American Fire Insurance v. Brooks

Page, J., delivered the opinion of the Court. This is an action on a policy of insurance issued by the appellant to Walter B. Brooks and W. H. Bosley, receivers of the Gay Manufacturing Company, upon a steam saw-mill and machinery situated at Bosley, Gates County, North — 28 — Carolina. At the time of its issuance Archibald H. Taylor and William H. Bosley, trustees, held a mortgage upon the property, and the policy contained a provision by which the “ loss, if any,” was made payable to them, “ as their interest may appear.” This suit is now prosecuted for their use and benefit, by the receivers, in pursuance.of an order of Court requiring them to make collection of all unpaid claims arising upon policies of insurance on the property of the company, which had been destroyed by fire. Policy No. 5450, being that which forms the subject of this suit, was placed, through the agency of George B. Coale and Son, brokers, of Baltimore City, at the request of Mr. Bosley. Mr. Coale states, in his testimony, that the policy was forwarded to hi'm by Mr. Kelley, the general agent of the company, and was delivered by himself to the receivers ; that he collected the premum and paid it to the company, less his commissions, and that he was never notified by it not to collect the premium. He further testified that he informed Mr. Kelley who Messrs. Brooks and Bosley were and what business they were engaged in. The policy was dated the 21st August, 1891, and ran for one year from the 20th August. On 1st August, 1892, a renewal receipt .was sent by Mr. Kelley to Coale and Son. In his note transmitting it Mr. Kelley states that he forwards to the Coales, “ according to order received,” but there is no evidence that the plaintiffs gave such an order, or that it was given by the Coales, as a consequence of any conversation had with them or of any act for which they were responsible. Mr. Coale delivered the receipt to the receivers and received from them a check for the premium, but, by reason of illness, he failed to remit the money to the company. On the 6th of October the general agent of the company wrote to the Coales : “ We seem to be without your rerbittance for August on Policy No. 545°. and will thank you for the same;”, and again, on 3rd November: “Premium of $82.50 is still due on Policy No. 5450, &c., and unless same is paid we, of course, will consider our liability — 29 — as having ceased after receipt of this notice.” Neither of the receivers nor the trustees nor any officer of the Gay Company was at any time informed, before the fire, of these letters or of their contents. On the 29th of November Mr. Kelley wrote to the Gay Manufacturing Company directing his letter to Bosley, Gates County, N. C. The following is a transcript of this communication : Philadelphia, Nov. 29th, 1892. Gay Manufacturing Company, Bosley, Gates Co., N. C. Gentlemen : Under date of 20th August last, at the request of your agents, Messrs. George B. Coale & Sons, of Baltimore, we renewed our policy, No. 5450, by issuing Renewal Receipt No. 1397, covering $1,500 on your sawmill plant at Bosley, the premium agreed upon being $82.50, which has not yet been paid to u's, notwithstanding we have repeatedly called the matter to your attention through your agents, Messrs. George B. Coale & Son, 25 South St., Baltimore, Md., and we now write to advise you that the policy will be cancelled on our books for nonpayment of premium on December 6th,proximo, in accordance with the terms of the policy, unless payment be made before that date ; after which date no further liability will be recognized, and will look to you for the unearned portion of premium for the time insurance has been in force, viz., August 20th to December 6th, 108 days ; amount earned, $24.41. Yours very truly, Wm. B. Kelly, General Agent. This letter, thus addressed, finally came into the hands of George L. Barton. Barton’s relation to the receivers seems to be somewhat uncertain. He was located at Suffolk, Va., about twenty-five miles by rail from Bosley, and had charge of the mills at both places. He signed his name as “ manager,” but Mr. Bosley says that was a “ self-constituted position.” He was, however, in charge of the — 30 — business at both places, and was representing the receivers there, if anyone was. The date when he received Mr. Kelley’s letter does not clearly appear; but probably, it was the fifth'day of December, for on that day he wrote to Mr. Kelley: “Your favor of November 29th, addressed to our company at Bosley, Gates Co., N. C., has just been received at this office.” In this letter, Barton expresses surprise that the premium had not been paid on the renewal, as Coale & Son had received it promptly, and concludes with saying: “ We do not wish to lose your good company on our list, and assure you, you shall receive the premium, which we did not know has not been paid. As soon as we hear from Coale & Son we will write you again upon the subject.” Not having received the premium from the Coales, on the 6th of December, Mr. Kelley caused to be made on the books of his company certain entries, which, in that office, were understood to mean the policy was cancelled, though that was not written in words. On the third of June the property was destroyed by fire. It does not appear that either of the receivers or trustees was informed of this correspondence, or of the entries on the books of the company, except that before or after the fire Barton told Bosley that the company had cancelled one of their policies, because Coale had not paid the premium; and that, he (Barton) had notified the company they would be responsible for it. Bosley says this conversation took place “some time” before the fire; but Barton recollects talking the matter over with him after the fire, but could neither affirm nor deny that he had had such conversation before; but, whenever it was had, Barton showed Bosley the letter of the defendant’s agent and his own reply. Later' on, Barton, having obtained from the receivers authority, made out the proofs of loss, and on 28th July forwarded them to the company. Mr. Kelley replied on the 31st July; he returned the proofs, and assigned for so doing the following reasons: “ Policy No. 5450 having been cancejled before the fire, by a notice to you, under — 31 — date of November 29th, 1892, acknowledged by you December 5th, 1892, and no premium consideration ever having been received on same, the papers having evidently been sent us in error. The claim you make under Elizabeth City Policy, No. 4676, is in error, because the apportionment embraces Policy No. 5450, which has been can-celled as above stated. The error is against yourselves, as the amount properly due in the settlement as apportioned to the valid Policy No. 4676 should be $821.51. When you make your claim for this amount in proper form we shall be glad to recognize it under that policy, but no claim can be admitted under Policy No. 5450.” Upon this state of the proof, the Court instructed the jury, that if the defendant issued the renewal receipt and sent it to Broker Coale to be delivered to the plaintiffs, and it was accordingly done, and the premium was paid to Coale on said delivery, and the fire occurred, and the proofs of loss mentioned in the evidence were submitted to the defendants as required by the policy, the plaintiffs were entitled to recovex', notwithstanding the money received by Coale was in fact not paid over by him to the defendants. The appellant contends thex-e was erx-or in this instruction, because, 1st, the policy' was properly cancelled, and 2nd, it ought to have been left to the jury whether Barton was the agent of the insured, and also whether Bosley, receiver and trustee, had not received notice of cancellation in proper time or notice in which he acquiesced “ some considerable time befoi'e the date of the fire.” These contentions present views diametrically opposite to those underlying the Court’s instruction. The theory of the Court seems to be that, while there was evidence in the cause to enable the jury, if they believed it, to find the receipt of the the renewal premium by the appellant, there was none sufficient in law to establish a cancellation of the policy. It appears to be well settled that where one engages another to procui'e insurance the pex-son so employed is the agent of the insured, and not of the insurer, in all matters — 32 — connected with such procurement. Hartford F. I. Co. v. Rennolds, 36 Mich. 502 ; Standard Oil Co. v. Triumph Ins. Co., 64 N. Y. 85., This rule applies to cases where the insurance has been effected through the medium of a broker, although the broker may have solicited the insured to take out the policy. Such solicitation only cannot constitute the broker the agent of the insurer, so as to bind the latter, for the acts, declarations or omissions of the former. 1 May on Insurance, sec. 124 A.; Kings Co. F. Ins. Co. v. Swigert, 11 Brad. (Ill. App.) 590. But when the broker’s employment extends only to the procurement of the policy his agency is not continuing. It ceases when the purpose of his employment has been accomplished; that is, upon the execution and delivery of the policy. Grace v. Am. Cent. Ins. Co. of St. Louis, 109 U. S. 278 ; Hinkley v. Arey, 27 Maine, 364; Lohnes v. Ins. Co. N. America, 121 Mass. 439 ; Herman v. Niag. F. I. Co., 100 N. Y. 411. If the broker undertake to do acts outside of such employment the question for whom he acts will depend upon the special circumstances of the case ; and if the assured or insurer relies upon such acts to bind the other party, the burden of proof rests upon him who seeks to bind the other thereby to prove his authority. In the absence of direct proof of actual authority, and where the effort is to bind the insurer, the insured may establish the agency by showing what acts the insurer.has permitted the broker to do, and that the act relied on ought reasonably to be inferred to be within the scope of the apparent authority implied from such acts. 2 Wood on F. Ins. Co., sec. 420; Smith v. Home F. Ins. Co., 47 Hun. 37 ; Pierce v. The People, 106 Ill. 23 ; North Brit., &c., Ins. Co. v. Crutchfield, 108 Ind. 518; Kausal v. Min. Mut. F. Ins. Asso., 31 Minn. 17. It is contended, however, that these principles do not apply to the case at bar, by reason of this provision contained in the policy, viz: “ In any matter relating to this insurance no person, .unless duly authorized in writing, shall be deemed the agent of this company.” It is difficult, how — 33 — ever, to perceive how this clause can be made applicable in this case. The purpose of the provision could not have been to take from the insurance company the power to appoint an agent by parol, and thereby in many cases to secure immunity from the consequences of its own acts. If the clause is to be so construed as that, although the company has expressly or by acts which warrant the implication, appointed an agent, yet it shall not be responsible for the conduct of such agent while acting within the scope of his real or apparent authority, unless such appointment is in writing, then the clause is a mere trap to ensnare the unwary policy-holder and a device by which an insurance company, for its own purposes, may abrogate and repeal the fundamental principle of the law of agency. The object of the insertion of the clause was to protect the company from the statements, knowledge and acts of persons connected with the procuring of the policy by the clear understanding of the parties to the contract that in any matter relating to such insurance no person, unless duly authorized in writing, shall be deemed its agent. Wytheville Ins. and Banking Co. v. Teiger, 18 S. E. R. 195 ; Grace v. Am. Cent. Ins. Co. of St. Louis, 109 U. S. 278 ; Arthurholt v. Fire Ins. Co., 159 Pa. St. 7; Insurance Co. v. Lee, 73 Texas, 641. In this case the uncontradicted evidence was, that the employment of Coale and Son by the insured extended only to the procurement of the policy. Their duty was, “ to place the policy.” This being so, when the policy was delivered, their functions were ended so far as the appellees were concerned. The policy was sent to Mr. Coale, and by him delivered to Mr. Bosley. To Mr. Coale was also sent the receipt for the premium, which he collected and remitted to Mr. Kelley, retaining his commissions. One year later the renewal receipt was forwarded to Mr. Coale; and, when it was delivered, he again collected the premium. That it was intended by Mr. Kelley that Coale should collect the premium and remit to him, was left by the instruction to be determined by the jury. The course of dealing — 34 — between Coale and Kelley in relation to this and other policies, the enclosure to Coale of the renewal receipt, and Kelley’s letter of Oct. 6th, 1892 (in which he writes to Coale, “ we seem to be without your remittance,” etc., and “ will thank you to send the same forward at once)were all before the jury and tended to prove what that intention was. If they found the intention was that Coale should deliver the receipt and collect the premium, then payment to him was equivalent to payment to the company. It is also insisted that the policy was effectually cancelled on the 6th day of December, and that the prayer is bad because it ignores that fact. This position necessarily assumes that the policy was in full force up to that date. The cancellation is an alleged fact set up by the appellant and the burden of proof is upon it to establish it. Runkle v. Citizens’ Ins. Co., 6 Fed. R. 143 ; Mohr v. Ohio Ins. Co., 13 Fed. R. 74. The right to cancel is reserved by a clause in the policy to both parties. It may be cancelled by the insured at his own request, and by the company, “ by giving five days' notice of suc.h cancellation.” If it shall be cancelled by the company, the clause further provides that if the premium has been paid, the “unearned portion shall be returned on surrender of the policy,” &c., “ except that when the policy is cancelled by this company by giving notice, it shall retain only the pro rata premium.” These, are conditions upon which the right of the company to cancel rest; they must be strictly construed and strictly performed. Runkle v. Citizens' Ins. Co., supra; Lattan v. Royal Ins. Co., 45 N. J. L. 453. Five days’ notice of the cancellation is therefore a condition precedent, which must be complied with by the company before it can perform the act of cancellation. Here the notice was, not that the policy had been cancelled, but that unless the premium was paid on or before the 6th of December, it “will be cancelled” on that date, and “no further liability will be recognized” thereafter. Now leaving out of view, without expressing any opinion thereon, — 35 — the questions raised at the argument, growing out of the hypothetical character of the notice, and whether Barton’s relation to the insured was such that a service on him was binding on the appellees, it is clear that the mere service of such a notice as this, if the premium had in fact been paid or the insured was chargeable with its receipt, would not ipso facto work a cancellation. The policy would have to be cancelled by the insurer, by some act clearly indicating that he had done so ; (1 Biddle on Ins., sec. 376); and this act could not be effectually performed, under the provision of the policy, until the five days had expired. The entries upon the books of the company, by which the actual cancellation was shown, were made on the sixth day of December. Is there, then, any evidence in the case tending to prove the five days had passed at that date ? The notice was sent by mail, and in such case the receipt must be shown. Farnum v. Phœnix Ins. Co., 83 Cal. 246; Mullen v. Dorchester M. F. Ins. Co., 121 Mass. 171. It was addressed not to the insurer but to the “ Gay Manufacturing Co.,” and forwarded not to the residence of the insurers ,or of Barton, but to Bosley in North Carolina, twenty-five miles from Suffolk, where the superintendent of the receivers had his office. The only evidence tending to prove the date when it reached the hands of any one connected in any manner with the receivers, is that contained in Barton’s letter to Kelley of the 5 th of December, in which he states that his letter containing the notice “ has just been received at this office.” The act of cancellation was therefore made one day after the receipt of the notice by Barton. This was not within the right reserved in the policy, and was an utterly void act. Had the attempt to cancel been made later on another question would have arisen, upon which we have now no occasion to comment. No other attempt was made; and what was done, for the reason given, was nugatory and void. As these views dispose of the claim that the policy wás cancelled, we deem it unnecessary to discuss the many other — 36 — points raised in the argument in reference to the subject. Finding no error in the rulings of the Court the judgment ;will be. affirmed. (Decided March 25th, 1896). Judgment affirmed.