Baker v. St. Paul Fire & Marine Ins. Co., 24863

• Decision Date: 01 April 1968
• Docket Number: No. 24863,24863
• Parties: Byron K. BAKER, Respondent, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Appellant.
• Court: Missouri Court of Appeals

Page 281

427 S.W.2d 281

Byron K. BAKER, Respondent, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Appellant.

No. 24863.

Kansas City Court of Appeals, Missouri.

April 1, 1968.

James Borthwick, Kansas City, Blackwell, Sanders, Matheny, Weary & Lombardi, Kansas City, of counsel, for appellant.

James G. Trimble, James, McFarland & Trimble, North Kansas City, for respondent.

CROSS, Judge.

Plaintiff, Byron K. Baker, brought this action in magistrate court seeking to recover insurance benefits under a contract providing major medical expense coverage. Plaintiff had a judgment in magistrate court and defendant insurance company appealed. Trail de novo in the circuit court resulted in a jury verdict and judgment awarding plaintiff $931.75 as benefits and $89.00 interest. Defendant appeals.

Plaintiff tried and submitted his case on the theory that he was entitled to recover under an oral agreement with defendant's agent that the insurance coverage in question would be effective immediately on receipt of plaintiff's application therefor, accompanied by payment of premium in full, pending issuance and delivery of the policy. It is defendant's position that plaintiff failed to make a submissible case because (1) there was no evidence that defendant's agent had authority to bind the effective date by an oral contract of insurance and (2) any oral agreement as to the effective date of the coverage merged into and was extinguished by the written policy (which was issued and dated to be effective after plaintiff suffered casualty giving rise to medical expenses incurred) and that parol evidence of the oral agreement was not admissible to contradict the terms of the policy. In determining the sufficiency of evidence to support the submission we are required to consider only the evidence favorable to the plaintiff, together with the reasonable inferences in his favor to be drawn therefrom. LePage v. Metropolitan Life Ins. Co., Mo.Sup., 314 S.W.2d 735. In accordance with that rule we proceed to state facts pertinent to the appeal issues presented.

In January of 1965 plaintiff and a partner owned and were operating two restaurants in Brookfield, Missouri. During that month plaintiff 'purchased' several policies of insurance from Gerry Elson who owns and operates a 'general' insurance agency in Brookfield representing eight different insurance companies. The policies so procured provided coverage for public liability, workmen's compensation, burglary loss and loss from fire. While discussing those subjects of insurance, plaintiff additionally discussed with Elson the subject of major medical coverage. Elson gave him a printed prospectus to look over and 'explained it to me as this is the policy I should have.'

On January 28, 1965, plaintiff made application to buy 'the insurance described in the prospectus', namely a $10,000.00 policy of major medical insurance, with a $500.00 deductible provision, affording coverage for plaintiff, his wife and his son. Elson 'filled out' one of defendant's bank printed forms as an application for such insurance. Plaintiff signed the application and paid Elson an entire annual premium of $97.60. It was 'thrown in with the workmen's compensation, liability and all those other policies.' Plaintiff paid 20% in cash and 'financed' the balance by a negotiable note, which Elson sold to plaintiff's bank on the same day of the transaction (January 28, 1965).

Plaintiff testified that at the time he signed the application and paid the premium he inquired of Elson when the coverage would begin and that Elson answered 'Effective this minute'; and 'He told me that I was covered as of that minute.' The application contains the following quoted provision:

'I represent that, to the best of my knowledge and belief, the foregoing statements are full, complete and true, and agree the insurance hereby applied for, unless effective under the provisions of the binding receipt attached hereto, shall take effect on the policy date stated in the policy but only then if the policy is delivered and the full first premium is paid while the health of each person proposed for insurance remains as described herein.'

Elson signed the application both as 'agent' and 'witness' and transmitted it to defendant. Upon inquiry from defendant concerning the health of Mrs. Baker, Elson furnished the company the information requested. Thereafter defendant issued and delivered its written policy of major medical insurance with an attached rider pertaining to Mrs. Baker, dated as of February 26, 1965. Otherwise the terms of the policy were in accordance with the oral agreement. However, prior to February 26, 1965, and on February 19, 1965, plaintiff sustained injuries in an automobile accident, was hospitalized for twelve days, and because of such accidental bodily injuries incurred medical expense totaling $1,431.75. Giving credit for the $500.00 deductible, plaintiff made claim through defendant's agent Elson for $931.75, which defendant has refused to pay. Plaintiff also requested proof of loss blanks from the company but none were furnished him. Defendant's counsel made formal admission into the record that the medical expenses claimed by plaintiff were the result of the accident on February 19, 1965.

The date the policy was delivered to plaintiff and the manner of delivery were not clearly shown. Plaintiff testified that he received the policy when he was 'flat on his back' as a result of his injuries and that 'it could have been delivered while I was in the hospital.' Thereafter plaintiff started inquiry of Elson, the agent, as to why the effective date on the policy was not the same as the date of his application and continued for several months after the original transaction 'still trying to get the effective date straightened up.' On July 28th plaintiff received a communication from Elson to the effect that he (Elson) didn't understand why the policy hand't been issued and that 'it was unusual or something like that.'

In direct testimony Elson denied that he told plaintiff he was covered as of January 28th, the date of the application, and disclaimed authority to bind such coverage. He did confirm that 'the amount of insurance that was covered' was '$10,000 major medical * * * $500.00 deductible', and that 'the premium was $97 and something'. He testified that he received premiums in full on 'all these policies' on January 28th, 1965, and assured plaintiff that he was 'covered' on his workmen's compensation, his fire policy and his general liability. Elson admitted on cross-examination that he did not remember that he specifically told plaintiff that 'this one policy (major medical) you are not covered on' because 'I don't remember the total conversation.' He further testified that at no time did he notify plaintiff that he lacked authority to bind health and accident policies. However, with reference to 'the practice in the industry here' as to the effective date of accident and health insurance, Elson stated, 'In my experience it has been that it has been issued at the date of the application.'

In contending there was no evidence that Elson had authority to make an oral contract of insurance defendant admits that Elson's possession of its printed application blank and his signature thereon as 'agent' show 'an agency relationship of some kind', but argues that evidence is lacking to show the scope and extent of the agency. Specifically, defendant insists that plaintiff has not sustained his burden to prove that Elson had authority from defendant to bind it under an oral contract of insurance. To support its position defendant cites and relies upon cases which follow the familiar rule that an agent who is authorized merely to solicit insurance, take applications, deliver policies and collect premiums, is without power to make oral contracts of insurance; also the rule that the scope of agency can not be established by the mere declarations of the alleged agent himself. Defendant concedes that the principal is responsible for the acts of the agent when the agent acts within its apparent authority if the principal has clothed its agent with the appearance of authority.

It is the law that 'In the absence of fraud on the part of insured and the agent, an insurance company is bound by all acts, contracts, or representations of its agent, whether general or special, which are within the scope of his real or apparent authority, notwithstanding they are in violation of private instructions or limitations on his authority, of which the person dealing with him, acting in good fath, has neither actual nor constructive knowledge.' 44 C.J.S. Insurance § 149, pp. 817--818. Mitchell v. Metropolitan Life Ins. Co., Mo.App., 116 S.W.2d 186. And, even if the agent's actual authority is less than his apparent authority, where the limitations thereon are unknown to the other contracting party, 'apparent authority is equal to real authority.' 44 C.J.S. Insurance § 228, p. 946; Shelby v. Connecticut Fire Ins. Co. of Hartford, 218 Mo.App. 84, 262 S.W. 686. A rule of particular significance to this case is stated in 44 C.J.S. Insurance § 146, p. 809, as follows: 'The forms furnished an agent for his use in transacting business with the public are cogent evidence as to what he is employed to do, and are representations to the public that he has authority to do things thereby indicated.' (Emphasis supplied.) Also see Pacific Mut. Life Ins. Co. of California v. Barton, C.C.A. 5, 50 F.2d 362, certiorari denied 284 U.S. 647, 52 S.Ct. 29, 76 L.Ed. 550. These rules were applied in recent Missouri cases which bear decisively on the question at hand.

In Voss v. American Mutual Liability Insurance Co., Mo.App., 341 S.W.2d 270, the St. Louis Court of Appeals held that an application form furnished by the insurance company to its agent containing the question, 'Have you bound coverage?' (addressed in a subheading to 'Solicitors') affirmatively...