British General Ins. Co. v. Simpson Sales Co.

• Decision Date: 21 March 1957
• Docket Number: 6 Div. 615
• Citation: 265 Ala. 683,93 So.2d 763
• Parties: BRITISH GENERAL INSURANCE COMPANY, Ltd. v. SIMPSON SALES COMPANY, Inc.
• Court: Alabama Supreme Court

Page 763

93 So.2d 763

265 Ala. 683

BRITISH GENERAL INSURANCE COMPANY, Ltd. v. SIMPSON SALES COMPANY, Inc.

6 Div. 615.

Supreme Court of Alabama.

March 21, 1957.

Marvin Williams, Jr., Davies & Williams, Birmingham, for appellant.

Victor H. Smith, A. W. Jones and Pritchard, McCall & Jones, Birmingham, for appellee.

GOODWYN, Justice.

This is the third time this dispute has been before this court. The first appeal is reported as Simpson Sales Co. v. British General Insurance Co., 252 Ala. 337, 40 So.2d 409, where we held that counts VII and X, the same counts in the present appeal, were not subject to demurrer interposed thereto, and that there was no error in overruling plaintiff's motion to strike certain allegations of those counts. The cause was reversed and remanded because of the erroneous rulings of the trial court in sustaining the demurrer of the defendant to these counts. The second appeal was of the same style, and reported in 257 Ala. 289, 58 So.2d 591, in which it was held there was reversible error for the trial court to give the affirmative charge with hypothesis for the defendant. The present appeal is from a judgment for the plaintiff rendered on a jury verdict in a retrial of the case following the second reversal. The facts are set out in the second case, 257 Ala. 289, 58 So.2d 591, with sufficient scope to indicate the basis of this opinion. Apparently the only additional evidence offered was by the defendant in support of its contention that the continuing of insurance coverage on property moved outside the area covered by the general agent's authority was not the usual course of business of insurance agents. Testimony as to the practices of other firms was excluded by the trial court. However, the procedure and custom of the defendant's agent in this respect, in representing the defendant company, was allowed.

The essential question for our determination on this appeal is whether we will adhere to the principles laid down when the case was here on second appeal, 257 Ala. 289, 58 So.2d 591. Appellant insurance company insists that what was there said 'is contrary to the long settled law of this state with reference to territorial limitations on the authority of an agent', citing in support Insurance Co. of North America v. Thornton, 130 Ala. 22, 30 So. 614, 55 L.R.A. 547, and Sun Insurance Office of London v. Mitchell, 186 Ala. 420, 65 So. 143. In referring to these cases in the second appeal of the instant case this court said [257 Ala. 289, 58 So.2d 592]:

'Insurance Co. of North America v. Thornton, 130 Ala. 222, 30 So. 614, 55 L.R.A. 547, was with respect to an agency contract which prescribed the agent's territory and expressly declared that all policies on property not so situated shall be null and void and of no binding effect. The Court gave full force to that clause though the insured had no notice of it and made the contract of insurance in reliance on the assumed authority of the agent, but not within the limits of his territory.

'In Sun Ins. Office of London v. Mitchell, 186 Ala. 420, 65 So. 143, this Court noted that the principle declared in the Thornton case, supra, was contrary to the generally recognized rule and gave a liberal interpretation to a clause without that feature referred to above, annulling all contracts on property situated outside the prescribed territory. * * *'

The opinion then continues as follows:

'It is a hard rule in any case where insured makes such a contract in ignorance of any limitation on the territory of a general agent. Other limitations on the authority of a general agent, or one held out to the public as such, are not operative as to those who deal with him without notice in good faith on the assumption that no such limitation exists. Sun Ins. Office of London v. Mitchell, supra. We will confine the rule of the Thornton case, supra, closely. We think it should not extend to transactions which occur in the territory assigned to an agent, affecting property already validly covered by a policy issued by him, insuring property then within his territory but being moved beyond it, when such transactions are appropriate or usual incidents of such business, and when the insured has no knowledge of such limitations and deals with the agent in good faith in a way which would be prejudicial to give effect to the limitations. Such transactions must be those which are appropriate or usual incidents of the business conducted by the agent. Sun Ins. Office of London v. Mitchell, supra. We cannot say as a legal conclusion that this principle has no application here.

'It was for the jury to settle the controverted matter of fact, and then, if that finding is favorable to plaintiff, determine whether the transaction involved in the controversy occurred within the agent's territory and was an appropriate or usual incident to the business there conducted by the agent under his authority for defendant.

'The affirmative charge should not have been given for defendant if the circumstances and course of business of the Franklin agency in Birmingham justified an inference by plaintiff as a member of the public that it would be appropriate for a general agent to make such stipulation under the circumstances, or that it was within the usual course of business of such an agency to do so. Syndicate Ins. Co. v. Catchings, 104 Ala. 176, 16 So. 46.'

As is required of us we have reviewed the case anew on this appeal without regard to the former decisions in the case. Code 1940, Tit. 13, § 28; Lattimer v. Stratford, 259 Ala. 405, 406, 66 So.2d 720; Lucas v. Lucas, 258 Ala. 515, 519, 64 So.2d 70; Wilkey v. State ex rel. Smith, 244 Ala. 568, 579, 14 So.2d 536, 151 A.L.R. 765; Birmingham News Co. v. Birmingham Printing Co., 213 Ala. 256, 258, 104 So. 506. We do not find that there is any conflict between our present views as to the law of the case and the rulings on the law in the former opinions, supra, 252 Ala. 337, 40 So.2d 409; 257 Ala. 289, 58 So.2d 591.

Appellant relies on the Thornton and Mitchell Cases, supra, to support the proposition that 'territorial limitations on the authority of a general agent of an insurance company are effective and binding even on uninformed third persons'. However, on the second appeal in the instant case this court held that the rule of the Thornton Case, as modified by the Mitchell Case, does not extend to transactions which occur in the territory assigned to an agent, affecting property already validly covered by a policy issued by him, insuring property then within his territory but being moved beyond it, when such transactions are appropriate or usual incidents of such business, and when the insured has no knowledge of such limitations and deals with the agent in good faith in a way which would be prejudicial to give effect to the limitations. Further, that the affirmative charge should not have been given if the circumstances and course of business of the Franklin agency in Birmingham justified an inference by plaintiff as a member of the public that it would be appropriate for a general agent to make such stipulation under the circumstances, or that it was within the usual course of business of such an agency to do so.

Thus there are two tests which may be applied. If either is found to exist, then the plaintiff is entitled to recover. The first is whether it was the usual course of business of such an agency to make such stipulation. The second is whether the circumstances justified an inference by plaintiff as a member of the public that it would be appropriate for a general agent to make such a stipulation. As bearing on the second test, we quote the following from Syndicate Insurance Co. v. Catchings, 104 Ala. 176, 188, 16 So. 46, 50 '* * * Would not this duty appear to the general public to lie naturally within the legitimate and proper scope of the powers of these agents? Who, except some one learned in the law, or trained in insurance business and technicalities, would have acted differently from the plaintiff, in trusting these agents and relying on what they told her as to making proof of her loss? * * *'

Whether or not the circumstances justified an inference by the plaintiff as a member of the public that it was appropriate for the agent to make the stipulation that plaintiff's property would continue to be covered on removal to Tennessee was a question within the province of the jury.

In Johnson v. Shook & Flectcher Supply Co., 245 Ala. 123, 132, 16 So.2d 406, 415, we find quoted with approval the following from Mechem on Agency, § 290, viz:

"The person dealing with the agent must also act with ordinary prudence and reasonable diligence. If the character assumed by the agent is of such a suspicious or unreasonable nature, or if the authority which he seeks to exercise is of such an unusual or improbable character, as would suffice to put an ordinarily prudent man upon his guard, the party dealing with him may not shut his eyes to the real state of the case, but should either refuse to deal with the agent at all, or should ascertain from the principal the true condition of affairs.' * * *

'Where there is no...