Rutherford v. John O'Lexey's Boat and Yacht Ins., Ltd.
| Decision Date | 02 February 1978 |
| Docket Number | No. 1,CA-CIV,1 |
| Citation | 118 Ariz. 380,576 P.2d 1380 |
| Parties | Andy RUTHERFORD, Jr., a single man, Appellant, v. JOHN O'LEXEY'S BOAT & YACHT INSURANCE, LTD., a Foreign Corporation, Robert O. Cummins and Lee Roy C. Kellis dba Cummins & Kellis, Robert O. Cummins and Jane Doe Cummins, husband and wife, and Lee Roy C. Kellis, and Jane Doe Kellis, husband and wife, Appellees. 3506. |
| Court | Arizona Court of Appeals |
On July 6, 1973, appellant, Andy Rutherford, Jr., entered the office of appellee, Cummins and Kellis Insurance Agency (Cummins & Kellis), to purchase liability insurance in connection with the operation of a motorboat which he intended to use for the first time on the weekend of July 7-8, 1973.
After discovering that Mr. Rutherford's boat was home-made and which no standard company would insure, Mrs. Dorothy Harville, an employee of Cummins & Kellis, telephoned appellee, John O'Lexey's Boat and Yacht Insurance, Ltd., (O'Lexey), a California insurance company which insures sub-standard risks. O'Lexey informed Mrs. Harville that it would issue a temporary policy on the condition that the premium and completed application be submitted immediately, bearing a July 6, 1973 postmark.
When Mrs. Harville began filling out the application, she discovered that Mr. Rutherford did not have all the necessary information to complete the application. She again called O'Lexey and asked if the company would bind weekend coverage even though the application could not be completed and mailed until Monday, July 9, 1973. She was told that O'Lexey would bind coverage provided that a completed application was mailed on Monday. Mr. Rutherford was present when both phone calls were made.
The conversation which ensued subsequent to the second call was vigorously contested in the trial court. Mrs. Harville testified that she told Mr. Rutherford that the binder was conditioned upon his completing the application and making arrangements for premium payments no later than July 9, 1973. Mr. Rutherford testified that he was told unconditionally that he was insured.
Mr. Rutherford did not return to Cummins & Kellis on Monday and Mrs. Harville was unable to get the necessary information when she phoned him. She tried unsuccessfully to reach him by phone for several more days. Meanwhile, O'Lexey notified Cummins & Kellis on July 11, 1973 that no binder was in effect because the application and premium had not been received. On July 16, 1973, appellant completed the insurance application and a binder was effective from July 16th until the application was rejected for failure to meet underwriting standards on July 19, 1973. At this point, neither Cummins & Kellis nor O'Lexey had been informed that the Rutherford boat had been involved in an accident on July 8, 1973. Finally, on July 20, 1973, Rutherford informed Cummins & Kellis of the accident. After being told that he was not covered by insurance for the accident and having been sued for personal injuries by a passenger in his boat. Rutherford sued both Cummins & Kellis and O'Lexey for indemnification against any liability arising out of the accident. The trial court entered judgment for both Cummins & Kellis and O'Lexey.
Rutherford alleges as error on appeal: (1) that the trial court erred as a matter of law in finding that there was no insurance coverage for July 7-8, 1973; and (2) that the trial court erred in failing to find that Cummins & Kellis violated their duty to obtain insurance for him.
Initially, we note that the trial court did not make written findings of fact or conclusions of law. However, the record clearly shows that the trial court found the more accurate recollections of the insurance transaction to be those of Mrs. Harville rather than those of Rutherford. The critical fact determination for purposes of appeal is that Mrs. Harville communicated to Rutherford that temporary insurance coverage was conditioned upon Rutherford's submission of a completed application including a premium. This determination is supported by the record and we will not disturb the trial court's findings in this regard. O'Hern v. Bowling, 109 Ariz. 90, 505 P.2d 550 (1973); Visco v. Universal Refuse Removal Co. 11 Ariz.App. 73, 462 P.2d 90 (1969). Additionally, we note that even were the record less clear concerning the trial judge's factual determination, we would assume the necessary findings to support the judgment when no written findings of fact and conclusions of law are made. Tencza v. Aetna Casualty and Surety Co., 111 Ariz. 226, 527 P.2d 97 (1974); Harmon v. Hanson's Pump and Machine Works, Inc., 4 Ariz.App. 107, 417 P.2d 741 (1966). Having accepted the determination that Rutherford was told that temporary insurance was effective provided that he submit a completed application on Monday, we conclude that a contract was created subject to a condition subsequent. O'Lexey offered a temporary policy (binder) subject to the condition of Rutherford's completion of the application by July 9. Rutherford accepted the offer. His promise to complete the application and pay the premium for permanent insurance was sufficient consideration to support this contract. See, Pennsylvania Casualty Co. v. Upchurch, 139 F.2d 892 (5th Cir., 1943); Franklin v. Carpenter, 244 N.W.2d 492 (Minn., 1976); 12 Appleman, Insurance Law and Practice, § 7222. A contract was in existence on the day of the accident. However, Rutherford's completion of the application by Monday was a condition that had to be performed before O'Lexey had any duty to perform. See, Restatement of Contracts § 250; 3 A Corbin, Contracts, § 628 (Rev. ed., 1960). Rutherford's failure to perform terminated his right to performance by O'Lexey. 1
Appellant appears to argue that notwithstanding contract law, insurance companies should not be permitted to insert conditions subsequent in binders. The controlling statute is A.R.S. § 20-1120, which states in pertinent part:
"A. Binders or other contracts for temporary insurance may be made orally or in writing, and shall be deemed to include all the usual terms of the policy as to which the binder was given together with such applicable endorsements as are designated in the binder, except as superseded by the clear and express terms of...
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