Greenwich Ins. v. Waterman

TAFT, Circuit Judge, (after stating the facts.) By their verdict the jury found that J&üph and Dickinson stipulated that the risk should attach from the lOih of April. The finding was based on sufficient evidence after a fair submission of the issue to the jury, and cannot be reviewed in this court. The main controversy here is on the question of Ward’s authority to bind the company by a preliminary and verbal contract of insurance. The court below, in effect, charged the jury ill at. if there was a well-defined usage by which local agents of foreign insurance companies could make binding contracts on applications for insurance to attach the same day, Ward could bind the company accordingly, whatever Ms private instructions. We are of opinion that the charge of the court on this point as a proposition of law was sound. If such a definite usage in respect to local agents of foreign insurance companies had been proven, the Greenwich Insurance Company would have been charged with notice of it, and by establishing [842] Ward as its local agent the company would have given him apparent authority to hind it in accordance with that usage, if reasonable. Goodenow v. Tyler, 7 Mass. 31; Fisher v. Sargent, 10 Cush. 250; Graves v. Legg, 2 Hurl. & N. 210; Mechem, Ag. § 281. The evidence discloses that the Greenwich Insurance Company had been doing a marine insurance business in Detroit for 10 years at least, and it could be fairly presumed that the company was familiar with any local usage obtaining there in the insurance business. If, as testified by several witnesses, millions of dollars of insurance were placed on the day of sailing, it would be extraordinary if vessel owners would consent to an arrangement by which no insurance should be binding on their vessels until time enough had elapsed after the day of sailing for their applications to be forwarded to the general agents of the insurance companies at distant points, and by them approved, with the arbitrary right thus secured to the insurance companies, in case of a loss meantime, to reject the application. A usage by which local agents could make binding preliminary contracts for the company would seem to us, therefore, to be reasonable. It does not necessarily show that a local agent has no authority to make preliminary binding contracts of insurance that he is without power to issue policies. 1 Wood, Ins. 25; Hardwick v. Insurance Co., 20 Or. 547, 26 Pac. Rep. 840. But it would seem that a known want of authority to issue policies of insurance would put the applicant for insurance on inquiry as to whether the agent had authority to bind the company by a preliminary contract. The necessity for binding contracts from the date of the application, in view of the condition of the insurance business at Detroit, is quite apparent, and it is probably said with truth that no foreign insurance company could do business there unless it made some ar-. rangement to effect binding insurance from the date of the application. This suggestion is met on behalf of the insurance company by evidence that, in case where application was made to its local agents for insurance to attach on the day of the application, they were instructed to telegraph the applications to the general agent at Buffalo, and receive by wire authority from him to accept the risk on behalf of the company. This course of business between the Greenwich Insurance Company and its local agents would not, of course, exempt that company from the operation of a local usage enabling agents to make binding contracts, unless the person dealing with this agent had knowledge of his authority. The difficulty we have in supporting the judgment below is not in the theory of the court’s charge on this branch of the case, but in the insufficiency of the evidence to show the local usage relied on by the plaintiffs. It is well settled that a usage or custom, to affect the construction of contracts, or to extend the apparent authority of agents beyond their actual authority, must be uniform, notorious, and well defined. Black v. Ashley, 80 Mich. 99, 44 N. W. Rep. 1120; Reynolds v. Insurance Co., 36 Mich. 131; Schurr v. Savigny, 85 Mich. 149, 48 N. W. Rep. 547; Stringfield v. Vivian, 33 [843] Mich. 681; Lamb v. Henderson, 63 Mich. 302, 29 N. W. Rep. 732; Bowling v. Harrison, 6 How. 248; U. S. v. Buchanan, 8 How. 83. The evidence of usage shown in the record is not at all satisfactory, and does not fulfill the requirements .above named. In answer to a leading question, Ralph does say that there was a well-defined usage in Detroit that applications for insurance to take effect, at once, if accepted by local agents, bound the company; but his cross-examination clearly discloses that Ms evidence is based rather on his opinion of what the local agent’s authority ought to be than the knowledge that the existence of such authority was recognized, notoriously and uniformly, in Detroit. He virtually admits that his knowledge of agents’ authority is largely confined to Ms own office. His opinion of the usage is based on the fact that when an application is filed for insurance to date from the day of the application, a policy is subsequently returned to the applicant dated accordingly. It has been held that such action by the company is not a recognition of the right of the local agent to bind the company by a preliminary contract, unless it has been brought home to the company that, before issuing’ the policy the agent has attempted so to do. Morse v. Insurance Co., 21 Minn. 407. Without expressing an opinion upon the correctness of this view, it is sufficient to say that in the case at bar the evidence that the local agent telegraphed applications for immediate insurance completely removes the ground for contending that the Greenwich. Company, by dating its policy back to the date of the application and evidencing a contract from that time, recognized the power of its local agent to make it. It is entirely consistent with, all of Ralph’s testimony that all local agents in Detroit telegraph for authority to accept risks to attach at once. We do not mean to say that even such a course of business, if not known to the public, would exempt companies pursuing it from the effect of local usage upon the apparent authority of their agents, if the usage were proven. Ivor do we deny that a usage may be established by the uncontradicted evidence of one witness when he is explicit as to its duration, certainty, and notoriety, (Robinson v. U. S., 13 Wall. 363;) but we do not find any such explicit statements in Ralph’s evidence. Adams’ testimony as to the usage is even less decided. Whether a, usage exists is for the jury on conflicting evidence; but, before the jury can be allowed to consider the question, there must be some evidence tending to establish a well-defined usage, uniform and notorious. There was no evidence of this bind in this case. The question of usage should not have been submitted to the jury. The court erred in so doing, and error has been properly assigned, on exception duly taken. The error was prejudicial. Without the proof ol! the usage claimed, there was no evidence that Ward had actual or apparent authority to make the contract sued on. It is clear that he had no actual authority to make binding contracts of insurance on vessels. From the circumstances that he received premiums, that he acted for the company in the adjustment of losses, that he did Dind the company as to cargoes, that he may have taken [844] charge of wrecking expeditions, that he received proofs of loss for the company, and that he received notices of abandonment without objection by the company, Ralph had no light to infer that he had authority to bind the company as to vessels when Ralph knew that he had no authority to issue hull policies, but that such policies were issued by the general agent of the company on an application forwarded by him. The argument is pressed upon us that, even if Ward had no authority to bind the company to hull insurance, he had authority to agree upon applications to be submitted for acceptance by the general agent, and that the general agent, by accepting the application he actually submitted for acceptance, in fact accepted the application he ought to have submitted. This, it seems to us, is a non sequitur. The minds required in this case to meet in order that a contract.should be made were those of the applicant and the general agent. If the proposition of the former was never submitted to the latter, how could their minds have met? Whether, when an insurance company holds an agent out as the proper person to receive and forward applications, and an application which would have been accepted is negligently altered by the agent of the company, so that, when accepted, it does not cover a loss which would have been covered had the application been properly forwarded, the insurance company can be held liable for the injury thus occurring through the negligence of its agent, is a question not presented on the record before us, because the declaration in the court below was on a contract to insure. A similar question is suggested by Senator Golden in the case of Perkins v. Insurance Co., 4 Cow. 645, 664, and is answered in the affirmative. We express no opinion on the point. Numerous errors — 64 in all — were assigned. Many of them were based on rulings wholly within the discretion of the court, and others were frivolous, because plainly without prejudice. It has been necessary for us to consider but one of them in the view we have taken of the case, but we allude to their number and character to deprecate a practice which so largely and uselessly increases both the costs and the labors of the court. The judgment of the court below will be reversed, with instructions to order a new trial, the costs of the error proceedings to abide the event of a new trial.