Morales, et al v Greensboro Contracting Corporation, et al

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An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of A p p e l l a t e P r o c e d u r e . NO. COA11-376 NORTH CAROLINA COURT OF APPEALS Filed: 20 December 2011 JOSE GUADALUPE VARGAS MORALES, by and through his Guardian Ad Litem, JOSEPH W. HART, Employee, Plaintiff, v. N.C. Industrial Commission IC File No. 549768 GREENSBORO CONTRACTING CORPORATION, Employer, and KEY RISK MANAGEMENT SERVICES, INC., Carrier, THE CINCINNATI CASUALTY COMPANY and/or THE CINCINNATI INSURANCE COMPANY, Carrier, Defendants. Appeal by Carrier-Defendant from opinion and award entered 16 November 2010 and the order entered 23 December 2010 by the North Carolina Industrial Commission. Heard in the Court of Appeals 13 October 2011. McAngus, Goudelock & Courie, PLLC, by John T. Jeffries and Jennifer M. Arno, for Defendant-Appellee. Carruthers & Roth, P.A., Defendant-Appellant. by Jack B. Bayliss, Jr., for -2- BEASLEY, Judge. Defendant-Carrier, The Cincinnati Casualty Company and/or The Cincinnati Insurance Company (Cincinnati), appeals an opinion and award and the denial of a motion for reconsideration of the Full Commission pursuant to N.C. Gen. Stat. § 97-86. the following reasons, we reverse the award of the For Full Commission. Jose Guadalupe Vargas Morales (Plaintiff) was employed by Defendant Greensboro Contracting Corporation (GCC). On 5 August 2005, Plaintiff sustained serious injuries in the course of his employment. injuries Defendant At the time of the injury, GCC was insured for sustained Key Risk under the Management Worker s Compensation Services, Inc. Act (Key by Risk). Plaintiff was covered under this policy and Key First has paid all medical and indemnity compensation due to Plaintiff. Cincinnati issued a worker s compensation insurance policy to GCC from 1 January 2005 through 1 January 2006. The policy contained a provision that allowed the insured to cancel at any time by written advance notice to Cincinnati. On 1 August 2005, Robert Isner (Isner), President and owner of GCC, faxed a letter to his insurance agents, Senn Dunn Marsh & Roland (Dunn) and specifically Larry Roland (Roland), and requested same day -3cancellation of GCC s insurance coverage. An Agency Agreement existed between Dunn and Cincinnati. Dunn received the cancellation request, immediately inform Cincinnati of GCC s request. but did not Per the agency agreement, Dunn advanced premiums to Cincinnati on behalf of its insured, including GCC, and later collected premiums from the insured. Premiums were billed on a quarterly basis and all four premium payments from 1 January 2005 through 1 January 2006 were paid to Cincinnati on behalf of GCC, even though GCC requested cancellation. After the expiration of the conducted an audit of the policy. 2005-06 policy, Cincinnati The audit revealed that Dunn was still paying the premiums to Cincinnati on behalf of GCC, but GCC had not actually made any payments to Dunn or Cincinnati after the 1 August 2005 request for cancellation. Cincinnati did not have actual knowledge of GCC s intent to cancel the policy until 19 May 2006 when Dunn sent Cincinnati a request to cancel GCC s policy effective 1 August 2005. Subsequently, Cincinnati retroactively cancelled the policy on 26 June 2006, effective 1 August 2005 and credited Dunn with $10,000 pursuant to the audit of the 2005-06 policy. On 5 August 2008, Key Risk filed a request for hearing with the Industrial Commission to determine whether or not Cincinnati provided concurrent coverage entitling Key Risk to contribution. -4On 21 April 2010, Deputy Commissioner George T. Glenn filed an opinion and award which concluded that Cincinnati and Key First provided concurrent coverage. Cincinnati filed notice of appeal to on the Full Commission Commission concluded concurrent coverage. and that 16 November Cincinnati and 2010, Key the Risk Full provided On 23 December 2010, the Full Commission denied Cincinnati s motion for reconsideration. On 5 January 2011, Cincinnati gave notice of appeal to this Court. Cincinnati argues that the Industrial Commission erred as a matter of law when it held that notice of cancellation to the insurance company s insurance company. agent did not constitute notice to the We agree. The standard of appellate review of an opinion and award of the Industrial Commission in a workers' compensation case is whether there is any competent evidence in the record to support the Commission's findings of fact and whether these findings support the Commission's conclusions of law. County Board of Commissioners, S.E.2d 252, 254 (1997). 126 N.C. Lineback v. Wake App. 678, 680, 486 However, the Industrial Commission's conclusions of law are reviewable de novo. Johnson v. Herbie's Place, 157 N.C. App. 168, 171, 579 S.E.2d 110, 113 (2003). Key First argues that the Commission s plain reading of the insurance policy constituted findings and not conclusions of law, and we should review the Commission s interpretation of the -5insurance policy under the competent evidence standard. [a]s general We disagree. Our Court has previously held a rule, however, any determination requiring the exercise of judgment, or the application classified a[s] of [a] legal conclusion principles, of is law. Any more properly determination reached through logical reasoning from the evidentiary facts is more properly classified a[s] [a] finding of fact. In Re Helms, 127 N.C. App. 505, 510, 491 S.E.2d 672, 675 (1997) (internal quotation marks and internal citations omitted). Moreover, our Court has explicitly stated [t]he interpretation of language used in an insurance policy is a question of law, governed by well-established rules of construction. N.C. Farm Bureau Mut. Ins. Co. v. Mizell, 138 N.C. App. 530, 532, 530 S.E.2d 93, 95 (2000). Therefore, we conclude that the Commission s interpretations of the language of the insurance policy are in fact conclusions of law that we review de novo. We first address the issue of notice. In the Commission s Conclusion of Law Number 4, it determined Senn Dunn s notice/knowledge of the alleged cancellation on August 1, 2005 pursuant of Isner s letter is not imputed to Cincinnati as Senn Dunn was not acting within the scope of its authority at the time per the Agency Agreement. The Full Commission based this conclusion on its interpretation of the general rule outlined in Thomas-Yelverton Co. v. -6Insurance Co., 238 N.C. 278, 77 S.E.2d 692 (1953) that states, knowledge of the agent when acting within the scope of the powers entrusted to him will be imputed to the company, though a direct stipulation to the contrary appears in the policy or the application (internal for the quotation same. marks Id. at omitted). 282, The 77 S.E.2d Full at 694 Commission determined that Dunn was not acting within the scope of its authority when he accepted Isner s cancellation because the agency agreement between Dunn and Cincinnati did not give Dunn express authority to cancel insurance contracts. We do not believe that the inquiry into Dunn s authority stops at a plain reading of the agency agreement. We recognize the general rule that [o]ne who is authorized or employed to procure insurance does not thereby acquire any authority to cancel the policies after being procured. Urey v. Insurance Co., 197 N.C. 385, 387-88, 148 S.E. 432, 433 (1929). Our Supreme Court has also held [t]he authority of agents of insurance companies,. . ., is controlled not so much by the terms of th[e] . . . policies, which they procure, as by the things which the principal permits them to do by the nature and extent of the business for which they are employed and permitted to carry on. Hill v. Insurance Co., 200 N.C. 115, 122, 156 S.E. 518, 522 (1931). -7Here, the parties to the initial insurance contract were Cincinnati and GCC. On 1 August 2005, Isner intended to cancel the policy by delivering written notice to Dunn, the insurance agent. Dunn was expressly authorized to accept and bind contracts of insurance and sell and service our [Cincinnati s] products. Although not expressly granted in the policy, we believe, and Hill suggests, that an agent s authority is not wholly controlled by an express grant of authority from principal to agent. Powers possessed by agents of insurance companies are to be interpreted in accordance with the general law of agency. Id. The power of an agent, then, to bind his principal may include not only the authority actually conferred, but the authority implied as usual and necessary to the proper performance of the work [e]ntrusted to him, and it may be further extended by reason of acts indicating authority which the principal has approved or knowingly or, at times, even negligently permitted the agent to do in the course of his employment. Morpul Research Corp. v. Hardware Co., 263 N.C. 718, 721, 140 S.E.2d 416, 418 (1965) (citations omitted). In the case sub judice, Isner delivered the written cancellation to Dunn. Although cancellation may have exceeded Dunn s authority actual express under the agency agreement, Isner believed that cancellation was within the scope of Dunn s -8authority. Moreover, knowledge of the Cincinnati, written when it cancellation, received accepted actual Isner s cancellation as valid even though Dunn did not have express authority to cancel contracts. Cincinnati approved of the extension of Dunn s authority, which surpassed that expressed in the agency agreement, when Cincinnati accepted the cancellation that was delivered to Dunn. On 19 May 2006, Dunn sent an email to Cincinnati with instructions to cancel GCC s policy with an effective date of 1 August 2005 and on 26 June 2006, Cincinnati retroactively cancelled the policy effective 1 August 2005. Under these circumstances, it is clear that although Dunn acted without express authority to cancel, all parties involved in the contract believed Dunn had authority to cancel the policy and the principal, Therefore, we Cincinnati, hold that Dunn approved acted the within cancellation. the scope of his employment when he accepted the cancellation from Isner and the general rule applicable. of notice outlined in Thomas-Yelverton Co., is We conclude that Isner s 1 August 2005 notice to Dunn was imputed to Cincinnati, the principal. We now address whether the cancellation letter received by Dunn was sufficient to cancel the Cincinnati policy effective 1 August 2005. In objective interpreting is to a determine contract, the the of intent court's the principle parties to the -9agreement. Holshouser v. Shaner Hotel Grp. Props. One, 134 N.C. App. 391, 397, 518 S.E.2d 17, 23 (1999). In determining the intent of the parties to a contract, we must look to all circumstances surrounding the making of the agreement, including the language of the contract, its purposes and subject matter, and the situation of the parties at the time the contract was executed. Crowder Const. Co. v. Kiser, 134 N.C. App. 190, 201- 02, 517 S.E.2d 178, 186 (1999). The conduct of the parties in dealing with the contract indicating the manner in which they themselves controlling construe in its it is important, construction by sometimes the court. said to be Preyer v. Parker, 257 N.C. 440, 446, 125 S.E.2d 916, 920 (1962) (citation omitted). The Full Commission concluded that the policy was not properly cancelled pursuant to the policy terms because GCC was required to give Cincinnati advance notice of cancellation. The Full Commission concluded that the letter from Isner dated 1 August 2005 requesting cancellation on the same day that he sent the letter did not constitute advance notice, and therefore did not cancel the contract. We disagree with this conclusion of law. A review of the findings of fact shows that Isner sent a request to Dunn for cancellation effective on the same day. on 1 August 2005 to be GCC never paid any premiums after -10the 1 August 2005 cancellation. knowledge of Isner, Cincinnati on discovered that without continued behalf of Dunn consent or Dunn, without the consent or had to GCC. pay After continued authorization. advanced an premiums audit, paying on Cincinnati GCC s Subsequently, to behalf Cincinnati refunded Dunn the advanced premiums and canceled GCC s contract with a retroactive date of 1 August 2005. Here, the intentions of both parties to the contract are controlling. GCC intended to cancel the contract and Cincinnati, upon actual knowledge of GCC s intent to cancel, accepted GCC s request to cancel effective 1 August 2005, the date of the request. The Full Commission erred by limiting its inquiry to the express terms of the agreement and ignoring the actual intentions of the parties to the contract. In this instance, the conduct of the parties shows a clear intention to end their contractual relationship. Interpretation of the policy provisions are unnecessary where the intentions of the parties to the contract are not at issue. not a party to the original Key First, who was contract, argues that the cancellation was not effective because the same day notification did not constitute advanced notice. Key First is not a third party beneficiary to the contract, nor did it detrimentally rely on the contract between GCC and Cincinnati. parties to the contract are GCC and Here, the only Cincinnati and their -11intentions erred in are dispositive. concluding that Therefore, Isner s 1 the August Full 2005 Commission letter was ineffective to cancel the contract where both parties to the contract agreed that the contract was canceled on 1 August 2005. We conclude that the contract was canceled on 1 August 2005. Cincinatti also argues that there is no legal basis for quasi-estoppel under the facts found by the Full Commission, and its decision must therefore be reversed. We agree. The Full Commission concluded that Cincinnati was estopped from denying coverage in this matter on the grounds that the policy was cancelled on August 1, 2005, as it continued to collect premiums for the policy after August 1, 2005, and renewed the policy on October 19, 2005, for the January 1, 2006 through January 1 2007 policy period. The rule of estoppel is grounded in the premise that it offends every principle of equity and morality to permit a party to enjoy the benefits of a transaction and at the same time deny its terms or qualifications. Godley v. County of Pitt, 306 N.C. 357, 360, 293 S.E.2d 167, 169 (1982). received After the unauthorized 2006 audit, premiums from Cincinnati Dunn Here, Cincinnati on behalf retroactively of canceled GCC. the policy and credited Dunn with the return of the unauthorized payments. Estoppel is not applicable because Cincinnati incurred no benefit where it returned the unauthorized premiums. Also, applying the rule of estoppel in this situation would be -12contrary to equity where the Full Commission held Cincinnati responsible for one half of all medical and indemnity compensation for Plaintiff, although (1) GCC intended to cancel its policy; (2) GCC believed that the policy was cancelled; (3) GCC never paid any more premiums after 1 August 2005; and (4) the premiums that were paid on behalf of GCC were unauthorized and ultimately returned to Dunn. Estoppel is inapplicable in this situation and we reverse the Full Commission s conclusion of law. For the forgoing reasons, we conclude that the Full Commission s findings of fact did not support its conclusions of law. Accordingly, we reverse the opinion and award of the Full Commission. Reversed. Judges HUNTER, JR. and THIGPEN concur. Report per Rule 30(e).

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