Globe & Rutgers Fire Insurance v. Warner Sugar Refining Co.

Page, J.: The action is to recover earned premiums at the short rate on canceled policy of explosion insurance. The following facts were stipulated: “ That during the month of May, 1917, and for sometime prior thereto one Clarence T. Birkett had been and was an insurance broker carrying on a general insurance brokerage business. That during the month of April, 1917, the defendant placed with said Clarence T. Birkett an order for explosion insurance, said insurance to cover its refinery property at Edgewater, New Jersey, in the total amount of $3,500,000. That said Clarence T. Birkett thereafter and prior to the first day of May, 1917, obtained binders for such explosion insurance in amounts sufficient to cover the sum stated, from various insurance companies with — 494 — which he dealt, among which the plaintiff was one. That on or about May 1st, 1917, the plaintiff delivered to said Clarence T. Birkett its insurance policy covering the same subject and between the same parties as the binder issued by plaintiff and referred to in the last preceding paragraph, namely, in the amount of $1,000,000 and insuring the defendant upon its property situate at Edgewater, N. J., from direct loss and damage by explosion for a term of one year beginning at noon May 1st, 1917, and ending at noon May 1st, 1918.” Upon the trial plaintiff proved that for a number of years Birkett had acted as agent and broker for defendant in securing, placing and canceling insurance; that prior to May 1, 1917, defendant had negotiated and secured other insurance with the plaintiff through Birkett; that Birkett returned the policy for cancellation on June 28, 1917, and asked that the pro rata rate be charged; that plaintiff refused to cancel at that rate and demanded the customary short rate, which for this period was thirty per cent of the premium; that Birkett thereupon left the policy for cancellation and that demand for payment was made on the defendant and refused. . On behalf of the defendant there was testimony that it had given Birkett instructions (which were not disclosed to plaintiff) to place the risk only with companies which also had issued or would issue fire insurance policies on the property, such fire insurance being under negotiation with the plaintiff at the time the explosion policy was issued, but who thereafter declined it. There are two legal questions presented by these facts: (a) Was the defendant bound by the acts of Birkett in negotiating the insurance on its behalf with the plaintiff? (b) If the act of Birkett was unauthorized was it ratified by the retention of the policy until June 28, 1917? Birkett was concededly employed by the defendant to procure insurance against loss by explosion. Therefore he had general authority to negotiate for and receive the particular kind of a policy, on the defendant’s behalf, he negotiated for and received from the plaintiff; that he had theretofore negotiated for and received policies from*’the plaintiff on behalf of the defendant covering other and different risks. When he negotiated with the plaintiff, he was acting within the apparent — 495 — scope of his authority. It is true, as a general rule, that a third person dealing with an agent should ascertain the agent’s authority or deal with him at his peril, and “ that a special agent with limited powers cannot bind the principal where he acts outside of the scope of his authority; but that rule is subject to this qualification, that where an agent is intrusted to do a particular kind of business he becomes, as between the principal and parties dealing with him, the general agent for the transaction of that business; and his acts, as between his principal and strangers, in that particular line, will bind the principal, although he violates some private instructions given by his principal not known to the public.” (Cox v. Albany Brewing Co., 56 Him, 489; Stahlberger v. New Hartford Leather Co., 92 id. 245; Newman v. Lee, 87 App. Div. 116; Cohen v. Goldstein, 128 N. Y. Supp. 69, 70.) The reason for this rule is obvious. No man is at liberty to send a man forth to deal for him, with secret instructions as to the manner in which he is to execute his agency, which are not communicated to those with whom he deals, and then when his agent has deviated from those instructions to say that he was a special agent, that the instructions were a limitation upon his authority, and those that dealt with him acted at their peril. If the principal deemed the transaction to his advantage, the instructions would remain a secret, and he would obtain the benefit. If in his opinion it was otherwise, he could escape liability. The other party would then be subjected to the hazard of the transaction being set aside or affirmed for reasons of which he had no knowledge and of which he could not take a like advantage. In the instant case, if there had been an explosion upon the defendant’s property between the dates of the issuance of the policy and of its cancellation, the defendant could have recovered under the policy and the plaintiff could not have escaped liability by showing that it had not also insured against fire, and that the agent had no authority to negotiate for one without the other, for the plaintiff knew of no such limitation of his authority. Whether these instructions were given was not entirely free from doubt. Although Birkett and the vice-president of the defendant testified that such instructions were given, the — 496 — president of the defendant who was present at the conversation-did not mention them in his testimony. If there was any question as to whether the instructions were given to the agent or whether the plaintiff was justified in relying upon his apparent authority, they would be questions of fact for the jury. Even if the instructions were given and the authority of the agent was limited thereby, it was, at least, a question of fact for the jury to determine whether the retention of the policy by the defendant until June 28, 1917, was not a ratification of the agent’s act. The judgment should be reversed and a new trial ordered, with costs to appellant to abide the event. Clarke, P. J., and Dowling, JJ., concurred; Smith and Shearn, JJ., dissented.