Houston Fire & Casualty Insurance Co. v. Jones

• Decision Date: 20 February 1963
• Docket Number: No. 7106.,7106.
• Citation: 315 F.2d 116
• Court: U.S. Court of Appeals — Tenth Circuit
• Parties: HOUSTON FIRE & CASUALTY INSURANCE CO., a corporation, Appellant, v. Kenneth JONES, George Holderman, Donald F. Swan, Louise Tripp, and Mary Nichols, Administratrix of the Estate of Arvil Epps, deceased, Appellees.

315 F.2d 116 (1963)

HOUSTON FIRE & CASUALTY INSURANCE CO., a corporation, Appellant, v. Kenneth JONES, George Holderman, Donald F. Swan, Louise Tripp, and Mary Nichols, Administratrix of the Estate of Arvil Epps, deceased, Appellees.

No. 7106.

United States Court of Appeals Tenth Circuit.

February 20, 1963.

Joseph A. Sharp, Tulsa, Okl. (Best, Sharp, Thomas & Glass, Joseph M. Best and Jack M. Thomas, Tulsa, Okl., on the brief), for appellant.

Finis Smith, Tulsa, Okl. (John Cochran, Richard Gibbon and James Brown, Tulsa, Okl., on the brief), for appellees.

Before MURRAH, Chief Judge, and PICKETT and LEWIS, Circuit Judges.

LEWIS, Circuit Judge.

In an action for declaratory judgment on insurance coverage, the trial court found that the appellant insurer was obligated to defend actions brought in the Oklahoma state courts against appellees Jones and Holderman by the other appellees for damages incurred in an automobile accident and to indemnify them to the limits of an insurance binder issued the day before the accident. Appellant challenges the findings of fact, and the conclusions of the trial court holding the company responsible under a binder issued by an unlicensed employee of an agent of that company.

Earl B. Johnston was employed as a salesman for Jack H. Morse and Associates, a licensed and appointed policy-writing agent for the appellant, Houston Fire and Casualty Insurance Company. Johnston had never taken an examination requisite to obtaining either an agent's or solicitor's license in Oklahoma, 36 O.S.A. § 1309, but had paid a fee upon his application and, according to his deposition, was under the impression that he was licensed to perform any of the functions delegated to the agency.

In the summer of 1960 Johnston contacted Kenneth Jones, an independent oil producer, in an attempt to sell casualty insurance on the vehicles and equipment owned by the partnership of Jones and Holderman. The partners were interested in obtaining insurance prior to moving some of the equipment to another leased location and on August 12, Jones telephoned Johnston with instructions to write insurance on a car, pickup and truck. Johnston informed Jones that he would be covered by insurance as of that date. He went to Jones' house and received a check for $200 as an advance premium and began writing an insurance binder that afternoon. The binder was written on a form supplied to him by appellant during a course of instruction.

On the following day, August 13, 1960, Jones was involved in a serious accident while driving the truck. On that date, without knowledge of the accident, Johnston completed the binder, signing it "Jack H. Morse, Agent, by Earl Johnston," and mailed it to the insurance company.

Claims against Jones exceeded the $100,000 liability limits of the policy and when suit was brought against him, he demanded that the company settle the claims or take over his defense in state court actions. The company denied coverage but made no offer to return the money paid upon premiums. Jones brought this action and the other parties interested in the outcome of the suit joined him as plaintiffs.

Although the appellant here speculates darkly upon the possibility of fraud and collusion, the issue was not pleaded nor proved in the trial court and the sole issue remains whether the evidence supports the conclusion that:

"Plaintiffs have met the burden of showing either actual or apparent authority of Earl B. Johnston to write binders for the defendant Houston Fire and Casualty Insurance Company."

Appellant contends that Johnston could not have actual authority to bind the company since he was not licensed in accordance with the requirements of statute, 36 O.S.A. § 1307, and that if he could be deemed a solicitor without a license, only the appointing agent would be responsible for his acts, 36 O.S.A. § 1320¹ and that he was never appointed an agent of the appellant, 36 O.S.A. § 1302. It further urges that under Oklahoma law apparent authority must find its inception in some act of the principal, relied upon by the person doing business with the agent, American National Bank of Sapulpa, Okl. v. Bartlett, 10 Cir., 40 F.2d 21; Rosser-Moon Furniture Co. v. Oklahoma State Bank, 192 Okl. 169, 135 P.2d 336 and argues that it is not even shown that Jones intended to do business with Houston Fire & Casualty Insurance Company and would have accepted whatever policy Johnston wrote.

Appellant acknowledges that prior to the enactment of the Oklahoma Insurance Code in 1957, a person designated as a "soliciting agent"² for a company had the power to bind the company in regard to matters within the limited scope of his authority concerned with the preparation of applications for insurance, Commonwealth Life Ins. Co. v. Hutson, Okl., 271 P.2d 722; North American Accident Ins. Co. v. Canady, 196 Okl. 105, 163 P.2d 221; Globe & Rutgers Fire Ins. Co. v. Roysden, 208 Okl. 660, 258 P.2d 644. The often quoted language of Phipps v. Union Mut. Ins. Co., 50 Okl. 135, 150 P. 1083, defined the powers of a "soliciting agent" under the former law:

"Ordinarily a mere `soliciting agent\' for an insurance company — that is, one whose power is confined to taking applications for insurance, which, when taken, are to be forwarded to the company for its approval or rejection — has no power to bind the company to a contract of insurance; nor has he, after the policy is issued, any authority to waive any of the terms or provisions therein.

"Such soliciting agent, however, can bind his company, with regard to matters within the limited and restricted scope of his authority; that is to say, in matters pertaining to the taking and preparation of the applications for insurance, for submission to the company."

Under this doctrine it has been held that a soliciting agent's promise bound the company to insure an unborn child, Commonwealth Life Ins. Co. v. Hutson, to recognize the insured by an adopted name, North American Accident Ins. Co. v. Canady, to continue coverage of relocated property, Globe & Rutgers Fire Ins. Co. v. Roysden.

It is apparent that under the former law, the company would have been bound to honor the...