Farrington v. Granite State Fire Ins. Co. of Portsmouth

• Decision Date: 14 June 1951
• Docket Number: 7581 and 7582,Nos. 7579,7580,s. 7579
• Citation: 232 P.2d 754,120 Utah 109
• Parties: FARRINGTON, v. GRANITE STATE FIRE INS. CO. OF PORTSMOUTH et al.
• Court: Utah Supreme Court

Page 754

232 P.2d 754

120 Utah 109

FARRINGTON, v. GRANITE STATE FIRE INS. CO. OF PORTSMOUTH et al.

Nos. 7579, 7580, 7581 and 7582.

Supreme Court of Utah.

June 14, 1951.

Ralph & Kastler, Salt Lake City, for appellant.

Paul B. Cannon, Irving H. Biele and Cheney, Marr, Wilkins & Cannon, all of Salt Lake City, for respondent.

CROCKETT, Justice.

These four actions were on four identical fire insurance policies issued by the defendant companies to the plaintiff on the same building. The actions were combined for trial in the lower court and are treated together here. The building was destroyed by fire and a jury found against the defendant companies for the full amount of their coverage. Defendants appeal asserting they were not bound on the policy because (1) the subject matter of the policy described as 'a building occupied as a skating rink' did not exist as such at the time the policy was issued, and (2) there was substantial concealment and misrepresentation on plaintiff's part concerning the building so that there was no meeting of the minds to form a valid contract.

The court instructed the jury that one Ned J. Bowman, through whom plaintiff obtained the insurance, was the agent of defendant companies and that the information furnished him was imputed to them. Defendants assail this as error. If this determination of the court was right, then, as will appear from the facts hereinafter recited, the defendant companies knew of the nature and condition of the building when the policies were issued and there could be no question of misrepresentation or concealment regarding the condition or purported 'non existence' of the building.

The pertinent facts are as follows: The plaintiff, Mrs. Alice D. Farrington, in February 1946 purchased a second-hand prefabricated portable building with sectional maple flooring in Cyrena, Illinois, had the same transported to Orem, Utah, and caused it to be erected on some ground she leased from the City of Orem in its park. It was used for some time as a roller skating rink; this was discontinued and was later rented out occasionally for dances. About the middle of January, 1949, exceptionally heavy snows caused a part of the roof to collapse, the extent of which is in dispute. The damaged portion was then stored in the rest of the building.

During the year 1948 the plaintiff had listed the building for sale for $15,000 with Ned J. Bowman, Vice-President of Capson-Bowman, Inc., a Salt Lake Real Estate firm. Plaintiff telephoned Mr. Bowman in March, 1949, and informed him that she wanted to place $10,000 insurance on the property. Mr. Bowman had seen the building in 1948 when he took the listing but had not seen it since. Plaintiff testified that when she asked for the insurance she explained to him the condition of the building as it then stood. Mr. Bowman himself testified that in the conversation 'she told me that a portion of it had been caved in and it was a sectional building, a building that could have been dismantled, which I knew, and she stated that a portion of it was stored, in good order, in the portion of the building that had not collapsed.' He quoted her a rate of insurance which was $2.64 per hundred dollars per year, which is admittedly a very high rate for fire insurance.

Bowman passed on this application and information to a Mr. Hodgen, the insurance man for his company, who in turn relayed it to Russell Wight and Company, general agents for the defendant companies. The Wight Company, for reasons of its own, divided this insurance, 25% to each of the four defendant companies and issued four policies, one from each defendant. The four policies were countersigned by Russell L. Wight; were then sent to Capson-Bowman, Inc., who placed a sticker bearing their firm name in a blank space left on the policies and designed for that purpose. They then delivered the policies to the plaintiff and proceeded to collect the premiums, retaining their commission and remitting the balance to Wight & Company. The premiums were paid $50 March 21st, $50 April 19th and $163.40 June 9, 1949. The plaintiff had received the policies March 21, 1949 and a short time thereafter she had a conversation with Mr. Hodgen with regard to the vacancy provision in the policy, in which she told him that the building had formerly been used as a skating rink and advised him of its condition. On April 22, 1949 the building was destroyed by fire of undetermined origin. Defendants investigated the fire and after some months of investigation and negotiation denied liability on the grounds stated in the first paragraph of this opinion. A jury trial resulted in a verdict for the plaintiff for the full amount of the defendants' policies, $2500 each, totalling $10,000.

From the facts hereinabove recited, it is plain that if Bowman was acting as agent for the defendant companies, so that they are charged with his knowledge, they had information concerning the character of the building and its condition before the policies issued so there could be no question about the binding force of the insurance contract.

In support of their contention that Bowman was not their agent, the defendants refer to certain provisions of the Insurance Code enacted by our 1947 Legislature, Sections 43-17-1 et sequi. Both parties in their briefs treat in detail a number of sections of that Code, each claiming the benefit of its own interpretation. The essence of the defendants' contention is that because Bowman was not licensed as an agent for the defendant companies, and was not listed as agent in the license which was issued to his company, that he could not act as agent for the defendant companies. They argue that his function in this transaction was that of a broker and that because Section 43-17-36 provides that a person licensed as a broker should not be licensed as an agent precludes the possibility of Bowman being defendant's agent. Defendants insist, however, somewhat inconsistently, throughout their brief that in connection with the placement of this insurance that Bowman was in fact the agent for the plaintiff. We deem it unnecessary to set forth a detailed analysis of the various sections of the Code because it was enacted primarily for the purpose of regulating insurance companies, agents, brokers, solicitors and adjusters. It was not intended to change or control the ordinary rules of agency between insurance companies and the public with whom they deal. If Bowman's conduct was in fact that of an agent for defendants, the licensing and regulatory provisions of the statute would not change that relationship so far as the plaintiff was concerned.

Mr. Bowman was the Vice-President of Capson-Bowman, Inc.; the business signs, letterheads and advertising of that company stated that it was engaged in the real estate and insurance business. Under their method of operation he had the right to, and customarily did, solicit sales of and sell insurance; he took the plaintiff's application for and the information concerning her insurance and transmitted it to the defendant company; upon the basis thereof, the defendants issued the policies; sent them to him, he placed his firm name thereon, addressed the policy to plaintiff, took the premiums, deducted the commissions and remitted the balance to the defendants. The insurance companies adopted and took the benefits of all his conduct favorable to them. It seems quite inconsistent for them to accept the advantages of everything he did for their benefit and yet insist that they are not responsible for the knowledge he acquired about the building within the necessary and ordinary scope of his duties in handling the transaction. From the facts stated he was their agent and they are charged with his knowledge. It certainly would be casting an unreasonable burden upon a lay person to require him to make inquiry beyond the authority of Mr. Bowman under the circumstances which were present here.

There is ample good authority for the view we take of the matter of agency: In New Brunswick Fire Insurance Company v. Nichols, 210 Ala. 63, 97 So. 82, the insured had applied to an agent authorized to write insurance for one company. A policy was written which was later cancelled by the insurer. The agent then contacted a second agent who wrote the insurance in another company. After loss by fire it was held that all information given by the insured to the first agent constituted knowledge of the insurer issuing the second policy. In Harris v. Sachse, 160 Pa.Super. 607, 52 A.2d 375, 379, the court in ruling on the same question said: 'In general, one dealing with an insurance agency in ordinary course, need not concern himself with the extent of the authority of an employee in the office of the agent who undertakes to act for the agent. The apparent authority with which such employee is...