Title: Turner v. Worth Insurance Company
Citation: 106 Ariz. 132, 472 P.2d 1
Docket Number: 9984-PR
State: Arizona
Issuer: Arizona Supreme Court
Date: June 25, 1970

106 Ariz. 132 (1970) 472 P.2d 1 Maurice D. TURNER, and Dorel Jensen, and Kimberly Ann Jensen and Bimberly Lynn Jensen, minors, Appellants, v. WORTH INSURANCE COMPANY, a corporation, Appellee. No. 9984-PR. Supreme Court of Arizona, In Banc. June 25, 1970. Rehearing Denied September 15, 1970. Rees, Estes &amp; Browning, by Paul G. Rees, Jr., Tucson, for appellant Maurice D. Turner. Robertson &amp; Fickett, P.C., by Richard C. Anderson, J. Michael Moeller, Tucson, for appellants Dorel, Kimberly Ann, and Bimberly Lynn Jensen. May, Dees &amp; Newell, by Willis R. Dees, Tucson, for appellee Worth Ins. Co. McFARLAND, Justice. This is an action for a declaratory judgment commenced by the appellee, Worth *133 Insurance Company (Worth) to determine if one Ivan Wilson was insured by Worth on the date of a fatal accident on August 23, 1964. Phyllis K. Jensen, wife and mother of the appellants, was killed while riding as a passenger in a vehicle operated by the other appellant, Maurice D. Turner, when it was involved in a collision with a car operated by Wilson. The Superior Court concluded that Wilson was not insured by Worth and the Court of Appeals affirmed. 11 Ariz. App. 403, 464 P.2d 990. On August 17, 1964, Wilson went to the office of Likens Insurance Agency for the purpose of obtaining motor-vehicle-liability insurance. Mrs. Hedwig Likens was agent for Worth, among other companies, and there is no question as to her authority to bind the company for temporary insurance pending approval of an application, which is the crux of the matter here. Wilson explained to Mrs. Likens that he was employed at Davis-Monthan Air Base, and had to have insurance in order to drive his car on the base. He had previously applied to Farmers Insurance, and had received a binder which was terminated without a policy being issued because of his past driving record. Mrs. Likens had him complete an application for a special-risk policy in the amounts of $10,000 liability per person, $20,000 per occurrence and $5,000 property damage. On the bottom of the application, in bold-face print, was a statement to the effect that: The words of importance are "a binder in writing or a policy." It is conceded that Worth never issued a policy, and, in fact, refused to insure Wilson by letter dated September 18, 1964. This letter was signed and forwarded to Wilson by Mrs. Likens, which is a further indication that Mrs. Likens had authority to bind or decline coverage on behalf of her principal. The only question is whether there was temporary insurance. The appellants here argue that there was an oral binder between Wilson and Worth; that there was a written binder evidenced by a receipt; and that Worth is estopped from denying coverage by reason of its subsequent acts. It is unnecessary to consider the issues of an oral agreement and estoppel since this Court is of the opinion that Worth, through its agent Mrs. Likens, bound itself to temporary liability insurance by virtue of a "binder receipt." By whatever name it may be known, a "binder" for temporary insurance is a contract. Assuredly it is a contract in contemplation of a subsequent and more formal agreement, but by its nature it incorporates the terms of the prospective insurance contract, whether those terms are prescribed by law or are part of the customary policy issued by the insurer. See e.g. Gardner v. North State Mutual Life Ins. Co., 163 N.C. 367, 79 S.E. 806; Seiderman v. Herman Perla, Inc., 268 N.Y. 188, 197 N.E. 190. A binder has been well defined in Seiderman v. Herman Perla, Inc., supra, as follows: *134 The basic terms of the above definition have been specifically adopted by our legislature and applied to liability insurance by § 20-1120, A.R.S., which provides: Thus, either an oral or written contract can amount to a temporary policy of insurance whether it is termed a contingently accepted application or a binder. A "binding receipt" was explained in Black v. Industrial Accident Commission, 215 Cal. 639, 12 P.2d 640, as: In the instant case we have a "binding receipt" which reads as follows: There was some dispute in the trial court as to the meaning of the abbreviation "appl." Mrs. Likens testified that this referred to the fact that only an application was intended not a binder. Of course, it could also reasonably mean that the money received was "applied" to the expected policy of insurance, and, if there is an ambiguity involved, it will be decided in favor of the insured. Dairyland Mutual Ins. Co. v. Andersen, 102 Ariz. 515, 433 P.2d 963. This familiar rule of construction, normally associated with the insurance contract itself, is equally applicable to a binder. See Annotation, 2 A.L.R.2d 943, 955-956. However, even accepting Mrs. Liken's statement that the word "application" was intended, it means but little since it merely *135 is descriptive of what occurred at the time that Wilson made application for insurance; a fact thoroughly acknowledged by all parties. But the remainder of the receipt sets forth the material terms of a contract of insurance. It indicates that a consideration of $30.80 was received; that it was accepted by Likens Insurance Agency (the check for this amount was deposited to Likens account the following day); that the contracting party was Ivan Wilson; that it was for a "10/20/5 liability" policy; that the total amount of the account was $72.00 less the $30.80 paid; and that the balance due would be financed which indicates that the negotiations exceeded the stage of a simple application. This receipt was signed by "H. Likens." In addition, the application itself bears a hand-written notation that the $30.80 constituted a "down payment." The application on its face required that a binder be in writing. The "binder receipt" complied with this requirement by the very tenor of the writing thereon, and contains no disclaimer to the contrary. Therefore, on its face, the receipt constitutes a contract of temporary insurance. However, it is claimed by the insurance company that the elementary contractual ingredient of intent was lacking. It is not seriously disputed that Wilson came into the office of Likens with the expressed intent of obtaining insurance not in the future but instantly, in order to obtain passage onto the place of his employment Davis-Monthan Air Base. Without evidence of insurance he could not obtain a "sticker" to operate his vehicle on the base; and evidence of possible insurance at some future date would be of little help. In view of this there can be little doubt as to his intent to be bound to a contract of insurance immediately, and he underlined this fact by the payment of almost half the premium. On the other hand, Mrs. Likens admitted that her intent was to have Wilson insured, temporarily, on the date of the application. Part of her testimony on this point was: Worth, in its brief, attempts to explain away this testimony on the basis that the intent was to cover Wilson from the date of application on the condition that Worth would subsequently accept the risk and issue its policy retroactive to such date. Obviously, such a rule would permit an insurer to hold itself immune from liability during the period while it considers whether to accept or reject the application, and then, if it accepts the risk, to assess a premium for the time that it was not obliged to assume liability. The conflicting theories on this subject were well set forth in McAvoy Vitrified B. Co. v. North American L. Assur. Co., 395 Pa. 75, 149 A.2d 42, in which case the court rejected the foregoing doctrine: The intentions of the parties in the instant case were identical. Mr. Wilson intended that he should be insured for "10/20/5" on the date of his application, and he paid the premium therefor. Mrs. Likens intended that Mr. Wilson should be insured for "10/20/5" on the date of his application, and accepted the premium therefor. The transaction was evidenced by a receipt which set forth the material terms of the agreement. Any greater "meeting of the minds" would require them *137 to bump their heads together. There obviously was a contract of temporary insurance. Several collateral matters arose during the course of this case; letters written between the parties before Worth declined to continue insurance on Wilson but after the accident. The accident arose during the period of insurance, and the liability became fixed, so that any subsequent disclaimers are irrelevant. This is a Declaratory Judgment action to determine if Wilson was insured at the time of the accident. We have determined that he was insured by Worth, and it matters not whether one or all the plaintiffs in any future tort actions obtained this ruling, since our decision is limited only to that question. The decision of the Court of Appeals is vacated. The judgment of the Superior Court is reversed, and the matter is remanded for further proceedings not inconsistent with this opinion. LOCKWOOD, C.J., STRUCKMEYER, V.C.J., and UDALL and HAYS, JJ., concur.