Appeal from Baldwin Circuit Court. (CV-91-956). Charles C. Partin, Trial Judge.
Released for Publication December 5, 1994.
Steagall, Hornsby, C. J., and Maddox, Shores, and Ingram, JJ., concur.
The opinion of the court was delivered by: Steagall
Certain persons, including David Powell, acting individually and as administrator of the estate of Sonia Powell, filed a wrongful death action against Gulf Gate Management Corporation (hereinafter "Gulf Gate") and George Bode and Scott Bode, each individually and as a director of Gulf Gate, alleging negligence, wantonness, and violations of the Dram Shop Act. David Powell alleged that Gulf Gate sold alcoholic beverages to an individual who was already intoxicated and who subsequently caused an automobile accident that resulted in Sonia Powell's death. Gulf Gate filed a third-party complaint against St. Paul Surplus Lines Insurance Company (hereinafter "St. Paul"); Swett & Crawford Group; Swett Insurance Managers, Inc., a subsidiary of Swett & Crawford Group and formerly doing business as Dana Roehrig & Associates, Inc. (hereinafter referred to as "Roehrig"); Loretta M. Giovine, individually and as an agent for Roehrig; Michael W. Norwood and Joseph McCarron, each individually and doing business as The Norwood Agency; and Alliance Insurance Group (hereinafter "Alliance"), seeking, among other things, damages for breach of contract, bad faith failure to pay, misrepresentation, and negligent failure to procure insurance; Gulf Gate also sought a judgment declaring that St. Paul and Alliance were required to defend and indemnify the Bodes in the underlying wrongful death action.
The trial court entered a summary judgment for Alliance and certified that judgment as final, pursuant to Rule 54(b), Ala.R.Civ.P. This Court affirmed that judgment in Gulf Gate Management Corp. v. Alliance Insurance Group, [Ms. 1921845, March 18, 1994] ___ So. 2d ___ (Ala. 1994). The court subsequently entered a summary judgment for St. Paul, holding that it was not an insurer of Gulf Gates and owed no duty to defend or indemnify it in the underlying action. The court certified that judgment as final under Rule 54(b); Gulf Gate appeals.
A summary judgment is proper and must be affirmed where there exists no genuine issue of material fact and the movant is entitled to a judgment as a matter of law. Rule 56(c), A.R.Civ.P.
The undisputed facts are as follows: St. Paul is a "surplus line" insurance company; that is, it is an insurer that is not licensed in Alabama, but that can issue policies to parties within this state through designated surplus line insurance brokers. As of 1990, Roehrig was an independent insurance broker that did business with St. Paul, as well as with other insurers. Roehrig had a surplus line broker agreement with St. Paul, which stated, in pertinent part:
"The Broker is hereby authorized by [St. Paul] to solicit proposals of insurance on their behalf, subject to the terms and conditions hereinafter set forth. The Broker is an independent contractor and not an agent or employee of [St. Paul]. The Broker has no authority to issue binders, policies, endorsements or insurance certificates or to otherwise bind coverage on behalf of [St. Paul] and has no authority to make representations on behalf of [St. Paul], including, but not limited to, representations regarding the application of coverage to specific situations, except where otherwise agreed in writing by [St. Paul]. All proposals of insurance must be submitted to [St. Paul] and approved by [St. Paul] prior to binding coverage."
Although, under this agreement, Roehrig was not authorized as an agent for St. Paul, Linda Giovine, a Roehrig employee, was authorized individually by letter to underwrite St Paul policies. Under the terms of her letter of authority from St. Paul, Giovine was authorized to "produce, underwrite, quote, issue and service policies" or to "decline individual risks submitted to her" if she chose to. Giovine could not assign or delegate this express written authority to any other individual or entity, including her employer, Roehrig. Generally, independent insurance agents or brokers would contact Giovine to obtain insurance for their clients and she would issue applications. She would prepare individualized quote letters to fit the special requirements and liabilities of each prospective client and would vary the conditions of coverage accordingly. If an application was acceptable and the prospective insured complied with the terms of her quote letter, Giovine was authorized to issue a "binder," i.e., a temporary contract for insurance, which would last 30 days. At the end of that time, permanent coverage would issue or coverage would cease. Giovine prepared many quote letters and had an approximate 15% "hit rate"; that is, about 15 of every 100 quotes she sent to the agents of prospective insureds actually culminated in a binding insurance policy.
In January 1990, the Bodes were the sole stockholders and directors of Gulf Gate, which they incorporated to operate Gulf Gate Lodge, a restaurant and bar. An independent insurance broker, Norwood Agency, contacted them to sell them a liquor law liability policy for their business. Norwood Agency was licensed as a property/casualty agent, but, in order to place surplus line coverage for the Bodes with St. Paul, it was required to hold a "surplus line broker" license as well. Norwood Agency did not have a surplus line broker license at that time, but was in the process of acquiring one through a "producer agreement" with Roehrig. Although the producer agreement was not yet final, Joseph McCarron, an agent at Norwood Agency, contacted Giovine to request a quote of insurance terms and an application for the Bodes. Giovine sent him an application for insurance, which contained the following provision:
"Signing this application does not bind the company to complete the insurance. If a policy is issued to you, this application will be incorporated into the policy and become part of it. All information requested in this application is considered material and important. If the company agrees to be bound under the terms of this application, your policy is void if you hide any important information from us, mislead us, or attempt to defraud or lie to us about any matter contained in this application. Nothing in this application represents the extent or limits of your coverage. For such information, you must read the Coverage Section in your policy. "
(Emphasis in original.) McCarron completed that application on behalf of the Bodes and returned it to Giovine.
Norwood Agency thereafter completed the producer agreement with Roehrig, and the agreement went into effect on February 15, 1990. The producer agreement established Norwood Agency's credit with Roehrig and enabled Norwood Agency to purchase surplus line policies for Gulf Gate and other clients. Norwood Agency was responsible for paying the premiums on these policies "no later than ten days after the statement date." The producer agreement also provided, however, that any special credit terms "contained in a quotation letter or binder would supersede this agreement."
With the producer agreement in effect on February 15, Giovine sent McCarron a quote letter on the liquor liability policy for which Gulf Gate had applied. This letter read:
"The Norwood Agency of Baldwin County