construct two steel buildings at the State Fairgrounds in Douglas. McMurry Construction's bid was $5,521,299.00 -- $,368,761.00 for a livestock pavilion and $2,298,759.00 for a multi-purpose show center. The contract required McMurry Construction to obtain builder's risk insurance covering 100% of the contract amount. Anticipating this requirement, McMurry Construction had turned to BW Insurance, the agency it typically used, to procure premium estimates for the builder's risk and other insurance and bonding requirements of the project. BW Insurance's employees estimated a premium of $8,415.00 for the builder's risk insurance on the originally estimated contract price of $4,500,000.00. McMurry Construction used that premium estimate in calculating its bid.
Upon learning that McMurry Construction would be awarded the contract, BW Insurance sent an insurance application to Ohio Casualty, seeking "blanket" builder's risk coverage for the two buildings because both buildings were to be insured under the same contract number. The contract amount was stated in the application to be $5,524,000.00. Because Ohio Casualty does not issue "blanket" builder's risk policies -- meaning one limit covering multiple buildings -- Ohio Casualty asked BW Insurance to break out the values of the two buildings. In turn, BW Insurance contacted McMurry Construction to obtain those figures. Misunderstanding what information was being sought, a McMurry Construction employee mistakenly gave BW Insurance the invoice amounts for the steel packages -- $603,003.00 for the livestock pavilion, and $365,147.00 for the multi-purpose show center. Those figures were then relayed from BW Insurance to Ohio Casualty, where they were inserted as the operative coverage amounts in the builder's risk policy. The premium charged to McMurry Construction was, as a result, reduced from the estimate of $8,415.00 to $3,659.00.
BW Insurance mailed a certificate of insurance to McMurry Construction on March 2, 2005, showing the amount of builder's risk coverage to be $968,150.00. The policy was mailed to McMurry Construction a few days later, once again containing the builder's risk coverages of $603,003.00 and $365,147.00 for the two buildings. On March 15, 2005, BW Insurance faxed another copy of the certificate of insurance to McMurry Construction at the latter's request, and on March 18, 2005, again at McMurry Construction's request, BW Insurance faxed to it a copy of the policy's declarations page. The declarations page, as the certificate of insurance, showed the builder's risk coverage to be $968,150.00. McMurry Construction does not contest the fact that nobody in its offices read the certificate, the declarations page, or the policy upon their receipt.
This case was engendered when the livestock pavilion collapsed as it neared completion on June 11, 2005, due to improper bracing by a subcontractor. The cost to return the building to its condition before it collapsed was $951,715.00.
W.N. McMurry Constr. Co. v. Cmty. First Ins., Inc., 2007 WY 96, ¶¶ 3-6, 160 P.3d 71, 73-74 (Wyo. 2007) (McMurry Construction I) (footnotes omitted). Unfortunately, the policy limit for the livestock pavilion, being only $603,003.00, was low enough to invoke the policy's underinsured coinsurance penalty. Ohio Casualty calculated the total policy benefit to be $176,543.19. Id., ¶ 7, 160 P.3d at 74.
[¶12] In McMurry Construction I, this Court upheld the district court's grant of summary judgment to BW Insurance and Ohio Casualty on tort and contract causes of action contained in McMurry Construction's complaint because those causes of action were barred by McMurry Construction's failure to read the insurance policy documents. Id., ¶ 37, 160 P.3d at 83. We also, however, held that McMurry Construction's failure to read the policy documents did not preclude an action for equitable reformation of the insurance policy and remanded the case for consistent proceedings. Id.
[¶13] Upon remand, following a bench trial, the district court made the following findings of fact:
1. That the Plaintiff, W.N. McMurry Construction Company (McMurry) is a Wyoming corporation with its principal office in Casper, Wyoming. McMurry Construction was formed and incorporated in late 2002. W.N. McMurry and Rich Fairservis are the primary shareholders of McMurry Construction. Mr. Fairservis runs the business. Richard Nelson has been employed at McMurry Construction since June of 2003.
2. That the Defendant, Ohio Casualty Insurance Company (Ohio) is an Ohio corporation doing business in Wyoming. Ohio is an insurer which has its home office in Ohio, but which is authorized to sell insurance policies in many states, including Wyoming. Ohio has an agency agreement with BW Insurance Agency. Ohio has a regional underwriting office in Denver, Colorado. Mike McKenna was, and is, the Regional Underwriting Manager for Ohio in its Denver, Colorado, office. Kim Rons is one of eight senior underwriters in the Denver, Colorado, office. Since 2002, Ms. Rons has reported to and been supervised by Mr. McKenna.
3. B.W. Insurance Agency, Inc., (BW) is a successor of Community First Insurance, Inc., and is an insurance agency with an office inCasper, Wyoming. Richard Garrod has managed the Casper BW office since 2002. Leo Ashba and Judy Goodwin were sales agents with BW and its predecessor companies. Mr. Ashba retired from BW in July 2005 and Ms. Goodwin is still employed at BW. Ms. Goodwin began her career with BW's predecessor company in 1988, and she has always worked the commercial insurance side of the business. Mr. Ashba began working for BW's predecessor company in 1983, and while he sometimes sold his insured clients their various commercial insurance policies, he primarily worked the bond side of the business. Mr. Ashba was assisted for over 20 years by Debbie Stoddard.
4. Community First was purchased by Bank of the West in 2004. It has operated as BW ever since.
5. As an agent, BW would shop from among multiple insurance companies to seek and procure the best insurance coverage for its insured clients, such as McMurry, for the lowest premium.
6. Some of the insurers BW used for general liability, property, and business auto policies and coverage from 2002 through 2005 are AIG, SAFECO, The Hartford, Ohio, Colorado Casualty, and St. Paul-Traveler's.
7. BW sought builder's risk quotes from AIG, SAFECO, The Hartford, Colorado Casualty, Zurich North America, and Ohio.
8. BW is paid a commission by insurers when it places its insured clients' coverages with those insurers. Typically, no additional payment or consideration is received from the insured client.
9. Community First Insurance signed an agency agreement with Ohio on September 1, 2003, which was adopted by BW.
10. BW had Ohio's authority and permission to bind or commit Ohio to providing builder's risk coverage of up to $1,000,000 without Ohio's underwriters' knowledge or approval.
34. Upon learning that McMurry intended to bid on the Fairground Project, in accordance with the usual service it provided, BW independently obtained from the bid center in Casper, Wyoming, where contract documents were on file, the documents from which BW could determine the insurance and bond requirements for bidders on the project and for successful bidder.
35. From the contract documents it obtained, BW recorded the bond and insurance requirements on a work paper referred to as the "Pink Sheet." Those requirements included a bid bond and a payment and performance bond in the amount of 100% of the contract amount, owner's protective liability insurance (OCP), and builder risk insurance in the amount of 100% of the contract sum.
36. Debbie Stoddard was Leo Ashba's long-time bond assistant. She was a bond specialist. Infrequently, Ms. Stoddard would be involved with clients' commercial insurance products or policies. Judy Goodwin worked primarily with clients' commercial insurance policies and needs and rarely with bonds.
37. Debbie Stoddard knew McMurry would be submitting its bid on the Fairground Project to the State of Wyoming on or about January 6, 2005. Ms. Stoddard knew that McMurry Construction needed to purchase OCP and builder's risk coverage and that McMurry needed estimated premiums for the proposed insurance policies to add into its bid.
38. Debbie Stoddard asked BW's Judy Goodwin to obtain and provide Ms. Stoddard with quotes or estimates for the OCP and builders risk policies. Judy Goodwin then provided Ms. Stoddard with a $3,330 quote for OCP coverage and an estimate of $.187/per hundred for the builder's risk coverage.
39. Judy Goodwin obtained her $3,330 OCP estimated premium number from Ohio through rates provided by Ohio, but she likely obtained her $.187/per hundred builder's risk rate from Zurich.
40. Upon being notified that the project would be awarded to McMurry, BW proceeded to obtain a payment and performance bond, OCP insurance, and builder's risk insurance in accordance with the requirement of the contract documents it had obtained from the bid center.
41. BW employee Debbie Stoddard signed the payment and performance bond on behalf of the surety, Hartford Casualty Insurance Company, on February 24, 2005.
42. BW employee Judy Goodwin prepared an application to Ohio for the OCP and builder's risk policy for a contract of $5,524,000. This application was ...