Zurich Gen. Accident & Liab. Ins. Co v. Baum

• Decision Date: 22 September 1932
• Court: Virginia Supreme Court
• Parties: ZURICH GENERAL ACCIDENT & LIABILITY INS. CO., Limited. v. BAUM.

165 S.E. 518

ZURICH GENERAL ACCIDENT & LIABILITY INS. CO., Limited.

v.BAUM.

Supreme Court of Appeals of Virginia.

Sept. 22, 1932.

^*

Error to Law and Chancery Court of City of Norfolk.

Action by notice of motion by J. D. Baum against the Zurich General Accident & Liability Insurance Company, Limited. To review a judgment in favor of plaintiff, defendant brings error.

Reversed and rendered.

Argued before CAMPBELL, C. J., and HOLT, EPES, HUDGINS, and GREGORY, JJ.

Page, Page & Page, of Norfolk, for plaintiff in error.

Ferebee & White, of Norfolk, for defendant in error.

HUDGINS, J.

J. D. Baum, in an action against Louis and Frank Corleto, recovered judgment in the sum of $4,000 for injuries sustained in an automobile accident. Execution was issued on the judgment and returned marked "no effects." He thereupon instituted this action for the amount of the judgment and costs, alleging that he was entitled to recover under the omnibus clause of an insurance policy issued by Zurich General Accident & Liability Insurance Company to Louis Corleto. This writ of error brings under review the proceedings in the trial court which resulted in a verdict and judgment against the insurance company.

The first error assigned is to the action of the court in overruling the defendant's demurrer to the amended notice of motion.

The notice of motion alleged that the policy was issued to one I. N. Rubin on a Ford sedan, 1928 model, engine No. R-605929; that this automobile was later sold to Louis Corleto, and in May, 1929, the policy was duly assigned to him; that Louis Corleto had disposed of this car and purchased another. Concerning the latter transaction, the notice alleged that, "on the 2nd day of August, 1929, by agreement between you and the said Louis Corleto, the original contract of insurance, represented by the policy hereto attached, was varied, altered, and modified in respect to the automobile covered thereunder, by the terms of which alteration and modification a certain automobile, described as a Ford Sedan, Model 1929, Engine Number A-20211496, was substituted for the automobile formerly insured, which said substituted automobile thereupon became, and was so recognized by you, as the automobile insured by you, all the other features of the original contract of insurance remaining unchanged."

The injury was inflicted on August 12, 1929, while the last-named car was being driven by Frank Corleto, acting as agent for his brother, Louis Corleto. The ground ofdemurrer was that the car involved in the accident which resulted in injury to plaintiff was not the car described in the policy, and that the only method by which coverage of one car can be substituted for another is by complying with the provisions of the policy contained in paragraph K, as follows:

"No change in the agreements, general conditions, special conditions or warranties of this policy, either printed or written, shall be valid unless made by endorsement signed by the manager and attorney or an assistant manager for the United States, nor shall notice to or knowledge possessed by any agent or any other person be held to waive, alter or extend any of such agreements, general conditions, special conditions or warranties."

The question thus presented is, Where it is stipulated in a contract that changes or modifications must be made in only one way, can the parties by mutual agreement change or modify the contract in any other way?

The insurance contract introduced in evidence is not under seal. Under common-law principles, the provisions of a simple contract in writing, by subsequent parol agreement of the parties before breach, may be waived, rescinded, added to, changed, or modified. Piedmont Mt. Airy Guano Co. v. Buchanan, 146 Va. 617, 626. 131 S. E. 793; Warren v. Goodrich Strip & Screen Co., 133 Va. 366, 112 S. E. 687; Moore v. Williamson, 213 Ala. 274, 104 So. 645, 42 A. L. R. 981, and note; 13 Corpus Juris, § 609, p. 593; 6 R. C. L. §§ 298, 299, pp. 914, 915; Teal v. Bilby, 123 U. S. 572, 8 S. Ct. 239, 31 L. Ed. 263; Utley v. Donaldson, 94 U. S. 29, 24 L. Ed. 54; Swain v. Seamens, 9 Wall. 254, 19 L. Ed. 554. This rule seems to be generally recognized in both the state and federal courts. The rule is applied notwithstanding the fact that the parties have stipulated in the contract that it can be changed or modified in only one specific way. Williston on Contracts, vol. 3, § 1828, states the rule thus:

"A contract in writing, but not required to be so by the Statute of Frauds, may be dissolved or varied by a new oral contract, which may or may not adopt as part of its terms some or all of the provisions of the original written contract. * * * Nor does it make any difference that the original written contract provided that it should not be substantially varied except by writing. This stipulation itself may be rescinded by parole and any oral variation of the writing which may be agreed upon and which is supported by a sufficient consideration is by necessary implication a rescission to that extent." See 6 R. C. L. §§ 298, 299, pp. 914, 915; Simpson v. Mann, 71 W. Va. 516, 76 S. E. 895, 48 L. R. A. (N. S.) 579; 13 Corpus Juris, § 611, p. 594; Piedmont v. Buchanan, supra.

In the absence of statutory requirement there is no reason why the courts should not apply these principles to the construction of insurance contracts, as well as others, and the authorities so hold. See Cyclopedia of Insurance Laws, Couch, § 1385; American Eagle Fire Insurance Co. of N. Y. v. MeKinnon, 36 Ariz. 409, 286 P. 183; 32 Corpus Juris, § 257, p. 1147; Wigmore on Evidence, par. 2441.

While the majority of the courts recognize the fact that these principles apply to insurance contracts, the difficulty in applying them usually arises because the agent with whom the policy holder has dealt is not clothed with authority to bind the company. The notice of motion alleged that the agreement to substitute one car for another in the insurance contract was made with the company, and hence there was no error in overruling the demurrer.

In support of this allegation, the plaintiff introduced evidence showing that Louis Corleto called the office of W. M. Bott & Co., the agent of defendant, by telephone, and informed the person who answered the telephone of the fact that he had disposed of the car covered by the policy and had purchased a new car, and requested that the policy be changed accordingly. No written indorsement was made on the policy changing the coverage from the old car to the new. The defendant objected to the introduction of evidence tending to show a parol agreement, on the familiar principle that parol evidence is not admissible to vary the terms of a written agreement, and that W. M. Bott & Co. were not so authorized to bind the company. After the jury returned their verdict, a motion was made to set it aside, for the reasons stated, and because the evidence fails to establish the alleged agreement.

Several errors are assigned, but, in our view, it is only necessary to determine whether the evidence warranted the jury in finding that the oral agreement alleged was, in fact, made.

In considering the case, we will assume that W. M. Bott & Co., general agents of the defendant in Norfolk and vicinity, were authorized, temporarily, at least, to bind the defendant by an oral agreement. There was no privity of contract between the plaintiff and the defendant. If the plaintiff is entitled to recover at all, he must prove the existence of a valid, subsisting accident insurance contract between Louis Corleto and the defendant, and that the car involved in the accident resulting in injury to him was covered by this policy. This was the substance of his pleading, and he must stand or fall on that allegation.

The only evidence introduced tending to prove any such contract is the testimony of two witnesses, Louis Corleto and George C. Cohen. The former stated that on August 2, 1929, "I called Mr. W. M. Bott & Company and a man answered the phone and I told him who I was and what I wanted to do, that I wanted to have the policy transferred, and he said, 'Wait a minute, just a minute, ' and he put a girl on the phone and I told the girl who I was, give her my name, and told her I wanted the car to be covered, and she told me the car would be covered. That is all."

Objection was made to the introduction of this evidence on the ground that there was no identification of the voice, or otherwise, of the speaker at the other end of the line. The courts are not in accord on the admissibility of such evidence. Canada and some ten or more of the states, including New York and Massachusetts, require identification of the speaker, by voice or otherwise, before the evidence is admitted. See Dorchester Trust Co. v. Casey (Mass.) 167 N. E. 915, and note, 71 A. L. R. 1; General Cheese Co. v. Moore Bros. Co. (Sup.) 180 N. Y. S. 481; Lockshin v. Canadian N. R. Co., 30 Manitoba L. R. 24, 47 D. L. R. 516.

The general rule, and the one supported by the better reasoned cases, is tersely stated by Judge Woods in Gilliland & Gaffney v. Southern Ry. Co., 85 S. C. 26, 67 S. E. 20, 24, 27 L. R. A. (N. S.) 1106, 137 Am. St. Rep. 861, thus:

"Those who install telephones in their places of business in connection with a telephone exchange, and use them for business purposes, impliedly invite the business world to use that means of communicating with them with respect to the business there carried on; and the presumption is that they authorize communications made over the telephone in ordinary business transactions."

The testimony shows that this telephonic communication was made through the telephone maintained by W. M. Bott & Co. at their place of business; hence identification of the person answering was unnecessary for the admissibility of the evidence.

It was also proven that in Norfolk and vicinity it was the custom of agents engaged in writing accident insurance, when informed by a policyholder that he had...