National Liberty Ins. Co. v. Milligan

Decision Date18 January 1926
Docket NumberNo. 4681.,4681.
Citation10 F.2d 483
PartiesNATIONAL LIBERTY INS. CO. OF AMERICA v. MILLIGAN.
CourtU.S. Court of Appeals — Ninth Circuit

Battle, Hulbert, Gates & Helsell, Robt. A. Hulbert, and Fred G. Clarke, all of Seattle, Wash., for plaintiff in error.

Elias A. Wright and Sam A. Wright, both of Seattle, Wash., for defendant in error.

Before HUNT, RUDKIN, and McCAMANT, Circuit Judges.

McCAMANT, Circuit Judge.

Plaintiff's testimony tended to prove that on the 23d of July, 1924, he agreed orally with E. R. Voorhees, defendant's agent at Morton, Wash., to take fire insurance in the sum of $6,000 on his hotel at Morton, Wash., and insurance in the sum of $4,000 on the furniture and fixtures therein. The premium was to be $500, payable within 60 days, and the insurance was to be written in the defendant company. At the conclusion of the interview plaintiff testifies that he asked Voorhees, "When will this take effect?" and that Voorhees answered, "Right now; you are insured right now; I will date it at 12 o'clock noon to-day, and if your building burns down tonight you will get every dollar of your insurance."

There was further testimony with reference to a telephone conversation had by Voorhees on the 23d of July with defendant's general agency at Seattle. Miss Mackie, telephone operator at Morton, testified that Voorhees reported the insurance as effective, and asked for the form of policy on which to write the contract. The testimony of Voorhees was in conflict with that of plaintiff and Miss Mackie. Plaintiff testified to further conversations with Voorhees on the 23d and the 25th of July, at which Voorhees told him that he had not yet received the policy from Seattle, but was expecting it. On the night of the 25th, the hotel and its contents were destroyed by fire.

A letter was received in evidence, written by Voorhees, under date of July 23, to Lamping & Co., Inc., defendant's general agent at Seattle. This letter was a mere transmission of a proposal of insurance. On the same day Lamping & Co., Inc., wrote a letter to Voorhees, declining to write the policy, and requesting cancellation of a $1,200 policy defendant was then carrying on the hotel furniture. A similar letter was written by Lamping & Co., Inc., under date of July 25. Voorhees testified that he received these letters after the fire. There was no testimony that plaintiff was notified before the fire of defendant's refusal to carry the risk. The verdict determines the controverted facts in plaintiff's favor. Defendant tendered the agreed premium shortly after the fire; his certified check was retained by Voorhees for a long time, and was eventually returned to him.

Defendant contends that an oral contract for fire insurance is unlawful under the laws of Washington. In the absence of a statute prohibiting the execution of oral contracts of insurance, such contracts are valid and enforceable. 14 R. C. L. 881; 32 C. J. 1113; Park & Pollard Co. v. Agricultural Co., 238 Mass. 187, 130 N. E. 208; Georgia Casualty Co. v. Bond-Foley Lumber Co., 187 Ky. 511, 219 S. W. 442; Lea v. Atlantic Fire Co., 168 N. C. 478, 84 S. E. 813. The rule in Washington accords with that announced by the foregoing authorities. Waldron v. Home Mutual Ins. Co., 16 Wash. 193, 196, 47 P. 425; Thompson v. Germania Co., 45 Wash. 482, 88 P. 941.

Defendant bases its contention on the insurance Code of Washington, and particularly on section 7152, Remington's Compiled Statutes, which is in part as follows: "On and after January 1, 1912, no fire insurance company shall issue any fire insurance policy covering any property or interests therein in this state other than on form known as the New York standard form, as now or may be hereafter constituted."

A similar statute in the state of Oregon has been construed in accordance with defendant's contention. Salquist v. Oregon Fire Relief Association, 100 Or. 416, 197 P. 312. In several other jurisdictions the courts have held legislation of this character applicable only to the policies when written, and not prohibitory of oral contracts. Lea v. Atlantic Fire Ins. Co., 168 N. C. 478, 84 S. E. 813; Republic Insurance Co. v. Poole (Tex. Civ. App.) 257 S. W. 624; Milwaukee Bedding Co. v. Graebner, 182 Wis. 171, 196 N. W. 533.

The question involves the construction of a Washington statute, and the federal courts are bound by the construction given the statute by the Washington Supreme Court. In Day v. St. Paul Fire & Marine Ins. Co., 111 Wash. 49, 51, 52, 189 P. 95, 97, the court held the statute of which section 7152, supra, is a part, to be "a complete act in itself," "intended to cover the entire insurance relationship." The Washington court has held, since the enactment of this statute, that the insurer may orally waive the provision in the standard form of policy providing for forfeiture in case there is other concurrent insurance not assented to by the insurer, Workman v. Royal Exchange Assurance, 96 Wash. 559, 165 P. 488; also that the insurer may orally waive the provision requiring sworn proofs of loss, Ramat v. California Insurance Co., 95 Wash. 571, 576, 164 P. 219; and the provision avoiding the policy if the building covered is on leased ground, Gregerson v. Phenix Fire Co., 99 Wash. 639, 641, 170 P. 331, L. R. A. 1918E, 521.

In Kidder v. Hartford Accident & Indemnity Co., 126 Wash. 478, 480, 218 P. 220, 221, it is held that the Insurance Code does not forbid an oral contract of accident insurance. The section of the statute construed in this decision was as follows: "No life insurance company doing business in this state shall make or permit any distinction or discrimination * * * nor shall any company or agent, sub-agent, or broker, make any contract of insurance or agreement as to such contract, other than is plainly expressed in the policy issued thereon."

The latest expression of the Washington court is found in M. R. Smith Lumber & Shingle Co. v. Netherlands Fire & Life Ins. Co., 238 P. 565. This decision makes no reference to section 7152, Remington's Compiled Laws, but it does hold that an oral contract of fire insurance is lawful in the state of Washington. This is, in effect a construction of the Washington statute, binding on the federal courts.

It is also contended by the defendant that Voorhees had no authority to bind it by an oral contract of insurance. He testified that he had never had in his possession blank insurance policies of the defendant, that he was a mere soliciting agent, and that all his applications were submitted to Lamping & Co., Inc., for acceptance or rejection. This testimony was corroborated by Edward Lamping, of Lamping & Co., Inc. There is authority for the proposition that a mere soliciting agent cannot bind his principal by an oral contract of insurance. 1 Cooley's Briefs on Insurance, 347; Mulrooney v. Royal Insurance Co. (C. C.) 157 F. 598, 606; Agricultural Ins. Co. v. Fritz, 61 N. J. Law, 211, 39 A. 910, 912.

In this class of cases the material question is the extent of the apparent authority of the agent. 1 May on Insurance (3d Ed.) 126; Brown v. Franklin Mutual Co., 165 Mass. 565, 43 N. E. 512; Shelby v. Connecticut Fire Co. (Mo. App.) 262 S. W. 686. In 1 May on Insurance, § 126, it is said: "The authority of an agent must be determined by the nature of his business, and is prima facie coextensive with its requirements. * * * His power cannot be limited by special private instructions, unless the insured has notice, or there is something in the nature of the business, or the circumstances of the case, to indicate that the agent is acting under special instructions."

In Union Mutual Insurance Co. v. Wilkinson, 13 Wall. 222, 235 (20 L. Ed. 617), Mr. Justice Miller says: "The powers of the local 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." To the same effect, see Brown v. Franklin Mutual Fire Ins. Co., 165 Mass. 565, 43 N. E. 512, 52 Am. St. Rep. 534; Charles H. Dresser & Son v. Allemannia Fire Co., 101 Conn. 626, 126 A. 912. There is no evidence that plaintiff was advised of the lack of authority now relied on by the defendant.

Plaintiff proved that defendant, under date of March 21, 1924, had requested the insurance commissioner to issue an agent's license to Voorhees. By the Washington statute approved February 23, 1923, an agent is defined to be "a person * * * duly authorized and commissioned by an insurance company, to solicit applications for and effect insurance in the name of the company, and to keep a complete record of all such transactions, and to discharge such other duties as may be vested in or required of the agent by said insurance company." Sess. Laws Wash. 1923, p. 54, § 1. This request, which was complied with, was a holding out of Voorhees as authorized to effect insurance in the defendant company. There was further evidence that Voorhees was accustomed to countersign and deliver policies to his customers; also that he collected the premiums. Mr. Lamping further testified that policies written on applications presented by Voorhees...

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