Riddle v. Rankin

• Decision Date: 10 July 1937
• Docket Number: 33440.
• Citation: 69 P.2d 722,146 Kan. 316
• Parties: RIDDLE v. RANKIN et al. [*]
• Court: Kansas Supreme Court

69 P.2d 722

146 Kan. 316

RIDDLE v. RANKIN et al. ^[*]

No. 33440.

Supreme Court of Kansas

July 10, 1937

Syllabus by the Court.

Under statute providing that agent who collects premium from insured on policy on which agent was instrumental in having written holds premium in trust for insurer, insurer was not entitled to cancel policy for premium default or collect premium from insured for second time after insured had paid premium to insurer's agent who failed to account to insurer therefor (Gen. St.1935, 40-247).

Statute providing that insurance agent who collects premium from insured on policy which agent was instrumental in having written holds premium in trust for insurer was designed for benefit of insured who pays premium on policy to broker or agent of insurer to protect insured in his rights under policy irrespective of defalcations of broker or agent respecting his payment to insurer (Gen.St.1935, 40-247).

Under statute, insurer has duty to ascertain if insured has paid premium to broker before it attempts to cancel policy for nonpayment of premium (Gen.St.1935, 40-247).

Although policy may be canceled by mutual consent of insured and insurer, there should be meeting of minds of parties, arrived at with fairness to accomplish such purpose and fraud practiced by one of parties to induce other to consent to cancellation of policy vitiates cancellation agreement.

An insurance broker intrusted by insurer to deliver policy to insured and collect premiums is agent of insurer for such purpose, and part of duty of agent under statute is to account to insurer for premium collected (Gen.St.1935 40-247).

An insurance broker who had duty to deliver indemnity policy to insured and collect premium for insurer and who failed to account to insurer for premiums collected was agent of insurer when he procured policy for cancellation from insured by fraudulent representations after insurer had notified broker of intent to cancel policy for nonpayment of premiums since insurer was charged with notice of payment to agent under statute (Gen.St.1935, 40-247).

Insured who was induced by fraud of insurer's agent to surrender policy for cancellation on representation that insurer was not responsible company did not ratify fraud by surrender of policy and taking of policy in new company or by making claim against new company without knowledge of facts.

1. An insurance policy may be canceled by mutual consent of the insured and the insurer. To accomplish this there should be a meeting of the minds of the parties, arrived at with fairness. Fraud practiced by one of the parties, with the purpose and effect of inducing the other party to consent to the cancellation of the policy, vitiates the agreement to cancel.

2. Our statute (G.S.1935, 40-247) is designed to protect an insured in his policy rights from defalcations of an insurance broker or agent who delivers to him a policy and collects the premium thereon.

3. When an insurer intrusts a broker to deliver a policy and collect the premium, and the broker does so, he holds the premium in trust for the insurer, and under our statute (G.S.1935 40-247) it is the duty of the insurer to ascertain if the insured has paid the premium to the broker before it attempts to cancel the policy for nonpayment of premium.

4. A broker, intrusted by an insurer to deliver a policy to the insured and collect the premium, is the agent of the insurer for that purpose. It is a part of his duty as such agent to account to the insurer for the premium collected.

5. Under the facts stated in the opinion, it is held the broker was the agent of the insurer when by fraudulent representations he procured policies for cancellation from the insured.

6. One ignorant of the facts and of his rights, who is induced by fraud of the insurer's agent to surrender his policy for cancellation and to take a policy in another company, cannot be held to have ratified the fraud by the fact that he did surrender the first policy and take the new one.

Appeal from District Court, Shawnee County, Third Division; Otis E Hungate, Judge.

Action by Humbert Riddle against H. N. Rankin and the Maryland Casualty Company, garnishee. From a judgment for the garnishee, the plaintiff appeals.

Reversed, with directions.

J. E. Addington and Howard A. Jones, both of Topeka, for appellant.

Ralph T. O'Neil, John D. M. Hamilton, and Barton E. Griffith, all of Topeka, for appellee.

HARVEY Justice.

This was a hearing on exceptions to the answer of a garnishee. The trial court made findings of fact and rendered judgment for the garnishee. Plaintiff, the garnishor, has appealed.

The facts, summarized or quoted from the findings of fact made by the trial court, may be stated as follows: The defendant Rankin operated a riding stable where he let riding horses for hire. On March 18, 1933, plaintiff, riding a horse hired from Rankin, sustained personal injuries, for which he sued Rankin and recovered a judgment for $2,851.25. Execution was issued against Rankin on this judgment and returned unsatisfied. Plaintiff then had a garnishment summons issued to the Maryland Casualty Company, which filed an answer of nonliability. Plaintiff elected in writing to take issue on the answer. This is the issue tried by the court below. The court found that in 1932 Rankin operated a business known as the Rankin Riding Stables; that Everett L. Herren and his son conducted an insurance agency, and that Glenn D. Hussey and others were conducting a separate insurance agency and were the general agents of the garnishee, the Maryland Casualty Company; that about August 24, 1932, at Herren's solicitation, he was authorized by Rankin to secure for him policies of insurance, one of which was to be against liability to patrons of the riding stables. Herren & Son were not an agent for the Maryland Casualty Company, nor were they agent for any company writing the kind of insurance desired by Rankin. Herren requested the Hussey agency to write the policy, which it did in the Maryland Casualty Company, and delivered the policy to Herren, and he delivered it to Rankin and collected from Rankin the premium thereon for one year. At the time he did this Herren was acting as the agent and by the authority of the Maryland Casualty Company. Two policies were written, one of which indemnified against damages such as plaintiff sustained, and it is with this one we are principally concerned. Herren failed to pay the premium to the Hussey agency, but that agency, under its agency agreement, paid the net premium on the policy for one year to the Maryland Casualty Company, which company retained the premium. Neither Hussey nor the Maryland Casualty Company knew Herren had collected the premium from Rankin. On October 3, October 23, and November 13, 1932, patrons of Rankin sustained injuries for which they claimed damages. These accidents were reported to the Maryland Casualty Company, but none of them had been adjusted by the last week of December 1932. Early in October, about the middle of November, and again about the middle of December, 1932, Hussey had called upon Herren to pay the premiums on the Rankin policy, but Herren did not pay, said he would get in touch with Rankin and get the money. The last week in December, 1932, "Hussey over the phone told Herren that if he, Hussey, did not have the money for the premiums that day or the next, he would cancel the policies by registered mail and Herren said, 'Don't do that. I am taking on another company and I will bring them to you."' Following this telephone conversation Herren went to Rankin "and stated to him, in substance, that the Maryland Casualty Company did not pay claims against it promptly; that he had had trouble with them about paying claims and that it was 'not worth a damn.' He further stated to Rankin that if he, Rankin, wanted someone to take care of him that he, Herren, would put him in a good company. Because of relying upon these statements of Herren, H. N. Rankin delivered to Everett L. Herren the two Maryland Casualty Company policies and thereafter Herren delivered them to the Hussey Insurance Agency *** they were marked cancelled for non-payment of premiums by that agency on December 31, 1932," and were forwarded through the Kansas City branch office to the home office of the Maryland Casualty Company at Baltimore, Md. About February 14, 1933, one Blackman, an auditor of the Maryland Casualty Company, came to Topeka to procure data to enable him to compute and audit the earned premium on the policies from the date they were issued to Rankin to December 31, 1932. As to the policy here involved, that depended on the number of riding horses Rankin kept at his stables. Blackman called Rankin by telephone and inquired and learned about the number of horses he kept. He then computed the earned premium on the two policies to be $34.99 and the unearned premium to be $69.91. There is no finding that Blackman told Rankin why he was inquiring about the number of horses, nor that he informed Rankin what he was computing, or the result of the computation. We were told at the argument that he did not inform Rankin of those matters. At the time Herren received the two Maryland Casualty Company policies from Rankin, Herren & Son were agents for the Public Indemnity Company, and on January 3, 1933, wrote, issued, and delivered to Rankin a policy in that company covering liability for accidents to patrons of the Rankin Riding Stables. It was agreed between Rankin and Herren that Rankin was to pay nothing to the Public Indemnity Company nor to Herren for this policy, but that the premium thereon was to be paid out of the money Herren had received from Rankin as premium for the Maryland Casualty Company policies. Herren...