Zeff Distributing Co. v. Aetna Cas. & Sur. Co.

• Decision Date: 12 April 1965
• Docket Number: No. 1,No. 50293,50293,1
• Citation: 389 S.W.2d 789
• Parties: ZEFF DISTRIBUTING COMPANY, Inc., a Corporation, Appellant, v. AETNA CASUALTY AND SURETY COMPANY, Inc., a Corporation, and Swade Insurance Company, a Corporation, Respondents
• Court: Missouri Supreme Court

Page 789

389 S.W.2d 789

ZEFF DISTRIBUTING COMPANY, Inc., a Corporation, Appellant, v. AETNA CASUALTY AND SURETY COMPANY, Inc., a Corporation, and Swade Insurance Company, a Corporation, Respondents.

No. 50293.

Supreme Court of Missouri, Division No. 1.

April 12, 1965.

Rehearing Denied May 10, 1965.

Irving Achtenberg, Kansas City, Achtenberg, Sandler & Balkin, Kansas City, of counsel, for appellant.

Douglas Stripp, Landon H. Rowland, Kansas City, Watson, Ess, Marshall & Enggas, Kansas City, of counsel, for respondent, Aetna Casualty & Surety Co., Inc.

Morrison, Hecker, Cozad & Morrison, Karl F. Schmidt, Byron J. Beck, Kansas City, for respondent Swade Ins. Co.

HYDE, Presiding Judge.

Action in two alternative counts, the first seeking recovery of $25,000.00 against Aetna Casualty and Surety Company, Inc. (hereinafter called Aetna) on a claimed insurance contract for loss from theft. The second count sought, if there was no insurance contract in effect, to recover the same amount from plaintiff's insurance agent, Swade Insurance Company (hereinafter called Swade), for failure to keep insurance in effect. The court directed a verdict for Aetna and the jury's verdict was for Swade. Plaintiff has appealed from the judgment entered for both defendants.

We first will rule on plaintiff's claim of error for directing a verdict for Aetna but some of the facts stated on this issue will be material to plaintiff's claims of error in the trial on the second count. Swade had for several years prior to 1959 handled about half of plaintiff's insurance, while another agency had handled a substantial part. In 1959, Max Swade, president of Swade, told plaintiff's president, Carl Zeff, that he could get plaintiff better rates on policies in a package deal including a jeweler's block policy insuring against theft. Zeff told him to do so and on August 4, 1959, Swade obtained an oral agreement of Aetna, confirmed by letter of August 5, 1959, for coverage of $25,000.00 on jewelry stock of plaintiff in accordance with Aetna's standard jeweler's block policy. Plaintiff had not previously had this kind of theft policy but other insurance included replaced some policies plaintiff already had. Swade did not obtain and send in plaintiff's completed application for this policy to Aetna until September 28, 1959, and before a policy was issued plaintiff sustained a loss by theft on October 1, 1959, in excess of $25,000.00. That loss was paid by Aetna and this suit is for a second theft loss on December 10, 1959, for which plaintiff claims another $25,000.00 due from Aetna. Carl Zeff, plaintiff's president, said he did not know what companies had plaintiff's insurance but relied on Swade, or other agencies, to keep his insurance in force and that it was their custom to pay all insurance premiums at the end of each year.

On October 8, 1959, a week after the first theft, Aetna's Kansas City agent called Max Swade and told him Aetna wished to cancel the Zeff binder in view of the loss sustained, asking him to call as soon as the risk was replaced in another company. On October 23, 1959, Aetna's agent again called Max Swade and told him Aetna would not cover beyond October 30, 1959, and that a binder would be sent for the period of October 1 to October 30 instead of issuing a policy. Plaintiff's evidence was that none of its officers or employees knew anything about these conversations. However, a written binder (designated Binder No. 4) was issued on October 23, 1959, which stated the insurance was for a period of 87 days from August 4, 1959. This binder was found in plaintiff's files and produced at depositions taken in this case. Carl Zeff said he never saw this binder until after the second loss and plaintiff's bookkeeper did not recall seeing it until after the second loss. However, a proof of loss form for the first loss was signed, acknowledged and sworn to by plaintiff's vice president, David Zeff, on November 12, 1959, which stated the insurance was by Binder No. 4 'to expire 10-23, 1959.' (The date of issuance instead of the date of expiration.) The loss for the first theft was not paid by Aetna until after the second burglary but Carl Zeff admitted he had a conversation with Max Swade (president of Swade) early in December before the second theft in which Max said 'he thought that Aetna might want to get off the policy,' or 'would probably want to get off but that he (Swade) would take care of it.' There were several variations of this conversation in Carl Zeff's testimony but his version was that he was not told by Max Swade that Aetna was off the risk.

Plaintiff claims it made a submissible case against Aetna, considering the evidence most favorably to it. Plaintiff says burden of proof of cancellation was on Aetna; that Binder No. 4 even if timely received was not proper notice of cancellation; that Binder No. 4 was not effective because not accepted by plaintiff (because not signed by plaintiff on line for signature of insured); and that proof of loss signed by plaintiff did not establish cancellation prior to the second loss. Plaintiff also argues that cancellation could only be by the notice as stated in Aetna's standard jeweler's block policy (although none was ever issued); that the proof of loss was not notice of cancellation and was inadmissible because of Aetna's admission that the only communication of termination was Binder No. 4; and that the significance of the proof of loss was for the jury to determine, saying the expiration date therein stated may have been inserted after it had been signed. However, there was no testimony that the proof of loss was not complete when executed by plaintiff; and David Zeff, plaintiff's vice president, said when he signed it he saw the statement on it that it 'has been carefully read and is a full, complete and true warranty,' and that he took it to another office to be notarized. See Kirk v. Metropolitan Life Ins. Co., 336 Mo. 765, 81 S.W.2d 333, 341. Plaintiff further claims that Binder No. 4 was never intended as a contract of insurance 'but as a method of cancellation of the existing oral binder and as a document upon which to base the payment of the prior loss.'

Aetna says this is not a cancellation case but rather a case where the insurance expired by its terms, prior to the second loss sustained by plaintiff; but plaintiff contends the written binder was intended to be a method of cancellation. The insurance began on a temporary basis (an oral binder confirmed by letter) pending written application which was delayed almost two months so that no policy was ever issued. It is said: 'Such temporary insurance constitutes insurance for a reasonable time considering all the attendant conditions.' 29 Am.Jur. 595, Insurance, Sec. 205; see also annotation, 2 A.L.R.2d 959; 44 C.J.S. Insurance Sec. 230, pp. 960, 961. When a loss having occurred so soon after the application was received, the application was never accepted but Aetna instead of issuing a policy issued its written binder fixing a definite expiration date of October 30, 1959. Thereafter, the prior expiration of this insurance binder was stated in the proof of loss executed by plaintiff on November 12, 1959. Aetna cites Seiderman v. Herman Perla, Inc., 268 N.Y. 188, 197 N.E. 190, 191, in which it was contended that a letter requesting return of a binder for cancellation within five days (which by its terms expired the next day after the letter was written) was an extension of the binder. The court held the insurance expired on the date stated in the binder, saying: 'This is not a case of attempted cancellation of a policy or binder before it expired according to its terms, by the service of notice upon a broker.'

On the binder only, we do not consider the present case to be as strong a case as the Seiderman case (because here insurance began with an indefinite oral binder) but considering Binder No. 4 with the acknowledgment of termination in the Proof of Loss, we find the situation to be just as conclusive. Therefore, our view is that the court correctly directed a verdict for Aetna. Carl Zeff, while saying he never saw Binder No. 4 until long after the second theft, did say in his deposition that he thought it was received by Zeff in October 1959 because it was written in October. However, there is no doubt that the proof of loss, based on this binder and specifically referring to it, was executed on November 12, 1959, almost a month before the second theft, and stated an expiration date prior to that time. Although the date of the binder was given erroneously as its expiration date rather than the expiration date stated in the binder, this proof of loss was a clear acknowledgment that the insurance had expired prior to the date the proof of loss was executed. Since it was an acknowledgment of termination rather than a communication of termination, plaintiff's contention concerning Aetna's admission cannot be sustained. No policy was ever issued and under the circumstances the issuance of the written binder excluded any idea of issuance of a policy. Plaintiff knew that its application for a policy had been signed only three days before the first burglary so, when without the issuance of a policy, plaintiff's vice president executed the proof of loss, referring to the written binder and showing an expiration date of the binder prior to the date of his execution of the proof of loss, plaintiff must be held to have acknowledged its insurance was under the binder and to have known that its temporary insurance had then expired by its terms. In Bernblum v. Travelers Insurance Co., 344 Mo. 217, 125 S.W.2d 844, 848, we held that a receipt signed by an alleged insured conclusively showed only a conditional acceptance so that the policy never became effective because there had not been compliance with the conditions stated in the receipt. Thus the beneficiary was held bound by the terms of the receipt. Likewise, in ...