Mayo v. American Fire & Casualty Co.

GRAHAM, Judge. Plaintiff did not appeal. The judgment is therefore a final adjudication as between plaintiff and Casualty Company. Conger v. Insurance Co., 266 N.C. 496, 146 S.E. 2d 462. Even so, whether plaintiff was entitled to recover from Casualty Company and, if not, the ground of Casualty Company’s nonliability, has significance in determining plaintiff’s right to recover from appellant. Conger v. Insurance Co., supra. If insurance was in effect as a result of appellant’s oral conversation with plaintiff on 20 May 1969, plaintiff’s right of recovery would be against Casualty Company and not against appellant. Wiles v. Mullinax, 270 N. C. 661, 155 S.E. 2d 246. The trial court’s conclusion that appellant did not bind Casualty Company to a contract of insurance with plaintiff is based upon its finding that appellant did not notify Casualty [312] Company of any commitment of liability as he was required to do under his agency contract. In our opinion this finding does not support the conclusion made and the case must therefore be remanded for a new trial. It is undisputed that appellant failed to give timely notice to Casualty Company as his agency contract required. However, we do not interpret the requirement of notice in the contract as affecting the authority of appellant to bind the company in the first instance. The provision in question provides in pertinent part: “The Agent may bind the Company for the kinds of insurance and within the limits set forth in the current or amended ‘General Rules’ as furnished by the Company. * * * Notice of any commitment of liability by the Agent shall be sent to the Company on or before the date on which the insurance is effective.” The duty to give notice under the above provision arises after the agent has committed the company to an insurance contract. The provision does not contemplate that the agent apply to the company for issuance of insurance coverage for a customer or that he notify the company in advance before he commits it to liability. The agent is authorized to enter into the contract on behalf of the company. He must then notify the company, on or before the date the insurance is effective, that it is bound. The agent’s failure to notify the company does not invalidate an otherwise valid commitment, though it may subject him to liability to the company. Indeed, the agency contract specifically provides that the agent “shall be liable for any loss sustained by the company from any negligent delay in complying with the provisions of this paragraph.” Appellant does not deny that he was under a duty to obtain insurance coverage for plaintiff. His position is that he performed this duty by orally binding his principal, Casualty Company, to a contract of insurance with plaintiff, effective 20 May 1969. “In an insurance parlance, a ‘binder’ is insurer’s bare acknowledgment of its contract to protect the insured against casualty of a specified kind until a formal policy can be issued, or until insured gives notice of its election to terminate.” Moore v. Electric Co., 264 N.C. 667, 673, 142 S.E. 2d 659, 664. [313] “Binders or other contracts for temporary insurance may be made, orally or in writing, for a period which shall not exceed sixty days. ...” G.S. 58-177 (4). See also Moore v. Electric Co., supra; Distributing Corp. v. Indemnity Co., 224 N.C. 370, 30 S.E. 2d 377; Lea v. Insurance Co., 168 N.C. 478, 84 S.E. 813. The essential questions to be determined are: Did appellant have the authority to orally bind Casualty Company to a contract of insurance; and if so, did he do so by his oral remarks on 20 May 1969? If he did, insurance was in force at the time of plaintiff’s loss and appellant is not liable to plaintiff. On the other hand, if insurance coverage did not attach as a result of the oral conversation between appellant and plaintiff, appellant had the duty to exercise reasonable diligence to obtain it and may be liable within the amount of the policy for his negligent failure to do so. Wiles v. Mullinax, supra; Equipment Co. v. Swimmer, 259 N.C. 69, 130 S.E. 2d 6; Elam v. Realty Co., 182 N.C. 599, 109 S.E. 632. In determining the essential questions involved the trial judge will pass upon the credibility of the testimony in his capacity as jury. Waiver of a jury trial invests the trial judge with the dual capacity of judge and jury. Taney v. Brown, 262 N.C. 438, 137 S.E. 2d 827. The construction of documents introduced and their legal effect present questions of law for the court. Wiles v. Mullinax, supra. If, on the next trial, the trial judge determines that appellant had authority to bind Casualty Company by an oral contract, he will then determine whether, for valid consideration, appellant orally agreed on behalf of the company to provide insurance for plaintiff until a more formal written binder or policy could be issued; and whether the content of the oral agreement was sufficient to constitute a valid binder. In this connection it should be noted that it is not essential that a valid binder contain all the terms of an insurance contract. It is only necessary that it contain the most important terms. Distributing Corp. v. Indemnity Co., supra. See particularly Wiles v. Mullinax, supra at 668, 155 S.E. 2d at 251. It should be further noted that extension of credit to an insured for the insurance premium does not destroy the effectiveness of a binder. Wiles v. Mullinax, supra; Lea v. Insurance Co., supra. New trial. Judges Parker and Vaughn concur.