Lea v. Atlantic Insurance

Allen, J. There are several exceptions to the admission of evidence, but all of them were taken to preserve and present the contentions of the defendant, (1) that a standard form of policy of insurance having been adopted by statute, neither a parol contract of insurance nor a written memorandum of the contract, known as a binder, is valid; (2) that there is no evidence of a parol contract and no evidence of a delivery of the binder; (3) that there is no evidence that Howard & Aiken, agents of the defendant, had authority to make a contract of insurance; and if we are against the defendant on these positions, the evidence offered to prove these facts was competent. (1) Is a parol contract of insurance or a memorandum of the contract, called a binder, valid, although a standard form of policy has been adopted by statute? In the absence o’f a statutory prohibition, the great weight of authority is in favor of the validity of a parol contract of insurance. 19 Cyc., 600; Vance on Insurance, 155 Com.; Marine Ins. Co. v. The Union Fire Ins. Co., 19 How., 318; Ins. Co. v. Coit, 85 U. S., 567; Phoenix Ins. Co. v. Ryland, 1 L. R. A., 549 (Md.); Horne Ins. Co. v. Adler, 71 Ala., 524; *483 Fire Ins. Co. v. Wilcox, 57 Ill., 182; Campbell v. Ins. Co., 73 Wis., 108; Walker v. Ins. Co., 56 Me., 378; Floars v. Ins. Co., 144 N. C., 235. In tbe last case tbis Court said: “It seems to be well established that in tbe absence of some statutory inhibition, an oral contract of insurance, or to insure, will be upheld if otherwise binding, except, as suggested by one author, in the case of guaranty insurance,” and this position is fully sustained by the other authorities cited. The memorandum of the agreement or binder is also well recognized and established as a valid contract of insurance. Vance on Insurance, 160; 19 Cyc., 395; Lipman v. Ins. Co., 121 N. Y., 457; Kerr v. Ins. Co., 124 F., 835; 1 Cooley Ins. Briefs, 535; 16 A. and E. Enc., 851; Karelson v. Ins. Co., 122 N. Y., 545; Putman v. Ins. Co., 123 Mass., 324; Gardner v. Ins. Co., 163 N. C., 367. In Yance on Insurance, 160, the author says: “The binding slip is merely a written memorandum of the most important terms of a preliminary contract of insurance, intended to give temporary protection pending the investigation of the risk by the insurer, or until the issue of a formal policy,” and this was cited with approval in Gardner v. Ins. Co., supra, as was also Lipman v. Ins. Co., 121 N. Y., 454, which holds a binder to be a valid contract of insurance. In 19 Cyc., 595, the custom of issuing binders is referred to and their legal effect is stated as follows: “It is usual, however, to issue to the person contracting for insurance some sort of a receipt or memorandum, which is sometimes called a binding slip, evidencing the making of the contract, although not specifying its terms and conditions. Such binding slip or memorandum is evidence of a present contract of insurance between the parties, and the insurance takes effect and is in force from the time the binding receipt or memorandum is delivered to the person contracting for the insurance.” Also, Chief Justice Parker says in Micks v. Ins. Co., 162 N. Y., 284: “It is usual for the company to issue a policy of insurance evidencing the contract between the parties, but the policy accomplishes nothing more than that; for when the contract is entered into between the agent and the owner, whether the binder be verbal or in writing, it includes within it the standard form of policies, and the contract is a completed one. So that all the plaintiff had to do in order to recover, aside from showing a loss by fire and compliance on her part with the condition of the contract, was to prove the making of the contract. This was accomplished by proving the conversation between her assignor and the agent, for the conversation disclosed the sum for which the property was to be insured, the amount of premium, and the period of the insurance, and the statute provided for all of the other conditions of the contract of insurance.” *484 If, therefore, a parol contract, or one evidenced by a binder, would be legal and enforcible in the absence of statutory regulation, does tbe fact that a standard form of policy bas been adopted render them invalid ? We think not.' As we said in Blount v. Fraternal Assn., 163 N. C., 170: “The statute does not purport to deal with the validity of the contract of insurance, but with the insurance company,” and it was never intended to furnish the opportunity or temptation to- a company to change the form of the contract and thereby escape liability. In Armstrong v. Ins. Co., 95 Mich., 139, which is approved in Gazzam v. Ins. Co., 155 N. C., 337, the Court having under consideration a statutory form of policy, said of the effect of deviating from its terms: “In construing this statute, we must consider the purpose which the Legislature had in view. It was not to subserve any public policy. Contracts of insurance, so far as the public are concerned, stand upon no different basis than other contracts. The object was to protect policy-holders and to provide a policy fair to the insured and the insurer, and avoid litigation. It was undoubtedly well known to the Legislature that policyholders do not usually examine and scrutinize their policies with the 'same care that they do other contracts which they make, involving their ordinary business transactions. The statute imposes a penalty upon an insurance company for issuing such a policy, but imposes none upon the insured. In using the word Void’ the Legislature certainly did not contemplate that an insurance company might insert a clause not provided for in the standard policy, receive premiums year after year upon it, and, when loss occurs, say to the insured, ‘Your policy is void, because we inserted a clause in it contrary to the law of Michigan.’ Such a result would be a reproach upon the Legislature and the law. The law, so construed, instead of operating to protect the insured, would afford the surest means to oppress and defraud them, and thus defeat the very object the Legislature had in view. In 16 A. and E., 851, the author says: ‘This preliminary contract is of the greatest importance, for if the applicant could not be made secure until all the formal documents were executed and delivered, the beneficial effect of the insurance system would be greatly impaired; and a clause in the State insurance law or in the charter of an insurance company providing that policies shall be executed in a certain manner does not affect the power of the insurer to make these preliminary arrangements. Such, a contract remains in force until it is superseded by the issuance of a regular policy, or until the risk is rejected by the insurer, and the insurer is liable for any loss in the meanwhile.” Also, in Floars v. Ins. Co., 144 N. C., 235, Vance on Insurance and Hicks v. Ins. Co., 162 N. Y., 284, are cited in support of the proposition *485 “that the enactment of a statute which establishes a standard form for a policy, the statute being only affirmative in its terms, will not invalidate an oral contract,” and further, that “the law will read into the contract the standard policy as fixed by the statute.” (2) We are also of opinion that there is evidence of a parol contract to insure and of a delivery of the binder. Mr. E. H. Howard, one of the agents of the defendant, says with reference to the parol contract: “I agreed to insure that tobacco for them,” and with reference to the binders, “That agreement was effective when the binders were issued.” S. W. Chamberlain, who was a bookkeeper of the plaintiffs and had charge of taking out insurance for them, testified: “I saw Mr. Howard and asked him about $3,000 insurance. I told him that I wanted it on leaf tobacco in the Banner Warehouse. It was then known as the Banner Warehouse, Lea & Adcock stock of tobacco. ■ He agreed to issue the insurance for me. He gave me a binder at that time. On 9 January I applied to Mr. Howard and told him I wanted $2,500 additional insurance on leaf tobacco or tobacco of Lea & Adcock in the Banner Warehouse. He said all right, and gave me the binder.” If this evidence is believed, there was an oral agreement to insure and a delivery of the binder to Mr. .Chamberlain, the bookkeeper and agent of the plaintiffs. This seems to be recognized in the brief of appellant, in which, referring to the last binder, it is said: “This slip, like the other, was delivered to the witness Chamberlain, who retained possession of the same.” (3) The evidence as to the authority of Howard & Aiken, agents of the defendant, to issue the policies of insurance is ample. It was in evidence that it was the custom of the defendant to send its policies of insurance in blank to the agents, and that they were filled up and signed by them; that these policies were ready for delivery without being sent back to the principal office, and that about one hundred policies had been issued by these agents in that way which were accepted by the defendant, and that about fifty of them were in the hands of the agent at the time of the trial. The witness Howard, one of the agents, testified: “I see the blank forms of policies now shown me, purporting to be the Atlantic Eire Insurance Company of Raleigh, N. C., in the usual form, signed by G. H. Dortch, secretary, and Charles E. Johnson, president, countersigned by blank. Those policies were sent to us from — those blanks, I mean— were sent us from the Raleigh office. I had those in my possession, and had them in my possession at the time I gave those binders. There are fifty of them here; fifty in a batch; these run from fifty-one to seventy-five. When we gave a binder and followed it by issuing a policy, we de *486 livered some o£ tbe policies. A good many of them told us to keep them in the bank. I delivered the policy to the insured; did not have to send it to Raleigh. It was already signed by the president and the secretary ■and was countersigned by Howard & Aiken, giving it effect, and I at once turned it loose. As to whether that was the usual and customary way in the course of business of Howard & Aiken, agents of the Atlantic Eire Insurance Company, will say that’s the only way, the only way we did it. They sent us the policy signed by the president and the secretary before getting any application, and all we did was to countersign it. After we countersigned one of those policies, we reported to the company that we had issued a policy. I do not know exactly how many policies for the Atlantic Fire Insurance Company we issued as agents for that company during the life of our agency; one hundred or more; one hundred and six, I think. The premiums we remitted during the five months amounted to little over $1,000. That was all the net premium to them.” It is well settled that such circumstances are evidence of authority in the agent to issue the policy, and that the company is affected with notice of the making of the contract. Grabbs v. Ins. Co., 125 N. C., 397. The plan adopted for the payment of premiums by charging them against the plaintiff in his account with the bank of which the agent of the plaintiff was cashier, and then having them remitted to the defendant by its agent, does not come under the condemnation of Folb v. Ins. Co., 133 N. C., 180, which holds that the insured cannot pay his premiums by satisfying a private debt due him by the agent of the company. Upon a review of the whole record, we find No error. BeowN, J\, took no part in the decision of this case.