Granco Steel, Inc. v. Workmen's Compensation Appeals Bd.

• Decision Date: 31 January 1968
• Docket Number: S.F. 22576
• Citation: 65 Cal.Rptr. 287,436 P.2d 287,68 Cal.2d 191
• Parties: , 436 P.2d 287 GRANCO STEEL, INC., Petitioner, v. WORKMEN'S COMPENSATION APPEALS BOARD, Namon Robinson et al., Respondents.
• Court: California Supreme Court

Page 287

65 Cal.Rptr. 287

68 Cal.2d 191, 436 P.2d 287

GRANCO STEEL, INC., Petitioner, v. WORKMEN'S COMPENSATION APPEALS BOARD, Namon Robinson et al., Respondents.

S.F. 22576.

Supreme Court of California In Bank.

Jan. 31, 1968.

Graham & James, John M. Collette, Leonard, Goshkin & Bancroft, Edmund D. Leonard and Jack A. Pollatsek, San Francisco, for petitioner.

Everett A. Corten, Selma Mikels, Sedgwick, Detert, Moran & Arnold, San Francisco, and C. Gordon Taylor, Oakland, for respondents.

SULLIVAN, Justice.

Granco Steel, Inc. (Granco), a California corporation, brought this proceeding before the Workmen's Compensation Appeals Board (Board) in order to determine whether it was covered by workmen's compensation insurance on the date of an industrial injury to one of its employees. The referee determined that Granco was not so covered and dismissed from the proceeding the alleged insurer, the Hartford Accident and Indemnity Company (Hartford). ¹ The Board denied reconsideration, and we granted a writ of review. (Lab.Code, § 5950 et seq.)

Granco was incorporated on November 1, 1965. On November 23, 1965, Aaron Hillman, Granco's vice-president, made arrangements regarding general liability, workmen's compensation, and other insurance with Ben J. Weiss, a general agent representing Hartford, as well as other insurance companies. Weiss provided oral binders in order to afford immediate coverage, and in January 1966 Hartford issued to Granco a 'comprehensive general-automobile liability policy' and a workmen's compensation policy--both policies effective as of November 23, 1965. Apparently these policies were sent to Weiss but were not immediately delivered by him to Granco.

In February 1966 Weiss sent Granco a bill for the premiums due on the above policies, which reflected a premium of $131 for the workmen's compensation policy. ² Upon receipt of the bill, Hillman telephoned Weiss, informed him that Granco had not yet hired any employees and did not anticipate doing so for some time, and requested that the policy be cancelled. It was agreed that Granco should contact Weiss as soon as employees were hired, and that Weiss would thereupon recommence the workmen's compensation coverage. ³ Accordingly, on February 10, 1966, Weiss wrote to Hartford, explained the situation, and requested that the workmen's compensation policy be 'cancelled flat.' ⁴ The letter also stated: 'We are however retaining the 54 LGX 143249 contract (the general liability policy) and if and when they set-up (sic) their operations and have employees we will request the compensation contract.'

It does not appear that a copy of this letter was sent to Granco. However, Weiss wrote to Hillman on the same day and advised him that the workmen's compensation policy had been returned to Hartford for flat cancellation, and that 'If and when, Granco does have employees, kindly advise so that the other coverages can be issued.' Enclosed with this letter were the general liability policy, which had not been previously delivered by Weiss to Granco, and an invoice for the premium for that policy.

Prior to February 17, 1966, Granco began to hire employees, and on that date William Granberg, its president, telephoned Weiss at the latter's office. Weiss was not there but one of his employees, Ethel Lerche, who answered the telephone, upon being told by Granberg the purpose of the call, said that she could help him. Arrangements were then made for an endorsement upon the general liability policy to provide coverage on an automobile which Granco was leasing for one of its salesmen. According to testimony given by Granberg and corroborated by other evidence, he also requested that workmen's compensation coverage be recommenced, and Mrs. Lerche asked questions concerning the number of employees and their identities. It was Granberg's understanding that coverage for all employees was effected by this telephone call. Granco's payroll commenced on February 28.

On April 18, 1966, Namon Robinson, one of Granco's employees, ⁵ was severely injured in the course of his employment. Upon being notified of the accident, Weiss sent one of his employees to the scene with a Hartford report-of-injury form to be filled out. Later in the day, however, Weiss informed Hillman that Granco was not covered by workmen's compensation insurance.

At the hearing Weiss testified that he was not in his office on February 17 when Granberg spoke by telephone with Mrs. Lerche; that the latter had in turn telephoned Weiss at home about general liability coverage for the leased car; ⁶ that she had not discussed with him the matter of Granco's workmen's compensation insurance; and that had a request for renewed coverage been made, he would have been under no obligation to place the Granco risk with Hartford rather than one of the other insurance companies which he represented. ⁷ He also testified, however, that at the time of the cancellation of the original workmen's compensation policy he intended to place future coverage with Hartford when Granco obtained employees; that when he notified Hartford that the original policy was to be cancelled, Hartford offered no objection to accepting Granco's workmen's compensation risk when coverage became necessary in the future; and that, following the April 18 accident involving Robinson, he (Weiss) provided an oral binder to Granco for future workmen's compensation coverage with Hartford, but Hartford later refused to issue a policy.

Mrs. Lerche testified that she had received Granberg's call on February 17 and had discussed with him the endorsement regarding the leased automobile, but that she had no record or recollection of any request for workmen's compensation coverage at that time.

As disclosed by the report on decision, the referee determined that Granberg had requested workmen's compensation insurance in his February 17 telephone call, but that Mrs. Lerche, although authorized to make oral binders on such coverage, had overlooked doing anything about the matter and had then forgotten about it. It was further determined that the February 17 conversation was insufficient to bind Hartford: 'Hartford has done nothing to mislead any party and did not make any agreement to accept this insurance. There was no reason why Mr. Weiss could not have placed it with any of a number of other compensation insurance carriers except that having placed it with Hartford once, he probably would have placed it with them again. This is not sufficient to bind Hartford.' The referee formally found that Robinson was employed by Granco at the time of his industrial injury on April 18, 1966; and that on said date Granco was uninsured as to workmen's compensation ⁸ but not wilfully so and ordered that Hartford be dismissed as a party defendant in the proceeding. Granco's petition for reconsideration was denied by the Board.

It is of course clear that the scope of this court's review of orders and decisions of Workmen's Compensation Appeals Board does not extend to a redetermination of factual questions decided upon the basis of substantial evidence. (Lab.Code, §§ 5952--5953.) Of the several factual determinations made by the Board herein, only that finding dealing with the content of the billing on the initial workmen's compensation policy (see fn. 2, ante) is now challenged by the Board as lacking in evidentiary support; ⁹ therefore, with the single indicated exception, we accept the factual determinations of the Board. It appears, however, that the ultimate finding of the Board, that Granco was not covered by insurance at the time of the Robinson accident, necessarily rests upon a determination that no oral binder of Hartford occurred prior to such accident. That determination clearly involves questions of both fact and law. Insofar as the finding comprehends issues relating to the credibility of witnesses or the weight of the evidence, the questions are of fact. However, insofar as the finding embraces a conclusion that such factual elements do not constitute a valid oral binder, a question of law is presented. (See, in another context, Mercer-Fraser Co. v. Industrial Acc. Com. (1953) 40 Cal.2d 102, 115, 251 P.2d 955; see generally Netterville, Administrative 'Questions of Law' and the Scope of Judicial Review in California (1956) 29 So.Cal.L.Rev. 434; see also authorities collected in Yakov v. Board of Medical Examiners (1968) 68 A.C. 61, 70, fn. 8, 64 Cal.Rptr. 785, 435 P.2d 553.) We proceed to examine that question of law. ¹⁰

'It is now settled law that insurance companies may enter into binding parol contracts to issue new policies, to renew existing policies or to transfer existing insurance from one location to another. * * * "The very reason for sustaining such contracts is, that the parties may have the benefit of them during that incipient period when the papers are being perfected and transmitted." ' (Lumbermen's Mut. Ins. Co. v. Slide Rule & Scale Eng. Co. (7 Cir., 1949) 177 F.2d 305, 308; see also Parlier Fruit Co. v. Fireman's etc. Inc. Co. (1957) 151 Cal.App.2d 6, 19, 311 P.2d 62.) Preliminary contracts of this nature, known as 'oral binders,' may be effected on behalf of an insurer by any agent possessing the authority to bind the company by contracts of insurance generally. (44 C.J.S. Insurance § 230, p. 957; see generally Annot. (1967) 14 A.L.R.3d 568; see Apparel Mfrs. Supply Co. v. National Auto. & Cas. Ins. Co. (1961) 189 Cal.App.2d 443, 454, 11 Cal.Rptr. 380; Parlier Fruit Co. v. Fireman's etc. Ins. Co., supra, 151 Cal.App.2d 6, 20, 311 P.2d 62.)

As with all contracts of insurance, it is necessary that the identity of the insurer be established if liability is to be predicated upon an alleged oral binder. 'Some difficulty on the score of the identity of the insurer exists where, as is often the case, an agent represents more than one insurance company. The element of identity is satisfied where the agent, being authorized to...