Home Insurance v. Crawford

Conley Byrd, Justice. The issues in this case grow out of a fire insurance policy issued by appellant Home Insurance Company through the Silliman Agency, Inc., to Jerry and Marie Pennington containing a mortgagee clause in favor of First Federal Savings and Loan Association of Camden, Arkansas. On August 25, 1969, the Penningtons conveyed the premises to appellee Joann Crawford (Kyser) who assumed the mortgage to First Federal. In making the conveyance and assuming the loan, the parties acted on the advice of First Federal’s Fordyce branch manager, J. H. Joyce. Upon a First Federal form furnished by Joyce it was agreed that the escrow fund for taxes and insurance and the insurance policy would be transferred to appellee. Joyce instructed the parties to go to the law office of Thomas Sparks to have the deed prepared, then to have the deed recorded and return it to Joyce to be kept with other legal papers on the property. Joyce gave no verbal instructions to appellee to notify anyone about the transfer of the policy. The deed was not returned to Joyce until after the property was damaged by fire on September 2, 1969. Home Insurance Company, not having received an endorsement showing transfer of the policy to appellee, denied liability to her. However, under the mortgagee clause, it paid First Federal and took an assignment of the mortgage. Home Insurance then instituted this action to foreclose the mortgage and for a declaratory judgment that it had no obligation to appellee under the policy. The trial court denied any relief to Home Insurance and awarded judgment including 12% penalty and attorney’s fee to appellee. For reversal Home Insurance contends among other things that the transfer without notice voided the policy and that the trial court erred in assessing the penalty. The stipulated facts show that both the Silliman Insurance Agency and First Federal were founded by W. E. Silliman, who is now President of Silliman Agency and Chairman of the Board and General Manager of First Federal. First Federal and Silliman Agency are both located in the same building in Camden and share the same outside entrances to the building. As a part of its business First Federal employees regularly handle transactions such as here involved and in the making of new loans take applications for insurance through the Silliman Agency. The Silliman Agency forms for transfer of a policy and for application for insurance were furnished to the First Federal’s Fordyce branch. According to instructions from W. E. Silliman, employees of First Federal waited until they had obtained a recorded deed before they notified the Silliman Agency to transfer a policy of insurance. H. B. Silliman, general manager of the Silliman agency, testified that the personnel in the Fordyce branch of First Federal normally notified the agency of losses and furnished the necessary information. It is undisputed that the Silliman Agency is a general agent of Home Insurance and that the transfer would have been consummated if the deed had been returned. Under the proof, we hold that the chancellor was warranted in concluding that Joyce was an authorized agent of the Silliman Agency and that as such he had represented to the appellee that the property was insured. Since under Ark. Stat. Ann. § 66-3219 (Repl. 1966) such an oral contract is binding on the insurer, the Chancellor properly held Home Insurance liable upon the policy. No error was committed in the allowance of the 12% penalty pursuant to Ark. Stat. Ann. § 66-3238 (Repl. 1966) on the counterclaim filed by appellee. That statute provides for the payment of the penalty where a loss has occurred and the insurer fails to pay after demand has been made therefor. We can find nothing in Ark. Stat. Ann. § 66-3239 (Repl. 1966) that prevents the allowance of the penalty upon a counterclaim for a loss. Home Insurance makes some other contentions such as, that Silliman Agency was not chargeable with knowledge of the change in ownership, and that First Federal could not possibly be an agent of Silliman but in view of the foregoing disposition we find it unnecessary to discuss them. Affirmed together with an allowance of an additional attorney’s fee of $750.00. Fogleman, J., dissents.