Citizens Casualty Co. of New York v. Otis Clark & Co.

Opinion

BROWN (H. C.), J. The Citizens Casualty Company of New York (Citizens) instituted this action against Swett & Crawford (S & C), insurance brokers, for breach of an agreement to obtain reinsurance contracts. Citizens also joined as defendants Christiana General Insurance Corp. (Christiana) and the Insurance Company of North America (INA) and its insurance broker, Otis Clark & Co., claiming that these companies mistakenly issued reinsurance policies on the risk for a one-year term instead of a three-year term and prayed for reformation.

The trial court determined that the causes of action were barred by the statute of limitations and rendered judgment in favor of all defendants.

Citizens appeals contending that the agreement with S & C was a written agreement and that S & C failed to plead the proper provision of the statute of limitations pertaining to written contracts and is deemed to have waived that defense.

The facts: In January of 1959, San Francisco Provident Loan Association (by its broker) requested S & C, general insurance brokers, to obtain an all risk insurance policy for a three-year term. The appellant Citizens agreed to undertake the risk subject to the express condition that S & C obtain reinsurance for 50 percent of the risk it assumed. S & C negotiated with Otis Clark, brokers for INA and Christiana, who agreed to take 25 per cent each of Citizens’ risk for á one-year term. It was their understanding that the insurance term was one year. They were unaware that the term of the principal policy was for three years or that Citizens had instructed S & C to have the reinsurance for a three-year term.

On January 16, 1959, Otis Clark, as broker on behalf of INA and Christiana issued its cover letter and binder for the reinsurance. The term was not specified in the binder.

[298]S&C then issued its binder to Provident stating: “Remarks 3 Year Premium $3,000.00 Warranted Reinsured 25% Insurance Company of North America, 25% Christiana General.”

On January 26, 1959, S&C wrote to Citizens: “Dear Bob: As agreed by you in our telephone conversation of January 16, 1959 at 1:45 p.m., p.s.t., we have bound the above risk for all risks, excluding fidelity and forgery, for a limit of $250,000- each loss for a three year flat premium of $3,000.00. We take pleasure in enclosing covering note No. 9101 of Otis Clark & Co. binding Insurance Company of North America, and Christiana General Insurance Corporation of New York for 25% each; we also enclose a copy of our binder No. 35863. Your daily report will follow shortly. . . .”