Henry Clay Fire Ins. Co. v. Grayson County State Bank

• Decision Date: 25 March 1930
• Parties: HENRY CLAY FIRE INS. CO. v. GRAYSON COUNTY STATE BANK.
• Court: Kentucky Court of Appeals

39 S.W.2d 482

239 Ky. 239

HENRY CLAY FIRE INS. CO. v. GRAYSON COUNTY STATE BANK.

Court of Appeals of Kentucky

March 25, 1930

As Modified on Denial of Rehearing June 9, 1931.

Appeal from Circuit Court, Grayson County.

Action by the Grayson County State Bank against the Henry Clay Fire Insurance Company. Judgment for plaintiff, and defendant appeals.

Affirmed.

F. M Drake, of Louisville, and C. O. Carrier, of Leitchfield, for appellant.

J. M Campbell, of Leitchfield, for appellee.

CLAY J.

This is an appeal from a judgment awarding appellee a recovery on a parol contract of insurance.

Beginning with an opinion by Judge Robertson in the early case of Security Fire Ins. Co. v. Kentucky M. & F. Ins. Co., 7 Bush, 81, 3 Am. Rep. 301, we have uniformly held that a parol contract of insurance, containing all the essential elements of a written contract, is valid. Continental Ins. Co. v. Jenkins, 9 Ky. Op. 147; 5 Ins. L. J. 514; Western Assur. Co. v. Meuth, 10 Ky. Law Rep. 718; Deadman v. Royal Ins. Co., 12 Ky. Law Rep. 389; Mattingly v. Springfield F. & M. Ins. Co., 120 Ky 768, 83 S.W. 577, 26 Ky. Law Rep. 1187; German-American Ins. Co. v. Yellow Poplar Lumber Co., 84 S.W. 551, 27 Ky. Law Rep. 105; Phoenix Ins. Co. v. Spiers, 87 Ky. 285, 8 S.W. 453, 458, 10 Ky. Law Rep. 254; Commercial Union Assur. Co. v. Urbansky, 113 Ky. 624, 68 S.W. 653, 24 Ky. Law Rep. 462; Hartford F. Ins. Co. v. Trimble, 117 Ky. 583, 78 S.W. 462, 25 Ky. Law Rep. 1497; Shawnee F. Ins. Co. v. Roll, 145 Ky. 113, 140 S.W. 49; Bracken County Ins. Co. v. Murray, 166 Ky. 821, 179 S.W. 842; Springfield F. & M. Ins. Co. v. Snowden, 173 Ky. 664, 191 S.W. 439; Georgia Casualty Co. v. Bond-Foley Lumber Co., 187 Ky. 511, 219 S.W. 442.

In the early case of Union Mutual Life Insurance Co. v. Wilkinson, 13 Wall. 222, 235, 20 L.Ed. 617, the United States Supreme Court, in speaking of the powers of an insurance agent, said: "The powers of the agent are, prima facie, coextensive with the business intrusted to his care, and will not be narrowed by limitations not communicated to the person with whom he deals. An insurance company, establishing a local agency, must be held responsible to the parties with whom they transact business for the acts and declarations of the agent, within the scope of his employment, as if they proceeded from the principal."

In discussing the same question, this court in the case of Phoenix Ins. Co. v. Spiers & Thomas, supra, said: "The tendency of recent decisions, and we think properly, is to hold the insurer bound by the acts and conduct of the local agent whenever it can be done consistently with the rules of law. The maxim, qui facit per alium facit per se, should apply with peculiar force to the acts of an insurance agent. He usually represents a company remotely located. Its patrons in his vicinity naturally look to him for direction generally as to the insurance obtained through him. He is generally regarded as having full power in reference to it. Being usually the only man upon the ground having anything to do with it, the persons insured in his company, with few, if any, exceptions, would, in the absence of notice that his powers were limited, regard his statement as to any matter relative to such insurance as authoritative, and any notice to him as to it as sufficient. They rarely know anything of the company, or of its officers, who issue the policies, and look to the agent through whom they have obtained the insurance as the complete representative of the company in everything connected with that insurance."

Following the above rule, we have uniformly held that the acts of an insurance agent within the apparent scope of his authority are binding on the insurer, unless the insured knew that he exceeded his powers, Wright's Adm'r v. Northwestern Mutual Ins. Co., 91 Ky. 215, 15 S.W. 242, 12 Ky. Law Rep. 850; Mattingly v. Springfield F. & M. Ins. Co., supra; Crawford's Adm'r v. Travelers' Ins. Co., 124 Ky. 733, 99 S.W. 963, 30 Ky. Law Rep. 943, 124 Am. St. Rep. 425; Aetna Ins. Co. v. Howell, 107 S.W. 294, 32 Ky. Law Rep. 935; Manchester Assurance Co. v. Dowell, 80 S.W. 207, 25 Ky. Law Rep. 2240; Germania Ins. Co. v. Wingfield, 57 S.W. 456, 22 Ky. Law Rep. 457; Rhode Island U. A. v. Monarch, 98 Ky. 305, 32 S.W. 959, 17 Ky. Law Rep. 876; General Assurance Corp. v. Richardson, 157 Ky. 503, 163 S.W. 482; Aetna Ins. Co. v. McCullagh, 185 Ky. 665, 215 S.W. 821; Standard Auto Ins. Ass'n v. Henson, 201 Ky. 230, 256 S.W. 414; Hurst Home Ins. Co. v. Ledford, 207 Ky. 212, 268 S.W. 1090; Continental Insurance Co. v. Turner, 222 Ky. 608, 1 S.W.2d 1063; and the rule applies to the making of an oral contract of insurance, Georgia Casualty Co. v. Bond-Foley Lumber Co., supra.

Proceeding from these general propositions deduced from our decisions and sustained by the authorities generally, we come to consider the specific contentions advanced in this case that the particular agent was not authorized to bind the company by an oral contract under the circumstances shown, and that an oral contract of insurance, in any event, must be limited to a brief period necessary to complete the preparation and issuance of a formal policy.

The property involved in this case was regularly insured by the appellant through the same local agent. The owner who had procured the original insurance subsequently conveyed the property to the appellee. It was desired to have the insurance transferred to the new owner, which required merely the consent of the company. The local agent was competent to act in that matter. It was within the scope of his agency, both actual and apparent. Continental Ins. Co. v. Simpson, 220 Ky. 170, 294 S.W. 1048; Niagara Fire Ins. Co. v. Johnson, 231 Ky. 426, 21 S.W.2d 794; Glens Falls Ins. Co. v. Elliott, 223 Ky. 205, 3 S.W.2d 219; Charles H. Dresser & Son v. Allemannia Fire Ins. Co., 101 Conn. 626, 126 A. 912.

Indeed, mere knowledge on the part of the agent of the change of title coupled with recognition of the insurance as continuing in force would have estopped the company from declaring a forfeiture or from denying liability on the ground of change of title in the property. Conditions in contracts of insurance for the benefit of the insurance company may be waived, expressly or by implication. United States F. & G. Co. v. Miller, 237 Ky. 43, 34 S.W.2d 938; Hartford Fire Ins. Co. v. Haas, 87 Ky. 531, 9 S.W. 720, 10 Ky. Law Rep. 573, 2 L. R. A. 64; Wilson v. Germania Fire Ins. Co., 140 Ky. 642, 131 S.W. 785; Niagara Fire Ins. Co. v. Layne, 162 Ky. 665, 172 S.W. 1090. So here, if the agent had assented to the transfer of the Dunn policy, no doubt could arise as to the efficacy of his act. But, instead of doing what was requested for the continued protection of the insured property, the agent suggested that a new policy be substituted for the old one, and agreed during the interim to continue the protection. Certainly no doubt could arise as to the validity of such an arrangement. We deem it unnecessary to review the evidence at length. It is sufficient to say that it is much stronger than is usual in cases of this character, and was very clear that the agents of the bank and the agent of appellant agreed upon the subject-matter, the risk insured against, the amount of the insurance, the rate of premium, the duration of the risk, and the identity of the parties. American Central Ins. Co. v. Hardin, 148 Ky. 246, 146 S.W. 418. The criticisms of the petition become unimportant, in view of the issues tried and the result reached. Pacific Mutual Ins. Co. v. Taylor, 166 Ky. 323, 179 S.W. 199. The name by which the agent is described is not important.

Confusion will be avoided by considering the actualities of the situation rather than the designation of the actors. The agent was there to transact the business of insurance for his company. His authority was coextensive with the subject-matter intrusted to his care, and his knowledge concerning facts material to the business he was conducting was the knowledge of the company, in the absence of known restrictions communicated to the party with whom he dealt. Continental Ins. Co. v. Simpson, 220 Ky. 170, 294 S.W. 1048; Von Bories v. Ins. Co., 8 Bush, 133; Rogers v. F. M. A. Ass'n, 106 Ky. 371, 50 S.W. 543, 20 Ky. Law Rep. 1925. This agent had procured the very policy then in force upon the property, and it was desired by both parties to maintain it in force. The apparent scope of the agency can be deduced from the nature and purpose of the business, as well as the course of conduct. May on Insurance (3d Ed.) § 126; Baldwin v. Phoenix Ins. Co., 107 Ky. 356, 54 S.W. 13, 21 Ky. Law Rep. 1090, 92 Am. St. Rep. 362; Gresham v. Norwich Fire Ins. Co., 157 Ky. 402, 163 S.W. 214.

The rule is thus stated in 2 C.J. p. 578, § 220: "As a general rule of law every grant of power implies and carries with it, as an incident, authority to do whatever acts, or use whatever means are reasonably necessary and proper to the...