Gaston-Lincoln Transit, Inc. v. Maryland Casualty Co.

MORRIS, Judge. Defendant first assigns error to the court’s finding that the defendant by its conduct waived and is estopped to rely upon the provisions of the endorsement “Auto 1145.” Its first basis for this assignment is its contention that the Jenkins Agency was a limited agency as opposed to an unlimited agency. Specifically, it relies on the portion of its answer to plaintiff’s interrogatory excluded by the court, but read into the record. According to this answer, defendant instructed its agencies that any inter-urban buses or frequent trips greater than 150 miles represented greater than normal risks and as such they were to be submitted to defendant for approval prior to binding by the agent. Thus, contends defendant, since the Jen *221 kins Agency had ■ no authority to bind the defendant to this risk, it had no authority to waive the provision. We cannot sustain this contention. “Although an agent be authorized to act in a limited capacity, yet if he has apparent authority to represent the company in relation to fixing rates of premiums, and does so, the company is bound thereby, unless the assured has knowledge of the agent’s limited powers.” Joyce, 2d, Insurance, § 551; Perkins v. Washington Insurance Co., 4 Cow. 645 (N.Y. 1825). There was evidence that Rhyne and Jenkins met annually and discussed the bus schedules and market value of the buses. “Where a principal objects to the act of his agent, as unauthorized, the question is, not what power did he intend to give his agent, but what power the third person who dealt with the agent, and who insists on his acts as valid, had a right to infer that he possessed, from his own acts and those of his principal.” Perkins v. Washington Insurance Co., supra, at 645. There is no evidence that Rhyne — or anyone asso-cited with plaintiff — knew that the Jenkins Agency had no authority to bind defendant in regard to rates. All of plaintiff’s prior insurance negotiations had been with the Jenkins Agency, not with the defendant itself. Thus, plaintiff was justified in the belief that the Agency could bind the defendant, and defendant cannot now deny the authority of the Agency to bind defendant or to waive the provisions of the rider. Defendant’s second assignment of error is to the court’s reforming policies 2-3895407 and 2-3953208 by deleting “Auto 1145” on the ground it was not contained in the preceding policy, and therefore plaintiff had no notice thereof. We do not agree. There appears to be no definitive case in North Carolina on the reformation of renewal contracts of insurance wherein the insurer has inserted a rider without notification. However, the overwhelming weight of authority in the United States is diametrically opposed to defendant’s position. “Generally, an insured in renewing his policy may rely upon the assumption that the renewal will be upon the same terms and conditions as the earlier policy, and therefore he is not bound by a reduction in the renewal policy where the change was not called to his attention at the time of the renewal. The usual remedy of the insured who, after sustaining a loss, discovers that he is not covered under his renewal policy because of some restriction or warranty not *222 in the earlier policy, or because of a reduction in coverage from the earlier policy, is to seek reformation of the renewal policy and, often in the same action, a recovery thereon as reformed, for the basic theory behind the rule which holds the insurer bound by the greater coverage in the earlier policy is that if an insurance company knows that the renewal policy differs and does not inform the insured, it is guilty of fraud or unequitable conduct, or that if it does not know, it is because of a mistake, and in either event the insured, who has relied on the assumption that he is receiving a policy based on the same terms and conditions as the earlier one, is entitled to recover as though there had not been a change in the coverage in the renewal policy. As is the rule with contracts generally, the mere failure of an insured to read the policy does not necessarily prevent his seeking reformation thereon and all the more so when there is involved a renewal of a policy wherein the insurer has reduced the coverage without notice to the insured, for the insured has a right to rely on the assumption that the renewal policy will contain the same terms and conditions as the earlier policy.” Annot., 91 A.L.R. 2d 546, 549 (1963). “By the renewal of a policy, except where there is a special agreement for different terms, the original policy is continued under the original stipulations, and the only change is in the time of its expiration, it certainly being in harmony with the reasonable intent of the parties that where an insurer agrees to renew a policy, the insured should have a right to expect that the new protection will be in substance the same as that afforded by the former contract and upon the same conditions. This is especially true, not only where the insured specifically requests the insurer to issue a policy like the previous one, but also where it is understood that the two policies are to be the same, as well as where the original policy expressly so provides, and the agreement to renew is made shortly before the expiration of the original policy, and the renewal premium is paid, or agreed to be paid.” 17 Couch 2d, Insurance, § 68:60. Although — as we have noted — there is no definitive North Carolina case on the specific point of law in question, the above line of authority was approved by the Supreme Court, per *223 Justice Sharp in Setzer v. Insurance Co., 257 N.C. 396, 126 S.E. 2d 135 (1962). We, therefore, hold that in the renewal of an insurance contract, absent notice to the contrary, the insured has a right to expect that the coverage of the new policy will be substantially the same as that afforded by its predecessor. If, absent notice to the contrary, the insurer inserts an endorsement varying the original coverage, the renewal contract may be reformed to conform with the terms of the prior policy. Recovery may be had in that same action by the insured under the renewal contract as reformed. Defendant’s final assignment of error is to the trial court’s failure to require an additional premium which would be due for the expanded coverage. Inasmuch as this assignment of error is based upon defendant’s exception to the court’s finding that defendant by its conduct has waived the right to demand further premium, it is without merit. Where jury trial is waived, the court’s findings of fact are conclusive if supported by competent evidence and judgment will be affirmed on appeal. Nichols v. Insurance Co., 12 N.C. App. 116, 182 S.E. 2d 585 (1971). There is ample evidence in the record that defendant through its agent, the George A. Jenkins Agency, Inc., was aware of the scope of plaintiff’s bus operations. There is also competent evidence that the course of dealings between the parties was directed at coverage of the entire bus operation at the rates agreed upon. Defendant cannot now be awarded additional premiums. No error. Chief Judge Brock and Judge Britt concur.