Mayo v. American Fire & Casualty Company

LAKE, Justice. The plaintiff’s alleged cause of action against Creech is for damages caused by Creech’s negligence in failing to procure, for the benefit of the plaintiff, insurance coverage which Creech undertook to procure. It is well established in this State that, if an insurance agent or broker undertakes to procure for another insurance against a designated risk, the law imposes upon him the duty to use reasonable diligence to procure such insurance and holds him liable to the proposed insured for loss proximately caused by his negligent failure to do so. Wiles v. Mullinax (second appeal), 270 N.C. 661, 155 S.E. 2d 246; Wiles v. Mullinax (first appeal), 267 N.C. 392, 148 S.E. 2d 229; Bank v. Bryan, 240 N.C. 610, 83 S.E. 2d 485; Meiselman v. Wicker, 224 N.C. 417, 30 S.E. 2d 317; Case v. Ewbanks, 194 N.C. 775, 140 S.E. 709; Elam v. Realty Co., 182 N.C. 599, 109 S.E. 632; 18 A.L.R. 1210. See also: 43 Am. Jur. 2d, Insurance, § 174; Annot., 29 A.L.R. 2d 171, 175. Conversely, if the agent or broker, in fact, procured the contemplated insurance coverage from a competent, solvent insurer, so that it was in effect at the time of the casualty against which the proposed insured sought coverage, he has performed his undertaking and is not liable to the insured thereon. Wiles v. Mullinax (third appeal), 275 N.C. 473, 168 S.E. 2d 366; Case v. Ewbanks, supra; Milwaukee Bedding Co. v. Graebner, 182 Wis. 171, 196 N.W. 533. In the latter event, nothing else appearing, *354 the agent or broker is not a party to the contract of insurance and is not liable thereon, irrespective of any default in the performance thereof by the insurer and irrespective of the insured’s lack of success in an action against such defaulting insurer. Creech contends that he is not liable to the plaintiff in this action for the reason that he, as agent for American and on its behalf, entered into a binder agreement with the plaintiff, which was in effect at the time of the fire and afforded the plaintiff the insurance coverage which Creech undertook to provide. A valid binder for fire insurance coverage may be oral or written. G.S. 58-177; Moore v. Electric Co., 264 N.C. 667, 142 S.E. 2d 659; Lea v. Insurance Co., 168 N.C. 478, 84 S.E. 813. No specific form, or provision, is necessary to constitute a memorandum, or an oral communication, intended as a binder, a valid contract of insurance. Wiles v. Mullinax (second appeal), supra. It is not required that the writing, or oral communication, set forth all the terms of the contemplated contract of insurance. Distributing Corp. v. Indemnity Co., 224 N.C. 370, 30 S.E. 2d 377. The provisions of the statutory standard fire insurance policy are read into a binder, whether oral or written. G.S. 58-177; Wiles v. Mullinax (second appeal), supra; Lea v. Insurance Co., supra. An extension of credit to the insured for the premium does not destroy the validity of the binder. Lea v. Insurance Co., supra; Couch on Insurance, 2d Ed, § 14:29. Where the insured and the agent contemplated coverage effective immediately upon the making of the oral agreement, it is immaterial that they also contemplated a subsequent delivery of a written memorandum which did not occur until after the loss. See, Wiles v. Mullinax (second appeal), supra. In Milwaukee Bedding Co. v. Graebner, supra, the facts were similar to those in the present case, except that there the agent handed to the contemplated insured a copy of her written notes concerning the terms of the policy which she was to prepare and deliver. The Supreme Court of Wisconsin said: “It is a general rule that, where an application for insurance is made to an agent who represents several companies, no contract of insurance is engendered between the insured and any particular company until such company is designated by the agent. But, where the company is selected by the agent, and in some manner designated as the company in which the insurance is to be written, a binding contract results. In such case the agent becomes the *355 agent of the insured for the purpose of selecting the company.” (Citations omitted throughout.) In the present case the superior court found as a fact that Creech, having been requested by the plaintiff to insure his building and its contents in specified amounts, “advised plaintiff that such property was now insured and that such insurance would be with the American Fire and Casualty Company.” This finding is fully supported by the evidence of the plaintiff himself. The parties having waived a trial by jury, this finding of fact by the Court, has the effect of a verdict of the jury and is conclusive on appeal. Knutton v. Cofield, 273 N.C. 355, 160 S.E. 2d 29; Young v. Insurance Co., 267 N.C. 339, 148 S.E. 2d 226; Everette v. Lumber Co., 250 N.C. 688, 110 S.E. 2d 288; Insurance Co. v. Lambeth, 250 N.C. 1, 108 S.E. 2d 36; Strong, N. C. Index 2d, Trial, § 58. The notes prepared by Creech at the time of the conference with the plaintiff on 20 May 1969, the parties having stipulated the authenticity of a copy contained in the record on appeal, show the plaintiff’s name, the name of American, the description of the building and its location, the amount of coverage and that the insurance was to be a standard fire policy. Nothing else appearing, the above mentioned finding of fact, supported as it is by the evidence in the record, compels the conclusion that Creech, on behalf of American, entered into a valid binder affording the plaintiff the insurance coverage which the plaintiff requested and Creech undertook to obtain, and does not support the contrary conclusions reached by the trial court to the effect that Creech did not bind American to a contract of fire insurance coverage and negligently failed to procure such coverage. It is apparent that the trial court reached its said conclusions by reason of its finding that Creech, through his secretary, forgot and neglected to issue the written memorandum, as contemplated, and the finding that the contract between Creech and American required Creech to send to American a notice of any commitment of liability on or before the date on which such insurance was to be effective. The agency agreement between Creech and American, the authenticity of the copy thereof contained in the record being stipulated, specifically authorized Creech to issue binders. While it required that notice of any commitment of liability by the agent be sent to the company on or before the date on which the insurance is effective, it further provided that the agent *356 would be liable for any loss sustained by the company from his negligent delay in doing so. Thus, the contract does not make the sending of the notice to the company a condition precedent to the company’s liability upon a binder, but merely provides for recourse by the company upon Creech if, due to his negligent failure to notify the company, it sustains a loss. Furthermore, nothing in the record indicates that the plaintiff had notice of this provision. Undisclosed, private limitations upon the authority of an agent do not bind a third party who, being unaware of them, contracts with the agent within the customary scope of such an agent’s authority. Lochner v. Sales Service, 232 N.C. 70, 59 S.E. 2d 218; Warehouse Co. v. Bank, 216 N.C. 246, 4 S.E. 2d 863; R. R. v. Smitherman, 178 N.C. 595, 101 S.E. 208; Strong, N. C. Index 2d, Principal and Agent, § 5. The trial court having made findings as to all material facts, which findings are supported by competent evidence and which findings preclude recovery by the plaintiff against Creech, and having fallen into error only in its conclusions of law based thereon, such error does not require a new trial but a reversal of the judgment insofar as it imposes liability upon Creech. See: Conger v. Insurance Co., 266 N.C. 496, 146 S.E. 2d 462; Strong, N. C. Index 2d, Appeal and Error, § 63. In this respect only the judgment of the Court of Appeals is in error. The appeal of Creech did not bring before the Court of Appeals, and so does not present to us, so much of the judgment of the superior court as adjudicated the right of the plaintiff to recover from American. Creech, having appealed, is not bound by that adjudication and is not precluded from attacking the soundness of the conclusions of law upon which it was based. See, Conger v. Insurance Co., supra. The judgment of the Court of Appeals is therefore vacated and this matter is remanded to it for the entry of a judgment reversing the judgment of the superior court insofar as that judgment relates to the right of the plaintiff to recover from the defendant Creech. Vacated and remanded.