Opinion
December 30, 1970
In an action against an insurance agent and broker to recover damages for his alleged negligence in failing to procure fire insurance on plaintiffs' real property, the appeal is from a judgment of the Supreme Court, Westchester County, dated July 2, 1969, in favor of defendant upon a jury verdict. Judgment reversed, on the law, and new trial granted, with costs to abide the event. The questions of fact have not been considered. The question is whether a principal suing his special agent on the theory of negligence is barred from recovery because of the concurrent negligence of the principal's general agent. The Trial Term in effect instructed the jury that the principal could not recover; and an exception was taken to the charge. We think that in the context of this case the instruction was erroneous and the judgment in defendant's favor must be reversed and a new trial granted. Plaintiffs owned buildings in Peekskill. Defendant purchased a real estate and insurance business from the plaintiff husband in May, 1967. As part of the bargain, defendant agreed to cover the buildings with fire insurance and specifically as to two of the buildings in the sum of $30,000. Defendant placed oral binders on the buildings with two insurance carriers for whom he was agent, but each subsequently refused coverage. Through an error in defendant's office, the file was misplaced; and defendant did not seek coverage elsewhere and failed to notify plaintiffs or their son-in-law, Arkawy, that no coverage existed. In the meantime plaintiffs went to Florida, leaving Arkawy in general charge and management of the buildings. Arkawy received bills from defendant for insurance coverage, but the bills were not specific and did not itemize the buildings covered. Defendant told Arkawy that it would take some time to straighten the bills out and Arkawy, on the strength of this statement, did nothing. The buildings were thus unprotected when they were destroyed by fire on July 24, 1968. Plaintiffs brought this action against defendant for $30,000 as damages claimed to have been incurred as a result of defendant's negligence. At the trial the jury was instructed that if either the plaintiffs or Arkawy were contributorily negligent, the verdict must be in favor of defendant. The jury returned for further instructions, asking this specific question: "Is negligence on the part of Arkawy the same as on the part of the plaintiff?" The Trial Term charged the jury that it was, that "his [Arkawy's] negligence is to be attributed to the plaintiff." Exception was taken to the charge. The rule is plain that a principal may be held liable to a third party for the negligence of his agent ( Grant v. Knepper, 245 N.Y. 158; 2 Harper and James, Law of Torts, § 26.7). At the same time the agent is liable for his negligence to his principal ( Barile v. Wright, 256 N.Y. 1). The principal's liability to a third party rests on an imputation of negligence arising out of the negligence of his agent. But the liability of the agent to his principal rests on the violation of the agent's personal duty of reasonable care and skill owing to the principal. On this record, defendant's violation of that duty is manifest, and the jury's question to the court indicates that the issue of defendant's negligence had been determined against him and that only the extent and nature of the plaintiffs' negligence were now the points on which the jury desired further explanation. Again on the record, there is little, if anything, to support a finding of plaintiffs' negligence, and the jury's question implies that only the negligence of Arkawy and its effect on the plaintiffs' rights were matters which concerned it. The rule is unsettled in New York whether a principal is remediless against a careless agent because a second agent is also careless. In Wisconsin the rule apparently is that the principal's recovery cannot be defeated by the imputation of the second agent's negligence to the principal ( Zulkee v. Wing, 20 Wis. 408). In Minnesota the rule is apparently to the contrary ( Capitola v. Minneapolis, St. Paul Sault Ste. Marie R.R. Co., 258 Minn. 206). For reasons which follow we think that the Wisconsin rule is preferable. 1. The imputation of negligence to the principal leads to the strange result that a principal who is so unfortunate as to have two careless agents is worse off than a principal who has only one. For the latter may recover against his one careless agent, but the principal who sued both careless agents would be met with defenses of reciprocal contributory negligence raised by the two and imputed to the principal to defeat recovery. We see no grounds of logic or policy to support this incongruous outcome. 2. The imputation of negligence to a principal for a loss suffered by a third party by reason of an agent's misconduct serves a useful social purpose. As the principal's business interests are being advanced by the agent, the risk of injury to persons with whom the agent deals or has contact should be borne by the principal (cf. 2 Harper and James, Law of Torts, §§ 26.1, 26.3). That rationale fails when applied to suits between principals and agents. The action is brought by the principal because the agent failed to advance the principal's business interests. Thus, the great weight of authority does not extend the doctrine of imputed negligence when a principal sues an agent (see 2 Harper and James, Law of Torts, § 23.7). 3. The relations between plaintiffs and their two agents suggest that the doctrine of imputed negligence in any event has no relevance here. Arkawy was put in charge of all of plaintiffs' properties, but defendant was particularly chosen by plaintiffs to obtain insurance on the buildings in suit on account of his special skill. Hence, the standard of that special skill should rightly be considered of a higher and greater scope than the care expected of a general agent. Plaintiffs, as well as the general agent, would naturally rely on the expertise of defendant, who had undertaken the specific mission of procuring coverage (cf. Spiegel v. Metropolitan Life Ins. Co., 6 N.Y.2d 91, 95-96). Consequently, plaintiffs should not be penalized by the failure of the general agent to oversee the accomplishment of the mission by defendant. On these grounds, we think that the doctrine of the imputation of negligence ought not be applied to plaintiffs. Since the jury's question raised the issue directly, the verdict for defendant undoubtedly was influenced by the court's charge. The judgment should be reversed and a new trial ordered. Christ, P.J., Rabin and Hopkins, JJ., concur; Munder and Latham, JJ., dissent and vote to affirm the judgment.