Norwich Union Fire Ins. Society v. Dalton

• Decision Date: 05 November 1914
• Docket Number: (No. 5398.)
• Citation: 175 S.W. 459
• Parties: NORWICH UNION FIRE INS. SOCIETY v. DALTON.
• Court: Texas Court of Appeals

175 S.W. 459

NORWICH UNION FIRE INS. SOCIETY v. DALTON.

(No. 5398.)

Court of Civil Appeals of Texas. Austin.

November 5, 1914.

On Motion for Rehearing, January 20, 1915.

On Motion for Rehearing of Plaintiff in Error, March 3, 1915.

Rehearing Denied April 14, 1915.

Error from District Court, McLennan County; Richard I. Munroe, Judge.

Action by Crate Dalton against the Norwich Union Fire Insurance Society. Judgment for plaintiff, and defendant brings error. Reversed and remanded for new trial.

Wm. Thompson, of Dallas, and Jno. S. Patterson, of Austin, for plaintiff in error. Witt & Saunders and Williams & Williams, all of Waco, for defendant in error.

Findings of Fact.

JENKINS, J.

(1) On September 17, 1912, and thereafter until its destruction by fire, defendant in error was the owner of the property alleged to have been insured by plaintiff in error.

(2) On said date defendant in error applied to, and obtained from, Friedlander & Ludde, insurance agents in Waco, where defendant in error and Geo. S. McGee reside, additional insurance in the sum of $5,000 on the building subsequently burned. This was all the business transaction that defendant in error ever had with said agents, except as hereinafter set out.

(3) On November 6, 1912, defendant in error phoned Friedlander & Ludde that he had sold the building to Geo. S. McGee, that the deed had been executed and placed in escrow, and that he desired $5,000 additional insurance in favor of McGee and of himself as mortgagee, and that he would call the next day and furnish the data from which to write the policy. A clerk in said agents' office replied that the request would be granted, and immediately made the following memorandum in the book kept for such purpose:

"November 6, 1912. Crate Dalton policy $5,000.00 in F. F. transferred to Geo. S. McGee, purchaser; also write $5,000 additional insurance separate binder in Ga. Home and N. B. M."

By "N. B. M." was meant North British & Mercantile Insurance Company. At the same time he addressed a letter to each of said companies, advising them of the binders, and stating that a daily report would follow on the morrow.

(4) On the next day defendant in error met Friedlander on the street, and was informed by him that the binders had been written for $2,500 in each of the companies above named. Defendant in error replied that the deal had not been consummated, but was still pending, and requested Friedlander to keep him and McGee protected until such time as he might notify him how the policies should be written. Friedlander promised to do so.

(5) On November 9th defendant in error called at the office of Friedlander & Ludde, and inquired if the policies had been written, and was informed that they had not, but that the binders were still in force. He stated that the trade with McGee was being held up, and requested that no policies be issued for the present, but that in the meantime the property be protected. To this said agents assented.

(6) On November 11th, about 2 p. m., Friedlander & Ludde received from the North British & Mercantile Insurance Company the following telegram:

"Please cancel binders sanitorium building favor McGee. Letter explains."

The building upon which the binders had been issued was known as the Sanitorium. They immediately drew a pencil mark through "N. B. M." as written in the memorandum, and interlined above it "Nor. Un.," meaning thereby the Norwich Union Fire Insurance Society, and also addressed a letter to the general agents of plaintiff in error at Galveston, Tex., advising them that they had bound plaintiff in error in the sum of $2,500 on said property, and also addressed a letter to the North British & Mercantile Company advising them that their binder had been canceled.

(7) Defendant in error knew nothing as to any of the facts stated in the preceding paragraph of this statement of facts until after the fire. At the time of his conversation with Friedlander on November 7th, and afterwards at the time of his conversation with both of said agents in their office, it was not in contemplation of either of said parties that the binder in the North British & Mercantile Company or in the Georgia Home Company would be canceled, nor that any other company would be substituted in lieu of either of such companies, or that any occasion would arise for such cancellation or substitution.

(8) Friedlander & Ludde were the local agents in Waco of the Georgia Home Insurance Company, the North British & Mercantile Company, and of plaintiff in error.

(9) On November 11th, at about 9 o'clock p. m., the property was destroyed by fire.

(10) On November 12th Friedlander & Ludde wired the general agents of plaintiff in error that the property had been destroyed, which telegram was received by them before notice of binder.

(11) On November 14th Friedlander & Ludde issued a policy in the Norwich Union for $2,500 on the property in favor of Geo. S. McGee, for the term of one year, with a mortgage clause in favor of defendant in error, and dated the same November 11, 1912.

(12) On November 16th Friedlander & Ludde received a letter from the general agents of plaintiff in error, requesting them not to deliver the policy. On the same day, Friedlander & Ludde received the premium from defendant in error, and remitted the same by letter to the general agents of plaintiff in error, who declined to receive the same, and returned it to Friedlander & Ludde.

(13) On December 12, 1912, defendant in error made proof of loss to plaintiff in error, and in January, 1913, made proof of loss to the North British & Mercantile Company.

(14) Defendant in error testified upon the trial hereof that he was not claiming the insurance against both the North British & Mercantile Company and plaintiff in error, but only against the one that was legally liable therefor. It was not the intention of either the defendant in error or of Friedlander & Ludde that both policies should be in force at the same time.

(15) Friedlander & Ludde, in issuing policies for the North British and for all other companies represented by them, used only the standard form of policy prescribed by the insurance commissioner of the state of Texas, which required five days' notice in order to cancel a policy, and this would have been in the policy had one been written by them on the North British & Mercantile Insurance Company binder.

Opinion.

A number of legal questions are incidentally involved in this case, but a correct decision herein depends upon the issue as to whether the insurance agents Friedlander & Ludde were, as a matter of law from the facts stated, authorized to cancel, without the knowledge or consent of the defendant in error, the binder issued by them in the North British & Mercantile Insurance Company, and substitute therefor the binder in the Norwich Union Fire Insurance Society.

The general principles of law involved are well settled, and may be stated as follows:

1. A written memorandum such as was made by the local insurance agents is known in insurance terminology as a "binder." A binder is a verbal contract of insurance in præsenti, temporary in its nature, intended to take the place of an ordinary policy until the same can be issued. It is a short method of issuing a temporary policy for the convenience of all parties, to continue, unless sooner canceled, until the execution of a formal policy. It will be construed as containing all of the provisions of an ordinary policy, including the provision for cancellation. Lipman v. Insurance Co., 121 N. Y. 454, 24 N. E. 699, 8 L. R. A. 719; Cooley's Ins. Briefs, 2790.

2. When a contract of insurance has been entered into, it cannot be annulled, except by the consent of the parties thereto, unless otherwise provided in the policy. This is but the statement of the elementary law of contracts, and will be found in a number of the cases herein cited, and in all of the text-books on insurance.

3. Another elementary principle of the law of contracts applicable to insurance is that the property must be in existence at the time the policy is issued. As a corollary to this, the rights of the parties are fixed at the time the property is destroyed. Blake v. Insurance Co., 67 Tex. 165, 2 S. W. 369, 60 Am. Rep. 15; Insurance Co. v. McKenzie, 70 Ill. App. 615; Insurance Co. v. Turnbull, 86 Ky. 230, 5 S. W. 542; Insurance Co. v. Lumber Co., 89 Me. 26, 35 Atl. 1008, 35 L. R. A. 278; Kerr v. Insurance Co., 117 Fed. 447, 54 C. C. A. 616; Hermann v. Insurance Co., 100 N. Y. 411, 3 N. E. 341, 53 Am. Rep. 197; Cooley's Ins. Briefs, 2790. A policy issued in lieu of another which has not been legally canceled is not a binding contract. Clark v. Insurance Co., 86 Me. 26, 35 Atl. 1008, 35 L. R. A. 276.

4. When one of the conditions for the cancellation of a policy is that notice must be given, the notice must be given for the full time, if any, specified in the policy. Insurance Co. v. Flippin, 4 Tex. Civ. App. 576, 23 S. W. 552; Insurance Co. v. Urbansky, 113 Ky. 624, 68 S. W. 654; Clark v. Insurance Co., supra; Insurance Co. v. McKenzie, 70 Ill. App. 615; Insurance Co. v. King, 108 Ark. 130, 156 S. W. 445; Yoshimi v. Insurance Co., 99 App. Div. 69, 91 N. Y. Supp. 393.

5. In insurance, as in all other contracts, notice to an agent is notice to his principal, but it must be within the scope of his authority to receive such notice. Lumber Co. v. Insurance Co., 158 Iowa, 563, 138 N. W. 504, 51 L. R. A. (N. S.) 539; Clark v. Insurance Co., supra; and other authorities herein cited.

6. A broker who is employed by the insured to attend to all of his insurance, and to keep his property insured, is the agent of the insured for the purpose of receiving notice of the cancellation of a policy, and may waive such notice, and surrender a policy for cancellation, and receive another in lieu thereof. Such authority may be presumed from a long course of dealing between the parties. Johnson v....