Collver v. Salem Ins. Agency, Inc.

Decision Date21 March 1995
Citation132 Or.App. 52,887 P.2d 836
PartiesEdgar COLLVER, Respondent-Cross-Appellant, v. SALEM INSURANCE AGENCY, INC., an Oregon corporation and Bret Brouse, Defendants-Cross-Respondents, and Guaranty National Insurance Co., a foreign corporation, Appellant-Cross-Respondent. 16-92-01649; CA A79128.
CourtOregon Court of Appeals

Joel S. DeVore argued the cause for appellant-cross-respondent. With him on the briefs was Luvaas, Cobb, Richards & Fraser, P.C.

George W. Kelly argued the cause and filed the briefs for respondent-cross-appellant.

[132 Or.App. 53-A] George A. Burgott argued the cause for defendants-cross-respondents. With him on the brief was Atherly Butler Burgott Leslie & Stine.

Before WARREN, P.J., and EDMONDS and LANDAU, JJ.

EDMONDS, Judge.

Defendant Guaranty National Insurance Co. (Guaranty) appeals a judgment in favor of plaintiff after the jury returned a verdict in favor of plaintiff on all claims against all defendants. 1 The trial court set aside the verdicts on the plaintiff's claims for negligence and entered judgment for defendants on those claims notwithstanding the verdict (JNOV), ORCP 63, but entered judgment on claims that Guaranty breached its insurance agreement with plaintiff and is estopped to deny coverage. Plaintiff cross-appeals from the JNOV. Although defendants Salem Insurance and Brouse are not liable under the judgment against Guaranty, they make cross-assignments of error in the event that we reverse that judgment. On appeal and on cross-appeals, we reverse.

All the claims arise from Guaranty's denial of automobile insurance coverage of plaintiff. Salem Insurance is an agent for various insurance companies, including Guaranty. Plaintiff purchased his automobile insurance through Salem Insurance. On April 11, 1990, plaintiff and defendant Brouse, one of Salem Insurance's representatives, 2 met and discussed with plaintiff changing his automobile insurance carrier to Guaranty. At that meeting, plaintiff contends that Brouse agreed to substitute Guaranty as plaintiff's insurer and entered into an oral binder of coverage on behalf of Guaranty. Guaranty subsequently issued a written policy on May 9, 1990, which provided insurance from April 17, 1990, through June 12, 1990. On June 15, 1990, plaintiff was in an automobile accident. Later, he filed an accident claim with Guaranty, which was denied.

As a result of the denial, plaintiff filed this action, alleging that Guaranty was liable under the oral binder or, in the alternative, that Brouse, Salem Insurance and Guaranty were liable for failing to procure coverage. Plaintiff does not seek to recover under the written policy and contends that the written policy is of no legal significance because it did not conform to the oral binder. He alleges, in part:

"7

"Defendant Brouse represented to Plaintiff that a two-month premium was due in the amount of $224 for said policy and that upon payment of the premium the insurance coverage would become effective on April 17, 1990 and terminate on June 17, 1990. Defendant Brouse accepted a check from Plaintiff in the amount of $224 for said coverage.

"8

"The actual premium claimed to be required by [Guaranty] for said period was approximately $20.00 greater than the quoted $224.00.

"9

"On or about May 8, 1990, [Guaranty] issued a policy of insurance for a period commencing on April 17, 1990 and terminating on June 12, 1990, which policy conformed in all other ways to the representations of Defendant Brouse.

"10

"On June 15, 1990, Plaintiff was involved in a two-vehicle accident * * *.

"11

"Plaintiff presented his various loss claims to Defendants. [Guaranty] denied that there was coverage in effect for the said vehicle on June 15, 1990, causing Plaintiff to sustain the damages alleged hereunder.

' * * * * *

"17

"As a result of the above-described Agreement between Brouse and Plaintiff, an oral binder between [Guaranty] and Plaintiff was established for the coverage described, Plaintiff has performed all obligations required of him and all other conditions precedent to [Guaranty's] performance under the contract of insurance have occurred. [Guaranty] has not paid for any of the covered losses sustained by Plaintiff."

In its answer, Guaranty asserts:

"8.

"On or about April 11, 1990, plaintiff made application for a policy of automobile insurance with defendant. * * *

"9.

"On this application for insurance, appearing immediately above plaintiff's signature on its first page appeared [sic] the calculation for monthly premiums on his 1988 Chevrolet pickup and his 1985 Cadillac. This application showed the monthly premium for his first vehicle to be $55.00 and the monthly premium for his second vehicle to be $67.00. The premium for two months' coverage would have been $244.00.

"10.

"On this application, appearing immediately above plaintiff's signature on page two, plaintiff declared in relevant part:

" 'I understand that this insurance is effective only if a check or money order for the total premium accompanies this application, and that my insurance protection will be null and void if the check(s) or money order(s) isn't honored by the bank or organization it's drawn on. In this case, I agree that the coverage this payment applies to never went into effect and that you were never bound to pay any claim under it.'

"11.

"On this application, appearing immediately above plaintiff's signature on page two, plaintiff declared in relevant part:

" 'I agree that my policy may be subject to adjustment in premium or policy term as a result of my motor vehicle report or other underwriting factors, including, but not limited to the failure of the agent to comply with company's rules and rates.'

"12.

"On or about May 9, 1990, defendant sent and plaintiff received a declaration page for his policy which advised him that:

" 'This policy is being issued for 56 days only. This term is based on the $224.00 premium which was submitted.'

"This declaration page advised plaintiff that the policy term began at 12:01 a.m. April 17, 1990 and terminated on 12:01 a.m. June 12, 1990. * * *

"13.

"On or about May 23, 1990, defendant sent and plaintiff received a notice advising him that:

" 'Providing insurance protection to you is important and is dependent upon you making your payments on time. Your current coverage expires on 12:01 a.m. 06/12/90. To continue your coverage, your payment must be received before the indicated date due.' "The notice advised that, if renewed, the policy would continue in effect from June 12, 1990 to August 12, 1990, upon payment of a two month premium of $242.00. * * *

"14.

"Notwithstanding these notices, plaintiff failed or refused to pay the premium necessary to continue his coverage beyond June 12, 1990.

"15.

"By reason of plaintiff's failure to pay the premium requested and the notice to him that the policy would expire, his insurance coverage terminated at 12:01 a.m. June 12, 1990." (Emphasis supplied.)

Before trial, plaintiff moved to exclude evidence of the policy application based on ORS 742.016(1), which provides:

"Except as provided in ORS 742.043, every contract of insurance shall be construed according to the terms and conditions of the policy. When the contract is made pursuant to a written application therefor, if the insurer delivers a copy of such application with the policy to the insured, thereupon such application shall become a part of the insurance policy. Any application that is not so delivered to the insured shall not be a part of the insurance policy and the insurer shall be precluded from introducing such application as evidence in any action based upon or involving the policy. Any oral representations by the insured that are not included in an application shall not be a part of the insurance policy and the insurer shall be precluded from introducing such representations as evidence in any action based upon or involving the policy." (Emphasis supplied.)

The trial court granted plaintiff's motion.

In its first assignment, Guaranty assigns as error the trial court's ruling to exclude evidence of the application. 3 It argues that the application provides that the policy was subject to adjustment in policy terms and that the policy, when issued, notified plaintiff that such an adjustment had been made. The policy's declaration page said, "Note: this policy is being issued for 56 days only. This term is based on the $224 premium which was submitted." Guaranty says:

"Plaintiff cannot avoid the terms of his application for insurance. He must take his written application as part and parcel of the [sic] whatever else he claims the oral or temporary contract of insurance to be. The application for insurance included provision [sic] which precludes the coverage plaintiff now claims." (Citation omitted.)

Plaintiff responds that his second claim is based on an oral binder under ORS 742.043, that the application for insurance was not part of the oral binder, and that regardless, ORS 742.016 prohibits the introduction of the application for insurance into evidence because it was not attached to any policy that was issued. Thus, according to plaintiff's argument, Guaranty's policy based on the oral binder gave plaintiff 60 days coverage from April 17, 1990, to June 17, 1990, and Guaranty breached its policy when it denied coverage for an accident that happened on June 15.

Oral binders for insurance are enforceable under ORS 742.043, which provides, in part:

"(1) Binders or other contracts for temporary insurance may be made orally or in writing, and shall be deemed to include all the usual terms of the policy as to which the binder was given together with such applicable indorsements as are designated in the binder, except as superseded by the clear and express terms of the binder.

"(2) Except as provided in subsection (3) of this...

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