Farley v. United Pac. Ins. Co.

• Jurisdiction: Oregon
• Parties: Donald FARLEY, Respondent, v. UNITED PACIFIC INSURANCE COMPANY, a Washington corporation, Appellant.
• Citation: 525 P.2d 1003,269 Or. 549
• Court: Oregon Supreme Court
• Decision Date: 06 September 1974

Page 1003

525 P.2d 1003

269 Or. 549

Donald FARLEY, Respondent, v. UNITED PACIFIC INSURANCE COMPANY, a Washington corporation, Appellant.

Supreme Court of Oregon.

Argued and Submitted May 10, 1974.

Decided Sept. 6, 1974.

William L. Hallmark, Portland, argued the cause for appellant. With him on the briefs were McMenamin, Jones, Joseph & Lang, Portland.

Raymond J. Conboy, Portland, argued the cause for respondent. With him on the brief were Donald R. Wilson, and Pozzi, Wilson & Archison, Portland.

Before O'CONNELL, C.J., and DENECKE, HOLMAN, TONGUE, HOWELL and BRYSON, JJ.

HOLMAN, Justice.

Plaintiff brought an action upon a contract to insure a crane against damage or loss. The action had two counts: the first on an oral binder to insure the crane, and the second on a written policy of insurance. The case was tried by the court without a jury, and judgment was entered for plaintiff. Defendant appealed.

As is proper after a verdict for plaintiff, the facts will be stated in the most favorable manner to plaintiff which the evidence will justify. Plaintiff purchased a crane which was situated in mountainous terrain. He intended to bring it to Portland for repair and desired to insure it against loss or damage by accident while in transit. He called Kent, a representative of a general agent for defendant who had authority to orally bind defendant, and explained to him his need. Kent subsequently called plaintiff back and told him defendant did not want to cover the crane until it was moved to Portland. Plaintiff told the representative that he needed no coverage after the crane was in Portland, that he had to bring the crane out of the mountains under its own power because a truck could not get to it, and that he wanted coverage because he was worried about it tipping over as it came out of the mountains. Kent said he would see what he could do and would call plaintiff again. When he did call back, he told plaintiff that the crane was covered and for plaintiff to go ahead, and he read him the insuring language which would be included in the policy.

Prior to moving the crane, plaintiff received the written policy from defendant and read the insuring provisions. Despite momentary familiarity with the policy language, he did not grasp its significance and thought he was covered while removing the crane from the mountains because Kent had indicated to him he was covered and 'to go ahead' after plaintiff had explained his need. The insuring language of the policy was as follows:

'2. THIS POLICY INSURES against direct loss or damage (except as hereinafter excluded) to the above described property caused by:

'* * *.

'(d) Collapse of bridges, culverts, docks, loading platforms;

'(e) Collision, derailment, or overturning of conveyances While the insured property is being transported thereon.' (Emphasis ours.)

Thereafter plaintiff attempted to move the crane out of the mountains under its own power to a place where he could meet a truck. While he was so doing, a narrow mountain road gave way and the crane slipped into a canyon and was a total loss. Defendant, of course, contends there is no coverage because there was no loss while the property was being transported on another conveyance. The court made the following conclusions of law:

'1. The policy of insurance issued to plaintiff is ambiguous and is to be construed against the defendant UNITED PACIFIC INSURANCE COMPANY.

'2. The defendant, acting by and through the representations, acts, omissions and conduct of David Kent, has interpreted the policy so as to include coverage of the loss of plaintiff's crane.'

The court also made a finding of fact that defendant's representative orally bound defendant for coverage of the loss. Defendant's basic contention is that the facts do not justify a recovery for plaintiff.

The first question is whether plaintiff is entitled to recovery on the oral binder for coverage. If he is, the necessity of dealing with all the problems surrounding a recovery on the policy does not exist. The trial court held, and the evidence is sufficient to justify a finding, that the agent orally bound his company to insure plaintiff's crane against the risk which demolished it. However, the policy had been issued and received by plaintiff, and its insuring provisions had been read prior to plaintiff's attempting the movement of the crane which resulted in its loss. The usual rule in such situations is stated in 1 Couch on Insurance 2d, 572--73, § 14:4 (1959), as follows:

'Where an oral contract is to be in effect until a policy is issued, a policy so issued, delivered, and retained is presumed to contain the entire contract, since the oral contract is merged in the written one, and, in the absence of grounds for reformation, only such loss is covered as falls within the written contract * * *.' (Footnote omitted.)

This general rule was upheld by this court in the case of Greenberg v. German Ins. Co., 83 Or. 662, 670, 160 P. 536, 163 P. 820, 821 (1917), in which the following language was quoted with approval:

'One who accepts a policy of insurance issued to him upon his written application cannot ignore the writings, and sue upon a preliminary parol agreement to issue a policy of different form; his remedy, in case of fraud or mistake, being the reformation of the contract in equity.'

Plaintiff urges that we adopt an exception to the general rule as set forth in 1 Couch on Insurance 2d 573, § 14:4 (1959), which is as follows:

'There is no merger of the preliminary oral contract and the written contract if there is a material variance between the terms of the two contracts of which the insured has not been advised * * *.' (Footnote omitted.)

He also cites Preferred Risk Fire Ins. Co. v. Neet, 262 Ky. 257, 90 S.W.2d 39 (1936); Baker v. St. Paul Fire & Marine Insurance Company, 427 S.W.2d 281 (Mo.App.1968); and American Surety Company of New York v. Williford, 243 F.2d 494 (8th Cir. 1957), for the same proposition. In Baker and American Surety the policy was not issued until after the loss, so the prior oral contract would have to apply; therefore, these two cases do not stand for the proposition for which they were cited. In some jurisdictions, however, there is such a recognized exception to the general rule, but we believe we are foreclosed from adopting such exception assuming we are so disposed, by the enactment of ORS 743.075(2), ¹ which provides:

'(2) No binder shall be valid beyond the issuance of the policy with respect to which it was given, or beyond 90 days from its effective date, whichever period is the shorter.'

Plaintiff puts emphasis on the words 'with respect to which it was given.' He argues that the coverage of the policy was so foreign to that of the oral binder that it was not issued 'with respect' to the binder. He also argues that Greenberg should be limited to cases 'where the written policy provides substantially the coverage which was contemplated by the insured.' This raises the intent with which ORS 743.075(2) was enacted by the legislature. A search of the archives for legislative history has been fruitless, and we are left to our own devices to determine the meaning of the statute. It occurs to us that if the oral binder and the issued policy are substantially the same, there is no problem. It is only in circumstances where they are not the same that there would be any necessity for such a statute. We therefore conclude that it was enacted to take care of those situations like the present one, where there is a claim that the coverage of the oral binder is greater than the written policy. As a result, it is our conclusion that plaintiff is limited to a recovery on the policy, if that is possible.

Plaintiff contends, and the trial court held, that the policy is ambiguous, and, being ambiguous, it should be construed against the insurer. Defendant, on the other hand, contends, and we hold, that the policy language as it relates to the occurrence in question, is not legally ambiguous. Provision 2(e), which is the provision of the policy in question, is not capable of being construed to cover the loss. It is not legally ambiguous. It is not open to construction.

The language has been the subject of interpretation by courts, and no cases have been called to our attention which go as far as plaintiff would have this court go in this case. There are cases cited by plaintiff which have construed the language to cover a situation in which the insured cargo was being transported on a truck, and the cargo (not the truck) collided with another object (like an overpass). ² The basis of the holdings is that to construe the word 'collision' to apply solely to the truck as differentiated from its load would be absurd. In our opinion these cases are not controlling here. The crane in question was not being transported on another vehicle, which circumstance is required before there is coverage.

Plaintiff also contends that defendant cannot assert the literal meaning of provision 2(e) of the insuring language since Kent interpreted the language to include coverage of the loss. Plaintiff relies upon the rule stated in 4 Couch on Insurance 2d 71--72, § 26:214 (1960), which is as follows:

'An insurance company is bound by the construction placed upon a provision of the policy by its agent provided the agent is acting within the scope of his actual or apparent authority; although a provision that no agent can change any of the terms of the policy by parol does not affect his power to bind the insurer by construction of doubtful language therein * * *.' (Footnote omitted.)

Plaintiff also cites Mutual Benefit Life Ins. Co. of Newark, N.J. v. Bailey, 5 Storey 215, 55 Del. 215, 190 A.2d 757 (1963); Bayer v. Lutheran Mutual Life Insurance Company, 184 Neb. 826, 172 N.W.2d 400 (1969); and Stivers v. National American Insurance Company, 247 F.2d 921 (9th Cir. 1957), as authority for his position, and these cases do support the...