Automobile Insurance Co. v. Buie

• Decision Date: 11 April 1923
• Docket Number: (No. 6922.)
• Parties: AUTOMOBILE INSURANCE CO., OF HARTFORD, CONN., v. BUIE.
• Court: Texas Court of Appeals

252 S.W. 295

AUTOMOBILE INSURANCE CO., OF HARTFORD, CONN., v. BUIE.

(No. 6922.)

Court of Civil Appeals of Texas. San Antonio.

April 11, 1923.

Rehearing Denied May 16, 1923.

Appeal from District Court, Tarrant County; Ben M. Terrell, Judge.

Action by James A. Buie against Automobile Insurance Company, of Hartford, Conn. From judgment for plaintiff, defendant appeals. Reversed and remanded.

Thompson, Knight, Baker & Harris, of Dallas, for appellant.

Slay, Simon & Smith, Walter L. Morris, and McCart, Curtis & McCart, all of Fort Worth, for appellee.

SMITH, J.

Appellee, Buie, placed materials on leased premises in Tarrant county, preparatory to drilling an oil well thereon. Desiring to insure these materials, or some of them, against loss by fire, he called upon one Rutledge, an insurance agent, through whom it had been his custom to procure insurance, and requested him to issue policies to cover those materials. Rutledge advised Buie that none of the companies represented by him would issue such policy, but that he could get the desired insurance through other agents, to which Buie assented. In pursuance of this understanding Rutledge requested the local agent of appellant company at Fort Worth to procure and issue the policy, and appellant's agent in response to this request issued the policy for $4,000 and delivered it to Rutledge, who in turn delivered it to Buie, from whom he collected the premium. In accordance with an arrangement with appellant's agent, apparently common among insurance agents in such cases, Rutledge retained half of the commission on this premium as compensation for procuring the risk and paid the balance over to appellant's agent, who acquiesced in the division of the commission and paid the net premium to appellant, his principal, who retained it.

It appears that the policy issued was made to cover all materials and machinery ordinarily used in the drilling of an oil well, and all that Buie then had on the ground, or subsequently placed thereon. Later on Rutledge, at Buie's request, procured from one of his own companies an additional policy, for $6,500, covering some of the materials or machinery insured in the first policy, which thereby became doubly insured. The latter policy, being the one sued on here, embraced a stipulation that the whole policy should be rendered void in the event the insured should thereafter procure additional insurance on the property covered in this policy.

Most of the materials and machinery insured were merged into a completed well-drilling outfit, including necessary houses, derrick, etc., but some of the lumber, of the value of several hundred dollars, was left over and remained idle on the ground. Subsequently, and during the period covered by the two policies, the completed structures, as well as the machinery installed therein, were totally destroyed by fire, but the left-over materials were not destroyed. Buie collected under the second policy, issued through Rutledge's company; but appellant resisted payment of the policy issued by it, and this suit was brought by Buie to recover the amount of this insurance. The insurance company answered, and, among other defenses, alleged that subsequent to the issuance of the policy sued on the insured had taken out additional insurance covering some of the property, and under the terms of the contract the policy was thereby rendered void. In reply to this pleading, Buie filed a supplemental petition, alleging that the property thus doubly covered was embraced in the policy sued upon through mutual mistake of the parties in that he did not apply to appellant for insurance upon the specific property which was subsequently covered in the second policy issued, and did not know it had been included in the policy sued on, which he sought to have reformed so as to exclude the doubly insured property. The cause was tried by jury, upon whose verdict judgment was rendered reforming the policy as prayed for, and in favor of Buie for the full amount of the policy. Only two issues were submitted to the jury, upon which they found, simply: (1) That Rutledge, to whom Buie applied for insurance, did not "give any notice or information" to appellant's agent "to include in the policy of insurance involved in this suit the items of property" afterwards included in the second policy, issued by Rutledge; and (2) that after appellant discovered that the additional insurance had been issued it did not within a reasonable time, or within 90 days after such discovery, notify the insured that it would not be bound by its policy, here sued on. In addition to these jury findings, the court below filed very full findings of fact and conclusions of law. Appellant has brought forward 37 propositions of law based upon 36 assignments of error, but when appropriately grouped they present a much smaller number of questions of law.

The question first to be determined is one of agency. As has been shown, Buie, the insured, did not deal directly with appellant's agent, and at no time had any communication with him. He applied to Rutledge, through whom for years he had been getting his insurance, in policies issued by companies for whom the latter was an agent. Rutledge did not represent appellant, and had no express authority to bind it by word or act. So, being unable to place the desired insurance in one of his own companies, Rutledge, with Buie's consent, sought elsewhere for the policy, procured it in appellant's company through the latter's agent, and, under an agreement to that end, the two agents shared equally the commission allowed by appellant on the premium, which Rutledge collected from Buie and paid over to appellant's agent, who in turn paid it over to appellant. The precise question thus presented is whether or not, under the peculiar facts, Rutledge is deemed to have been the agent of appellant, the insurer, in the transaction. The question is not a new one, in this or other jurisdictions, and in a practically unbroken line of authorities in this state it is held that in cases such as this, where the policy is issued at the instance of, and is delivered to the insured through, an intermediary agent or broker, such as Rutledge in this case, who collects the premium and shares in the commission paid thereon by the insurer, the intermediary agent or broker is deemed the agent of the insured in procuring the policy, and the insurer is not bound by his acts, nor is knowledge acquired by him in the transaction imputed to the insurer. May, Ins. § 124a; Joyce, Ins. §§ 413, 414, 557; 14 R. C. L. p. 1010; 22 Cyc. p. 1444; Insurance Co. v. Blum, 76 Tex. 653, 13 S. W. 572; Fire Ass'n v. Cement Co., 37 Tex. Civ. App. 629, 84 S. W. 1115; Insurance Co. v. Harris, 26 Tex. Civ. App. 537, 64 S. W. 867; Holmes v. Thomason, 25 Tex. Civ. App. 389, 61 S. W. 504; Insurance Co. v. Oliver (Tex. Civ. App.) 204 S. W. 367; McGraw v. Insurance Co., 126 La. 32, 52 South. 183, 38 L. R. A. (N. S.) 614, and note, 20 Ann. Cas. 1229. Appellee cites article 4961 of the Statutes, and Insurance Co. v. Wandell (Tex. Civ. App.) 195 S. W. 289, as authority for his contention that under the facts of the case Rutledge became the agent of the insurer, who was thereby bound by his acts, and to whom was imputed any knowledge acquired by said agent in the transaction. The opinion in the Wandell Case upholds this contention, and bases the decision upon the statute cited, and upon the decision in Insurance Co. v. Cummings (Tex. Civ. App.) 78 S. W. 716, which may also be said to support appellee's contention. It has been expressly held by the Supreme Court of Texas, however, that article 4961, relied upon in the Wandell Case, and cited by appellee, does not affect the question presented, and does not serve to constitute an intermediary agent or broker, such as Rutledge, the agent of the insurer. Insurance Co. v. Walker, supra. When the statute is thus eliminated, it leaves the Wandell Case and Cummings Case standing alone against the array of authorities we have cited above, which we feel obliged to follow. Appellant's propositions 21, 21a, 22, 23, and 24, raising this question, must be sustained.

The question next to be considered is whether or not equity will reform the contract of insurance so as to exclude from the property covered the material the insured claims was not...