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Granite State Insurance v. Bacon
Citations: 266 Ark. 842; 586 S.W.2d 254; 1979 Ark. App. LEXIS 367Docket: CA 79-88
Court: Supreme Court of Arkansas; August 29, 1979; Arkansas; State Supreme Court
James H. Pilkinton, Judge, presided over a case involving an error by an insurance agent in securing fire insurance for E. H. Bacon's motel. The Arkansas Supreme Court assigned the appeal to the Arkansas Court of Appeals, which upheld a Chancery Court decision reforming a policy from Granite State Insurance Company to provide $55,000 coverage for Unit A of the motel, resulting in a judgment of $44,899.24 to Bacon for fire damage, along with statutory penalties and attorney fees. The insurance company also received $540 on a cross action against its agent, Walter H. Broyles, for the additional premium due to the reformed policy. The appeal centered on the insurance company's claim that the Chancellor erred by not allowing it to seek indemnity or contribution from Broyles for amounts paid exceeding the initially issued $5,500 coverage. Broyles had been managing Bacon's insurance for several years and mistakenly entered $5,500 instead of $55,000 for Unit A's coverage, despite prior understanding to maintain the same coverage. The error was not discovered until after a fire partially damaged Unit A on December 1, 1977. This case parallels Pennsylvania Millers Mutual Insurance Company v. Walton, where a similar mistake by an agent led to insufficient coverage, and the Supreme Court ruled that the agent was not liable to the insurance company without evidence of collusion or bad faith. The principles established in that case were applied to dismiss Granite State's claim against Broyles. The case centers on whether Mr. Broyles had the authority to bind Granite State Insurance and whether the company would have accepted increased coverage. The testimony indicates that Mr. Broyles, as a general agent, had the authority to bind Granite State to the risk prior to the policy's issuance. Both Mr. Broyles and underwriter Mrs. Eileen Cockmon confirmed that Granite State would have insured Unit A for $55,000 if requested, rather than the erroneous $5,500. Mrs. Cockmon stated that the initial evaluation of coverage is the agent's responsibility and that the company relies on the agent’s expertise. It is noted that the inspection report was issued four months post-fire and that there was no indication of collusion or bad faith by Mr. Broyles; the error was purely typographical. The evidence supports that Granite State was accustomed to insuring risks like Mr. Bacon’s motel, confirming that the company was not compelled into an unusual contract. The precedent set by Pennsylvania Millers Mutual Insurance Company v. Walton is deemed applicable to this case.