Nertney v. Nat'l Fire Ins. Co. of Hartford, Conn.

• Decision Date: 12 May 1925
• Docket Number: No. 35595.,35595.
• Citation: 199 Iowa 1358,203 N.W. 826
• Parties: NERTNEY v. NATIONAL FIRE INS. CO. OF HARTFORD, CONN.
• Court: Iowa Supreme Court

199 Iowa 1358

203 N.W. 826

NERTNEY

v.NATIONAL FIRE INS. CO. OF HARTFORD, CONN.

No. 35595.

Supreme Court of Iowa.

May 12, 1925.

Appeal from District Court, Butler County; C. H. Kelley, Judge.

Action upon a preliminary contract of insurance. There was a verdict for the plaintiff, and from the judgment rendered thereon defendant appeals. Affirmed.C. G. Burling, of Clarksville, and Stout, Rose, Wells & Martin, of Omaha, Neb., for appellant.

Healy & Breen and Hanson & Schaupp, all of Fort Dodge, for appellee.

VERMILION, J.

The facts are not in dispute. The Vaughn I. Griffin Company, a copartnership of which Vaughn Griffin and G. W. Finn were members, was engaged in the insurance business at Mason City. Griffin was the agent of the appellant company. As shown by his contract of agency and his certificate of appointment, Griffin was agent of appellant to solicit applications for insurance against loss or damage by fire on farm property in Cerro Gordo county and vicinity, for submission to the appellant for approval or rejection, and to receive premiums.

The appellee resided at Ottawa, Ill., and owned a farm in Cerro Gordo county. On March 28, 1921, he wrote to Finn, saying he wanted to put $1,500 insurance on the barn on his farm. There was some correspondence over the matter, during the course of which two applications were sent to appellee to be filled out and signed, which he refused to do, for reasons not material here. On April 15, 1921, an application for the insurance in the appellant company was sent him in a letter signed by Griffin, which said:

“You can fill out the blank application on the typewriter if you choose, sign same and return to us. The insurance will be in force immediately, but the policy may not be issued for two or three days.”

The appellee filled out and signed the application and put it, with a check for the premium, in the mail, properly stamped, and addressed to the Vaughn I. Griffin Company at Mason City, at 5 o'clock on April 16, 1921. The application was headed with this provision: “Subject to the approval of said company and to the terms and conditions hereof and of the policy that may be issued hereon,” and contained the further provision:

“The company shall not be bound by any act done or statement made to or by any agent, or other persons, which is not contained in this, my application, and this application shall be deemed and considered a part of the policy to be issued hereof if accepted by the company.”

The application and check were received by the Griffin Company on the morning of April 18th. Griffin on the same day mailed the application, with a check for the premium, less his commission, to a general agency of the appellant company at Omaha. Later on that day he received a telegram from appellee, notifying him that the barn had been destroyed by fire. The fire occurred on the night of Saturday the 16th, or the morning of the 17th, and after appellee had mailed the application to the Vaughn I. Griffin Company, but before it was received by that company. Griffin notified the appellant's agency at Omaha of the fire. On April 19th the agency at Omaha notified the Vaughn I. Griffin Company by mail that the application was refused for the reason that they did not insure farm outbuildings except in connection with the balance of the property, and the check for the premium was returned to the Griffin Company.

The action is predicated on the contention that the insurance was effective from the time of the execution and mailing of the application by appellee, under the agreement in the letter of Griffin that the insurance would be in force immediately. The appellant denied the authority of Griffin to so agree. The question of the authority of the agent is the principal question in the case.

[1][2][3] I. It is plain that Griffin had no express authority in respect to insurance on farm buildings to do more than take applications therefor to be submitted to the company. Did he have implied or apparent authority to make a valid agreement for preliminary in surance effective on the signing and forwarding of the application and until the application should be accepted or rejected by the company? The question here is, not as to the authority of the agent to make a valid contract of insurance covering the full term for which the insurance was applied for, but as to his implied or apparent authority to make a valid preliminary contract of insurance covering the time necessary for the forwarding of the application to the company and its acceptance or rejection. Implied authority is said to be actual authority circumstantially proved--the authority which the principal intended the agent to possess. Apparent authority is not actual authority, but is such as the principal holds the agent out as possessing. Koivisto v. Insurance Co., 148 Minn. 255, 181 N. W. 580. That the application for the insurance for the full contemplated term was by its express terms subject to the company's acceptance or rejection does not, we think, control upon the question of the agent's authority to make a preliminary contract of insurance pending the acceptance or rejection of the application by company. Nor, if the agent had implied or apparent authority to make such a preliminary contract of insurance, would the statement in the application, that the company should not be bound by any act done or statement made by any agent and not contained in the application, operate to relieve the company from such a contract? Section 1750, Code of 1897; section 9004, Code of 1924; Acid Mfg. Co. v. Insurance Co., 126 Iowa, 225, 101 N. W. 749.

It is an admitted fact that, if the application had been accepted, the policy issued in pursuance thereof would have covered the risk from the date of the application. It was shown that it was the general custom in the locality to so date policies issued on applications, and that Griffin had knowledge that the defendant company in issuing policies or applications for insurance on farm buildings so issued them as to cover the risk from the date of the application. It was also shown that, while Griffin had been previously employed by another local agency of the defendant company, he had assisted in taking an application for farm insurance, and had agreed that the insurance should become effective immediately, and that the policy issued by the company six weeks later covered the risk from the date of the application.

Where the policy covers the risk from the date of the application, it is apparent that the insured pays for insurance for the stipulated period beginning with the date of the application, not the date of its acceptance. No one would be expected to take out insurance for a period of time that had already elapsed. But, unless there is a valid preliminary contract of insurance covering the time between the making of the application and its acceptance or rejection, that is what every insured who receives such a policy is required to do. The injustice of saying that, on the acceptance of the application, the insurer has had protection from the prior date where no loss has occurred, where it is also said that he is not protected if a loss did occur, is plain. But, if the agent had no authority to make a contract for preliminary insurance covering the interim between the making of the application and its acceptance or rejection by the company, there was no insurance covering that time. The company has a right arbitrarily to refuse to accept the application. Of course, where the application is accepted or rejected before a loss, no question can arise as to whether the property was covered. But, where the loss occurs after the date of the application and before its acceptance, may the company question the authority of its agent, who made a contract for preliminary insurance covering that period when, had the application been accepted, the policy issued would have covered it, and the insured would have paid for such protection? May it, in such case, say to the insured, “If no loss has occurred, your property was covered for the elapsed time; there was a binding contract for preliminary insurance, for which you must pay; but, if a loss has occurred, our agent had no authority to make a contract for preliminary insurance, and you had no insurance.” If the company may pay only at its option for a loss occurring after the making of the application and before its acceptance, notwithstanding the agreement of the agent for preliminary insurance, the insured, manifestly, has no protection during that time, yet, if he procures insurance, he pays for such protection. We are not to be understood as saying that, in the absence of any agreement for preliminary insurance covering the interim between the making of the application and the acceptance or rejection of it by the company, the mere fact that, when, or if, the application is accepted, the policy would cover the risk for that time, would create a liability for a loss so occurring, where the application was not accepted. But we are of the opinion that, when it is shown that it is the custom of the company upon accepting the application to issue its policy covering the period from the date of the application, its agent taking the application has implied or apparent authority to make a valid preliminary contract of insurance effective from the making of the application until its acceptance or rejection.

While the precise question has not before been presented to us, our conclusion is in accord with the principles announced in former decisions. Miller v. Insurance Co., 27 Iowa, 203, 1 Am. Rep. 262; Slater v. Insurance Co., 89 Iowa, 628, 57 N. W. 422, 23 L. R. A. 181;De Bolt v. Insurance Co., 181 Iowa, 671, 165 N. W. 55; Acid Mfg. Co. v. Insurance Co., supra; Funk v. Insurance Co., 171 Iowa, 331, 153 N. W. 1048;Johnson v. Insurance Co., 184 Iowa, 630, 168 N. W....