Case Name: The Hartford Fire Insurance Company v. Whitman
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1906-12-11
Citations: 75 Ohio St. 312
Docket Number: No. 9754
Parties: The Hartford Fire Insurance Company v. Whitman.
Judges: Shauck, C. J., Price, Crew, Summers and Spear, JJ., concur.
Reporter: Ohio State Reports, New Service
Volume: 75
Pages: 312–322

Head Matter:
The Hartford Fire Insurance Company v. Whitman.
Parol contract of insurance — Differs from parol agreement to issue policy — Company not bound by acts of agent, when— Policy held by agent of company, not delivery of contract, when — Law of contracts — Lazv of insurance companies.
1. A parol contract of insurance, as distinguished from a parol agreement to issue a policy, must not be executory, but must take effect in praesenti.
2. In order to establish the relation of insurer and insured, in parol, as existing before the delivery of the policy, the plaintiff must' do so by full and clear proof.
3. In the absence of such a stipulation in the application or policy as makes the actual delivery of the policy a condition precedent to the consummation of the contract of insurance, the actual delivery or non-delivery of the policy is not of itself conclusive evidence of the completion of the contract of in surance; but the unconditional acceptance of the application by the insurer is a consummation of the contract.
4. Where there is no oral agreement for insurance prior to the policy, if a policy has been executed in form, but has not passed out of the possession of the insurer or his agent and no payment of premium has been made, the contract is prima facie incomplete; and the burden is upon the party who asserts that there is a contract, to show that the policy became operative by the intention of both parties.
5. Where, there being no oral agreement for insurance to take effect prior to the issue of the policy, upon an application for insurance at less than the regular rate, an agent wrote up and countersigned a policy and, without parting with the possession thereof, wrote to the applicant that he had “issued” a policy, but would hold the same until he should have time to hear from his company, and the company thereafter rejected the risk and the agent forwarded the policy to the company, these facts constitute no proof of a consummated contract of insurance, although the applicant may not have received notice of the refusal of the risk.
(No. 9754
Decided December 11, 1906.)
Error to the Circuit Court of Wayne County.
This case was orally argued before one division of the court, but was submitted to and decided by the full bench. The plaintiff alleges in his petition, among other things, that about July -ist, the defendant, by its agent, consummated a contract with the plaintiff for insurance on his dwelling-house in the sum of $700, and $300 on its contents, by the execution arid= receipt of the plaintiff’s application therefor, which the agent prepared and mailed to plaintiff for his acceptance and signature, and which plaintiff accepted and signed and returned to said agent, all of which was done in pursuance of a previous conversation. and agreement as to the terms of said insurance; that by the terms of said verbal agree ment plaintiff was to pay as a premium the sum of $19 on -the call of the agent therefor after the issuance of the policy of insurance, which was to be issued by said agent forthwith on the receipt of said application and thereafter to be delivered to the plaintiff at the convenience of the agent, the insurance to take effect immediately on the return of the application by the plaintiff; that the defendant issued a policy of insurance covering the plaintiff’s said property and notified the plaintiff thereof in writing, on which notice he relied, and relying on such insurance gave the matter no further special attention; that for reasons unknown to the plaintiff, the agent delayed calling for said premium and the delivery of the policy until the said dwelling-house'and contents thereof were destroyed by fire on the 13th of August, 1903. Plaintiff also alleges that after the fire he notified defendant’s said agent of his loss and demanded its adjustment, and demanded payment according to said contract of insurance, and offered to pay the premium due thereon; that said agent refused to deliver the policy and concealed and kept the same from the plaintiff notwithstanding his repeated requests therefor, and the defendant company refused to make any adjustment or payment of the loss as by the terms of the policy they are bound to do, or to exhibit the policy so that the plaintiff might more certainly know his duties and rights thereunder. The plaintiff prayed that the contract of insurance might be specifically enforced and the loss ordered adjusted and paid to the plaintiff according to the said contract of insurance, and for such other and further relief as in equity he might be entitled.
The answer of the defendant largely consisted of specific admissions and denials, and in substance the defense was, that the defendant, through its said agent, or otherwise, never entered into any contract of insurance with the plaintiff, verbal or written, upon the property described in the petition, or any other property.
The case was tried to a jury, and at the close of the plaintiff’s • evidence the defendant moved the court to direct a verdict for the defendant, and also at the conclusion of all the testimony the defendant requested the court to charge the jury “that under the law and the evidence in this case the plaintiff is not entitled to recover and your verdict will therefore be for the defendant.” The court overruled the motion to direct a verdict for the defendant and refused to charge the jury as requested. A verdict for the plaintiff resulted and upon that verdict judgment was entered against the defendant. The circuit court affirmed the judgment of the court of common pleas.
Messrs. Barger & Hicks and Mr. M. L. Smyser, for plaintiff in error, cited and commented upon the following authorities:
13 Am. & Eng. Ency. Law (2d Ed.), 221; Brown v. American Central Ins. Co., 70 Ia., 390;. 30 N. W. Rep., 647; 16 Insurance Law Journal, 236; Taylor v. Phoenix Ins. Co., 47 Wis., 365; 8 Insurance Law Journal, 851; Idaho Forwarding Co. v. Fireman’s Fund Ins. Co., 8 Utah, 41, Myers v. Liverpool & London & Globe Ins. Co., 121 Mass., 338; Parry v. Dwelling-House Ins. Co., 67 N. H., 291; Manchester Fire Ins. Co. v. Plato et al., 23 C. C., 35; Newark Machine Co. v. Kenton Ins. Co., 50 Ohio St., 549; Johnson v. North British & Mercantile Ins. Co., 66 Ohio St., 17; 63 N. E. Rep., 610.
Mr. Hiram B. Swartz, for defendant in error, cited and commented upon the following authorities :
McGatrick v. Wason, 4 Ohio St., 576; Johnson v. North British & Mercantile Ins. Co., 66 Ohio St., 17; 11 Am. & Eng. Ency. Law, 280; Newark Machine Co. v. Kenton Ins. Co., 50 Ohio St., 549; Manchester Fire Ins. Co. v. Plato et al., 23 C. C., 35; Germania Ins. Co. v. Shoemaker et al., 1 O. S. C. D., 48; 22 Bull., 315; Brown v. American Central Ins. Co., 70 Ia., 390; 30 N. W. Rep., 647; 16 Insurance Law Journal, 236; Aetna Ins. Co. v. Maguire et al., 51 Ill., 347; Section 3654, Revised Statutes.

Opinion:
Davis, J.
There is a well defined distinction, maintained in the cases, between a parol contract to insure or to issue an insurance policy, and a parol contract of insurance. Cases within the latter class, in order to be enforceable, must not be executory, but must take effect immediately on the making of the agreement. Taylor v. Phoenix Ins. Co., 47 Wis., 365; Myers v. Liverpool, etc., Ins. Co., 121 Mass., 338; Idaho Forwarding Co. v. Fireman's Fund Ins. Co., 8 Utah, 41.
Nowhere in the record of this case do we find any evidence of a parol contract of insurance in praesenti. Whatever verbal agreement was made, if any agreement was ever consummated, was to take effect in futuro, on the execution and receipt of the plaintiff's application therefor and its acceptance by the insurer; and such is the averment of the plaintiff in his petition and his testimony on the trial. Nothing different appears anywhere in the record. In the evidence, there is not even a suggestion of a preliminary contract with the defendant for insurance to take effect prior to the application. There is some evidence tending to show that there was an agreement to issue a policy of even date with the application; but this is disputed, the agent asserting that there was never any agreement as to the rate of premium to be paid and that he only said to the plaintiff that he' would try to place the insurance in some company, at the rate which plaintiff said was all he would pay. He is supported in this by the undisputed fact that he did try in one company, in the same manner as with the defendant, and failed; and that he thereafter proceeded with the defendant, notifying the plaintiff that he would hold the policy until he should have time to hear from the company.
The defendant was never, even by implication, a party to any contract, verbal or written, until the plaintiff made his written application to the defendant (2 Clement on Fire Insurance, 574, Rule 15). It is a conceded fact that the agent with whom the plaintiff dealt was the agent of several companies and that his undertaking was to get the insurance "in some stock company," not any particular one; but the defendant was not a party to, or known in, any negotiations until the agent had tried to get the insurance in another company and it had refused the risk on account of the rate proposed, nor until an application for insurance had been made directly to the defendant. The plaintiff, therefore, must recover, if at all, upon his alleged written contract as contained in the application and the policy which he claims was issued thereon. Thus is raised a pure question of law, which we think was erroneously resolved in both of the lower courts.
This question was presented to the trial court in this form: Do the facts proved in this case show that the Hartford Fire Insurance Company had entered into a contract with the plaintiff to insure the plaintiff's building and that such contract -was subsisting at the time the plaintiff's building was destroyed by fire? We have already disposed of the contention that there was an oral contract. It is admitted that the plaintiff made a written application to be insured in the defendant company, which was dated June 26, 1903, and was received by the agent about July 1, 1903; and it is admitted that the application was for insurance, on building and household goods, to the amount of one thousand dollars at the rate of $1.90 per hundred,' making the premium for one year nineteen dollars. It is admitted that the agent wrote to the plaintiff on July 3, 1903, as follows: "I have issued a policy covering on your property. Will hold policy until I have time to hear from the company." It also clearly appears that the rate proposed in the application was very much below the regular rate for such a risk. It is also conceded that the agent had the authority to fill out and countersign policies; and that he did fill out • and countersign a policy to the plaintiff, which he did not deliver, but which was never out of his possession until the company declined the risk, when he mailed it to the company. The policy is stamped by the company, "Received July 9, I9°3\
It is a general rule that delivery is necessary to the validity of a written instrument. Nevertheless, the actual delivery or non-delivery of a policy of insurance is not always the final test of the completion of a contract of insurance, unless there is such a stipulation in the application or the policy as makes delivery a condition precedent to the consummation of the contract. Actual delivery of the policy may be very strong evidence of the consummation of the contract; but it is not of the essence of the contract, because possession of the policy is not conclusive. The insured may have obtained possession of the policy upon conditions, or by fraud, while possession by the insurer after the minds of the parties have met and the preliminary conditions have been performed by the insured, may be wrongful (Vance on Insurance, 173). A contract of insurance is consummated upon the unconditional acceptance of the application of the insured by the insurer. New York Life Ins. Co. v. Babcock, 104 Ga., 67; More et al. v. New York Bowery Fire Ins. Co., 130 N. Y., 537; Walker v. Farmers' Ins. Co., 51 Iowa, 679; Newark Machine Co. v. Kenton Ins. Co., 50 Ohio St., 549.
It is argued in this case that the agent, having full power to do so, countersigned and issued a policy in accordance with the application, and notified the plaintiff that he had done so; and that having done so, his act bound the company as an acceptance of the application and as a constructive delivery of the policy. Yet, while the agent wrote to the plaintiff that he had "issued" a policy, it is clear that he meant no more than that he had written it and signed it, and he coupled with this information the further statement that he would "hold" it until he had heard from his principal; and it is beyond dispute that he did so hold it and that the insurance company refused the risk, whereupon he sent it to the company according to the custom in such cases. All this is inconsistent with the idea of an acceptance or of a holding of the policy by the agent for the plaintiff.
"Delivery is largely a question of intention, as evidenced by words or acts. The requisites of a valid delivery may be said to be three: (1) There must be an intention on the part of the person executing the policy to give it legal effect as a completed instrument; (2) this intention must be evidenced by some word or act indicating that the insurer has put the instrument beyond his legal control, though not necessarily beyond his physical control; and (3) the insured must acquiesce in this intention" (Vanee on Insurance, 169).
In the absence of an orai agreement for insurance prior to the policy, if a policy has been duly executed but has not passed out of the possession of the insurer or his agent and no payment of premium has been made, the contract is prima facie incomplete; and it rests upon the party who asserts that there is a contract, to show that the policy became operative by the intention of both parties (Elliott on Insurance, Section 31). In the absence of any other evidence to show assent of the company to the making of a contract'of in sur anee, delivery of the policy must be shown (19 Cyc., 603). See Newark Machine Co. v. Kenton Ins. Co., 50 Ohio St., 349.
Upon the foregoing principles the Supreme. Court of Iowa held that where an agent of an' insurance company made out a policy of insurance to the plaintiff and left it in the hands of a third party until he could learn whether the company would accept the risk or not and the company did refuse to accept it, there was • no delivery of the policy and no consummated contract of insur'ance, and the court said: "We think the verdict should have been promptly set aside because there was no evidence to support it." Brown v. American Central Ins. Co., 70 Iowa, 390.
In order to establish the relation of insurer and insured as existing before the delivery of the policy, the plaintiff must do so by full and clear proof (Kerr on Insurance, 53, 88, Sections 33, 47); Suydam et al. v. Columbus Ins. Co., 18 Ohio, 459. We think that the plaintiff stopped very far short of proving the claims which he makes in his petition. And with respect to the allegation in the petition that the plaintiff relied on the notice that the agent was holding the policy, and therefore gave the matter of insurance no further attention, it is perhaps sufficient to again call attention to More et al. v. N. Y. Bowery Fire Ins. Co., 130 N. Y., 537, in which it is said, on page 547: "And it may be added that a person is under no obligation to do or say anything concerning a proposition which he does not choose to accept. Our opinion is that when an application for insurance is made, and its rejection is not signified, no presumption of its acceptance can be indulged in. There must be actual acceptance, or there is no contract."
The court of common pleas therefore erred in overruling the request of the defendant to direct a verdict for the defendant and in rendering judgment on the verdict. It follows that the judgment of the circuit court was also erroneous.
Reversed and judgment for plaintiff in error.
Shauck, C. J., Price, Crew, Summers and Spear, JJ., concur.