Hay v. Utica Mut. Ins. Co.

• Decision Date: 27 May 1977
• Docket Number: No. 10190,10190
• Citation: 551 S.W.2d 954
• Parties: George P. HAY, Plaintiff-Respondent, v. UTICA MUTUAL INSURANCE COMPANY, Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 954

551 S.W.2d 954

George P. HAY, Plaintiff-Respondent, v. UTICA MUTUAL INSURANCE COMPANY, Defendant-Appellant.

No. 10190.

Missouri Court of Appeals, Springfield District.

May 27, 1977.

Motion for Rehearing or to Transfer to Supreme Court Denied

June 14, 1977.

Application to Transfer Denied July 11, 1977.

Arch M. Skelton, Springfield, for plaintiff-respondent.

Max W. Foust, G. Spencer Miller, Morris, Foust, Beckett & Ponick, Kansas City, for defendant-appellant.

Before STONE, P. J., and HOGAN and TITUS, JJ.

TITUS, Judge.

Plaintiff sued Utica Mutual Insurance Company on a contract for temporary aircraft insurance to recover for the physical damage his Cessna airplane sustained in a landing accident. He also sought interest, damages for vexatious refusal to pay and attorney's fees. § 375.420, V.A.M.S. Subsequent to a bench trial, plaintiff was awarded judgment in the aggregate sum of $5,366.34 and Utica appealed.

On October 27, 1972, plaintiff called insurance man Coonrod to obtain insurance on the just-purchased Cessna. Unable to supply aircraft insurance himself, Coonrod telephoned Fairfax Underwriters Services, Inc., authorized representative for Utica. Fairfax issued and sent to Coonrod a binder which, in part, stated: "This is to confirm that we have bound with Utica . . . the following insurance effective 12:01 a. m. Standard Time Oct. 27, 72 for a period of 30 days." Among other things, the binder designated plaintiff as the named insured and a pilot who could operate the airplane when coverage would be afforded, set forth the amounts of liability and physical damage coverages, stated the amount of the premiums, described the Cessna aircraft and concluded: "This document is intended for use as evidence that the insurance as described herein has been effected and shall be subject to all terms and conditions of policy(ies) which will be issued and that, in the event of any inconsistency herewith, the terms and provisions of such policy(ies) shall prevail."

To become effective, a binder must contain the following agreed upon elements: (1) the subject matter; (2) the risk insured against; (3) the duration of the binder; (4) the amount of the coverage; and (5) the amount of the premium. Sander v. Mid-Continent Insurance Co., 514 S.W.2d 634, 637(6) (Mo.App.1974). All of these elements are present in this case.

Eight days after the binder was issued, i. e., Saturday, November 4, 1972, the Cessna, while being piloted by plaintiff, was damaged upon landing when its tail section made contact with a fence post. Coonrod reported the occurrence to Fairfax by telephone on the following Monday, November 6, 1972.

Prior to issuance of the Cessna binder, Fairfax, through Coonrod's endeavors, had issued another binder on plaintiff's Piper airplane effective October 4, 1972, for a period of 30 days. After obtaining the Cessna binder, Coonrod received from Fairfax two identical "Aviation Insurance Application" forms one for the Piper and the other for the Cessna. The forms were completed by Coonrod, signed by plaintiff and mailed to Fairfax on November 6, 1972. Each form contained this question: "Has any approved pilot been involved in or sustained any aircraft loss, including third party liability, whether or not covered by insurance? If so, give full details . . . on reverse side." Coonrod testified that in preparing the forms he read the question to plaintiff who answered "(N)o . . . '(n)ot in the past five years.' " Coonrod opined this justified his writing a "No" in the blank space on the Piper form and leaving the question unanswered on the Cessna form. Plaintiff said that when inquiry was made regarding losses, he reminded Coonrod he had not operated an airplane for the past 13 years but previous to that he "had a number of accidents" and Coonrod "said he didn't think it would make a hell of a lot of difference." Plaintiff also said he had signed the application forms without reading them.

Under date of November 10, 1972, Utica's aircraft policy on both the Piper and the Cessna was signed "Approved" by Aviation Office of America, Inc. The policy was "Countersigned" by an officer of Fairfax as "Authorized Representative" on November 20, 1972. The policy period stated in the policy was from October 27, 1972, to October 27, 1973. Plaintiff paid a premium of $1,300. The policy was not received by Coonrod until the last of November or the first part of December 1972.

In the course of investigating the accident of November 4, 1972, it was learned that plaintiff had been involved in five aircraft losses between 1957 and 1960. Under date of December 6, 1972, Fairfax wrote Coonrod "that the Company has denied the captioned loss (because plaintiff) did not disclose the proper information on his application where they asked for his loss experience." On January 11, 1973, Coonrod sent the policy to Fairfax requesting a pro rata cancellation. Thereafter, Fairfax sent Coonrod a check for the entire premium paid. Coonrod then sent his $1,300 check to plaintiff which he cashed and kept. However, in computing the judgment the trial court gave Utica credit for the entire premium charged for the physical damage coverage and credit on a pro rata basis for the balance of the premium on the Cessna.

In answer to plaintiff's first amended petition upon which the cause was tried and which was predicated upon the contract for temporary insurance as evidenced by the Cessna binder, Utica affirmatively pleaded that "the aforesaid policy . . . was issued pursuant to a written application for same by the plaintiff . . . and that defendant issued the policy relying upon the warranties made in the application; that the above policy is null and void for the reason that the warranties made in the application for insurance, which are the basis for the policy, were erroneous or false and were material to the risk insured . . . and had defendant known the true facts, (about plaintiff's prior aircraft losses) the policy would not have been issued." Utica further pleaded that due to plaintiff's return of the policy and accepting back the full premium paid, "plaintiff is estopped and barred from bringing and maintaining this action."

It is apparent from Utica's pleadings and the first point relied on in its brief, that the insurer has either misconceived the very foundation of plaintiff's action as pleaded in his first amended petition, or has purposely chosen to ignore the existence of the Cessna binder which evidenced a contract for temporary aircraft insurance effective October 27, 1972, for a period of 30 days. 43 Am.Jur.2d, Insurance, § 216, p. 275. The suit here is based on the binder not on the policy. The evidence does not establish just when the policy was issued. All we know is that it was not approved until November 10, was not countersigned until November 20, and was not delivered until after those two events had occurred, all of which was well subsequent to the accident of November 4. "Therefore, the binder was the only contract of insurance in force and effect on the date of the loss." Midwestern Insurance Company v. Rapp, 296 P.2d 770, 774(1) (Okl.1956). Under that binder, "so long as it was the only contract in effect, any right of recovery arising within its terms would become fixed and enforcible, irrespective of whether a subsequent policy would ever issue." Baker v. St. Paul Fire & Marine Insurance Company, 427 S.W.2d 281, 288 (Mo.App.1968).

The seeker of an insurance binder, without solicitation, is not required to disclose information pertinent to warranties, declarations or representations pertaining to issuance of the final policy. Sherri v. National Surety Co., 124 Misc. 450, 208 N.Y.S. 257, 258(1) (1925), aff'd, 215 App.Div. 808, 213 N.Y.S. 909 (1926), aff'd, 243 N.Y. 266, 153 N.E. 70 (1926); 16A Appleman, Insurance Law and Practice § 9255, p. 641. Unless, contrary to the procedure followed here, an application or similar disclosure of facts be a prerequisite to the issuance of a binder, the insured in a contract for temporary insurance...