Continental Ins. Co. v. Schulman

• Decision Date: 01 April 1918
• Citation: 205 S.W. 315,140 Tenn. 481
• Parties: CONTINENTAL INS. CO. v. SCHULMAN.
• Court: Tennessee Supreme Court

205 S.W. 315

140 Tenn. 481

CONTINENTAL INS. CO. v. SCHULMAN.

Supreme Court of Tennessee.

April 1, 1918

Certiorari to Court of Civil Appeals.

Action by H. Schulman against the Continental Insurance Company. Judgment for plaintiff was affirmed by Court of Appeals, and defendant brings certiorari. Reversed, and suit dismissed.

C. C Trabue, of Nashville, and Giles L. Evans, of Fayetteville for plaintiff in error.

Floyd Estill, of Winchester, for defendant in error.

GREEN J.

This is a suit to recover on a parol contract of insurance alleged to have been entered into between Schulman, the plaintiff below and Cowden & Co.; the latter acting for the Continental Insurance Company. The contract is said to have covered a stock of goods in the town of Fayetteville, which stock was destroyed by fire April 19, 1913, and the amount of insurance claimed to have been agreed on was $2,000.

There was a judgment in favor of Schulman in the trial court which was affirmed by the Court of Civil Appeals, and a petition for certiorari filed by the insurance company has been granted and the case heard in this court.

Proof was introduced by the plaintiff below tending to show that on February 15, 1913, he made a contract with L. E. Cowden of the firm of Cowden & Co., agents at Fayetteville for the Continental Insurance Company, whereby the said Cowden, on behalf of the company, insured the plaintiff in the sum of $2,000 on the stock of goods referred to above. The premium agreed to be paid for this insurance was $29 per annum. Schulman testified that he paid Cowden the sum of $10 on account and that Cowden assured him at this time, and subsequently, that the stock of goods was insured. Schulman stated that he applied to Cowden & Co. for his policy several times, but was put off on one pretext and another, and was on each occasion told by these agents that he was protected and his goods were insured. Although there is such a count in the declaration, plaintiff's proof does not tend to show the existence of an executory agreement to insure at the time of the fire, but all his proof indicates the existence of a consummated contract of insurance, albeit such contract had not been evidenced by a policy. Schulman said that Cowden told him Sherrell had looked over the stock and "it was accepted by the company." He said that when he asked Cowden for a policy that Cowden replied, "You are insured anyway, don't bother about it." "He told me about three times after that I was insured." "You have not got to have the policy, you are safe anyway."

Mrs. Schulman testified that Sherrell came into the store when Schulman was out and began looking around, and, when she asked what he wanted, replied:

"I just wanted to see the goods and see what stock he carries. We insured him, and we wanted to see what stock he carries."

Witnesses introduced by plaintiff below testified to admissions of Cowden that Schulman's stock was "insured," not that there was a promise to insure.

Agents employed to negotiate contracts of insurance, agree upon the rates of premium, the terms of insurance, and supplied with policies executed in blank by the general officers of the company, with authority to fill up and deliver said policies to any one with whom they may make a contract, may bind their principal by a parol agreement to insure.

Authority to make a preliminary contract to issue a policy of insurance is implied necessarily from the other authority conferred on such agents. If they breach a contract to issue a policy of insurance, this is an act committed within the scope of their authority for which the company is liable. These propositions are sustained by the great weight of authority. The leading cases are Ellis v. Albany City Fire Ins. Co., 50 N.Y. 402, 10 Am. Rep. 495; Angell v. Hartford Fire Ins. Co., 59 N.Y. 171, 17 Am. Rep. 323; Sanborn v. Firemen's Ins. Co., 16 Gray (Mass.) 448, 77 Am. Dec. 419; Sanford v. Orient Fire Ins. Co., 174 Mass. 416, 54 N.E. 883, 75 Am. St. Rep. 359. The editor of the note, 69 Am. St. Rep. 143, said that this authority on the part of such insurance agents had never been denied except in one case, namely, that of Cockerill v. Cincinnati Mutual Ins. Co., 16 Ohio, 148. This observation was made in 1899. We have found one later case apparently in harmony with the Ohio case, to wit, Benner v. Philadelphia Fire Ass'n, 229 Pa. 75, 78 A. 44, 140 Am. St. Rep. 706. We think, however, the majority rule is correct.

But, as stated in the beginning, we have before us a suit on a parol contract of insurance, not a suit on a parol contract to insure.

We have set out some of the plaintiff's evidence. The agents deny all this, but we are bound by the verdict of the jury. It should be observed, however, that the home office of the company had no knowledge of this alleged contract with Schulman. No record or report of such a contract was made by the local agents. They credited the $10 received from Schulman on a policy covering his household goods, not involved here.

Cowden & Co. are called in the record "recording agents" of defendant insurance company. As such agents, they were supplied with policies signed by the executive officers of the company, and they had authority to effect valid contracts of insurance by countersigning said policies and issuing them.

The commission of Cowden & Co. to act as agents for the insurance company was in the following words:

"The Continental Insurance Company of the city of New York, does hereby nominate and appoint L. E. Cowden and D. C. Sherrell, of Fayetteville, county of Lincoln, state of Tennessee, its agents under firm name of Cowden & Company, to effect insurance upon property located within the limits or in the vicinity of said city, to countersign, issue and renew policies of insurance when signed by the officers of the company, and to consent in writing to assignments and transfers thereof, and to collect premiums for transmission to the company. The power hereby conferred is subject to the rules and regulations of said company, and to such instructions as may from time to time be given by its authorized representatives and may be revoked at any time the company may so elect."

Proof was introduced going to show a custom on the part of such agents as Cowden & Co. to take applications for insurance and make a verbal contract binding on their principals from the time of the application until a policy could be written up. These witnesses, however, said that there was no custom in the insurance business in Tennessee to carry insurance on property under oral contracts; that such parol agreements of insurance as we have just mentioned were only intended to be in force for a day or two covering the period between the

application and a time when the agent had an opportunity to write out the policy. The policy when written bore the date of the application. One of the agents, testifying in reference to this custom, stated that the writing of the policy might be delayed for a week after the parol agreement of insurance. A week was the limit suggested by any witness during which, by this custom, property might be covered under a verbal agreement prior to the issuance of a policy. The testimony of this witness indicated that a delay of a week in writing the policy was unusual, and ordinarily such a policy was written up on the same day or the next day after the negotiations were concluded.

The property in this case was destroyed by fire on April 19, 1913, more than two months after this parol insurance is alleged to have been effected.

It is contended by counsel for Schulman that Cowden & Co. had express authority, under their commission above set out, to bind defendant company by a parol contract of insurance. We do not think this proposition can be maintained.

The commission of Cowden & Co. is not materially different from the commission of the agent considered in Caldwell v. Insurance Co., 124 Tenn. 593, 139 S.W. 698, in which case the agent was held not to have express authority to bind his principal by an oral contract of insurance.

The commission herein shows that the agents were...