Zander v. Casualty Ins. Co. of Cal.

Decision Date05 March 1968
Citation259 Cal.App.2d 793,66 Cal.Rptr. 561
CourtCalifornia Court of Appeals Court of Appeals
PartiesJon ZANDER, Plaintiff, Respondent and Appellant, v. CASUALTY INSURANCE COMPANY OF CALIFORNIA, Defendant and Appellant, Texaco, Inc., Norman Lawrence, and Shasta Trinity Oil Co., Defendants and Respondents. Texaco, Inc., et al., Defendants. Civ. 11471.

Carr & Kennedy, by Laurence J. Kennedy, Jr., Redding, for plaintiff-appellant-respondent.

Zonni, Ginocchio & Taylor, Los Angeles, and Edward L. Lascher, Ventura, for defendant-appellant Casualty Ins. Co.

Rich, Fuidge, Dawson, Marsh, Tweedy & Morris, Marysville, for respondent Texaco, Inc.

Hewitt, McBride & Kenward, by J. R. McBride, Yuba City, for respondent Lawrence.

Lopez & Kennedy, by Lee A. Topez, Redding, for respondent Shasta-Trinity Oil Co.

PIERCE, Presiding Justice.

Plaintiff (Zander) obtained a judgment, after a court trial, against defendant Casualty Insurance Company of California Casualty) for $21,219.20 for damages from breach of an oral insurance 'binder.' Casualty appeals. 1 We will discuss and answer Casualty's contentions under appropriate captions below.


On March 9, 1962, plaintiff, Zander, had recovered a personal injury judgment in Shasta County, action number 25119 against James H. Pollock and Austin M. Hughbanks in the sum of $21,590.18. The injuries had been suffered June 3, 1959, while plaintiff was an invitee upon service station premises known as 'Buffalo Ranch Service Station' near Redding. At the time of the accident one Lucas was the owner of the service station. He had recently acquired it. Pollock and Hughbanks, copartners, operated it as tenants from month to month. The service station, under different ownership, had used Texaco petroleum products. Such products in the area were exclusively distributed by Shasta Trinity Oil Company, a corporation, of which one Holt was president and sole owner. When the change of ownership and operation of the service station had occurred Richfield Oil Company had solicited a switchover to the use of its products. Pollock and Hughbanks, in a conversation with Holt and one Sellers, the local representative of Texaco, Inc., informed them that a principal inducement of the proposed change was that Richfield proposed a 'package' deal of combined fire, public liability and property damage insurance. Holt and Sellers wished to retain the business of the service station. They informed Pollock and Hughbanks they would try to negotiate the same deal with Texaco.

Defendant Lawrence, who transacted business as 'Norman Lawrence Associates,' was an insurance broker for Texaco Dealers Insurance Trust. Lawrence's offices were in Los Angeles. They were shared with the 'Trust.' That organization seems to have been a corporate device 'which enabled a group of insurance policies to be issued.' One Kamins was 'administrator' of that trust.

Kamins and Lawrence went to Redding in response to a call from Sellers. They viewed the premises and with Sellers present held a conversation with Lucas. There is a conflict in the record whether Pollock or Hughbanks were present. (Pollock did not testify. Hughbanks testified he had not met Lawrence. Sellers, however, testified both partners were present during the conversation.) At this conference Lucas specifically asked for and obtained from Lawrence assurance that As of that moment the premises were insured totally and completely for fire, public liability and property damage; that coverage would include Pollock, Hughbanks and Lucas.

Casualty and Lawrence at the trial both contended, and contend before us, that Lawrence had no authority to 'bind' Casualty. Evidence not only substantial but conclusive (to be elaborated upon below) disproves this.

On April 1, 1959, Lawrence's secretary, directed by him so to do, sent a memorandum-letter to defendant Casualty. It named Hughbanks and Pollock as the insured, Lucas, the station owner, as an additional insured. It specified the type of insurance including: garage public liability '$100/$300,000'; 2 also property damage in a specified amount. It described the premises to be insured. This memorandum-letter was inferably a notification to Casualty of issuance of an oral binder. Mrs. Judson (formerly 'Moore') the secretary, testified regarding such binders: 'Did you ever orally bind that company (Casualty)? A. Oh, yes, very often. Q. On one occasion or more than one occasion? A. On many occasions.'

Holt sent three letters to Lawrence: one confirmed the placing of the liability insurance, a second authorized the writing of the fire insurance, the third thanked Lawrence for his efforts in retaining the service station as a Texaco outlet. These letters can only be interpreted as letter-applications for insurance covered already by the binder. Lawrence, who also confirmed the fact he had often issued binders for Casualty, did nothing personally about placing with Casualty any order for formal insurance policy or policies.

On April 13, 1959, Casualty wrote Lawrence. The caption on the letter was: 'Re: Austin Hughbanks and James Pollock with Patrick Henry Lucas as an additional insured.' The first paragraph of the body of the letter read: 'With reference to the above captioned, We have been holding same under binder since April 1, 1959, and unless we are in receipt of a firm order to write prior to April 17, 1959 we will have no alternative but to discontinue coverages.'

Plaintiff's evidence shows that Lawrence instructed his secretary to, and his secretary did, call Casualty which agreed to extend the binder indefinitely. (On June 12, 1959--9 days after the accident had occurred--another binder request was sent by Lawrence's office to Casualty.)

Evidence other than Lawrence's own statement and the statement of his secretary showed that Lawrence was an agent of Casualty and had authority from Casualty to bind it orally. The procedure outlined above had been used before and was continued after the accident. When the accident happened, the binder, assuming, as we must, the truth of the foregoing, had been in continuous existence for 64 days.

Meanwhile, during this period, no policy or policies having been received, Pollock, Hughbanks and Lucas all became increasingly concerned. Hughbanks and Lucas got in touch with Holt. Holt communicated with Lawrence and with Sellers. He was told that policies were in the mail. This untrue intelligence was relayed to Pollock and Hughbanks.

After the accident Hughbanks asked Holt to talk to Lawrence. Lawrence then stated: 'Well, nobody ever signed the policies and returned them to us, and the binder's expired.' He then said: 'We don't have it covered.'

When Zander filed the original action, Lucas, as a Doe, Pollock and Hughbanks, under the partnership name, and the former owner of the service station, Graham, were named as defendants. Hughbanks, through his personal attorney, wrote Lawrence requesting that the pleadings be forwarded to the insurance carrier for defense of the action. Lawrence consulted a Casualty representative. A firm of adjusters, Brown Brothers, was employed. They prepared a 'reservation of rights' agreement; Lucas, Pollock and Hughbanks signed it. A firm of attorneys, Newton and Braun, was retained to represent the partners. Braun of that firm undertook the defense. Brown Brothers conducted an extensive investigation. Braun was instructed to, and did, send his litigation progress reports to Casualty, marking them 'Personal and Confidential.' Braun's activities on behalf of the 'insured' were typical of an attorney employed by an insurer in personal injury litigation to represent an insured. He took depositions. He was in frequent communication with the insurer regarding the progress of the litigation. Some months before trial Casualty, with no explanation either then or now rationalized, renounced liability not only of insurance coverage or obligation to provide a defense, but also of its liability for the attorneys' fee and expenses and for the adjusters' fee and expenses theretofore incurred. (Subsequently the latter's bill appears to that been paid. We do not know the fate of the bill of Newton and Braun. From correspondence in evidence we are aware they were unimpressed by Casualty's promise of referrals of future business as a satisfaction of the claim of the attorneys for fees already earned and expenses already incurred.) Agencies may be proved by acts as well as words. (County etc. Bank v. Coast Dairies & Land Co. (1941) 46 Cal.App.2d 355, 363, 115 P.2d 988.) Under the overwhelming evidence before us, most of it documentary, the solemnly proclaimed denial by Casualty of the fact that the adjusters and attorneys were its agents simply will not stick.

Judgment was obtained by Zander against Pollock and Hughbanks on March 9, 1962. Under an oral covenant not to execute, which was subsequently reduced to writing, those defendants did not appear at the trial. Pollock and Hughbanks paid Zander $370.98 upon obtaining the covenant. Plaintiff filed this complaint February 4, 1963.


Insurance Code section 11580, subdivision (b)(2), provides that an insurer must answer directly to the injured person after a judgment has been obtained against the insured. All policies of public liability insurance issued in California must contain provision for such liability. This action is authorized under that section.

Insurance of 'binders' called 'covering notes' in the Insurance Code has statutory authorization. Duration is limited to 90 days unless extended as provided by law. (Ins. Code, § 382.) California case law covers the issuance of binders. They may be oral and cover new policies; they 'may be effected on behalf of an insurer by any agent possessing the authority to bind the company by contracts of insurance generally.' (Granco Steel, Inc. v....

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