Opinion ID: 2600140
Heading Depth: 3
Heading Rank: 1

Heading: Contract to Procure Insurance

Text: ¶ 10 The formation of a contract requires a meeting of the minds. In Bulla v. Donahue, 366 N.E.2d 233, 236 (Ind. Ct. App. 1977), the court stated Where a person seeks to enter into a contract of insurance with an insurance company or its agent it is understood that the negotiations will not ripen into a contract until the parties arrive at an agreement as to all of the elements which are essential to an insurance contract, including the subject matter to be covered, the risk insured against, the amount of the indemnity, the duration of the coverage and the premium. Hamacher v. Tumy, 352 P.2d 493, 497 (Or. 1960). We conclude that no contract of insurance existed between Harris and Albrecht. They did not discuss any of the elements essential to an insurance contract except that Harris wanted business and fire coverage on [the] equipment and the contents of his architectural business. There was no mention, except fire, of the types of risks Harris wanted covered, the amount of indemnity, the duration of coverage, or the premium. Therefore, there was no meeting of the minds on which to base a contract of insurance. ¶ 11 However, the issue here is not whether an oral contract of insurance existed but rather whether an oral contract to procure insurance existed. In entering into a contract to procure insurance, obviously the owner is seeking the same ultimate objective, that is, a contract of insurance, but the performance for which he bargains is the services of the insurance agent in obtaining the best possible terms consistent with the owner's insurance needs. Such a contract could arise even though the agent was given the authority to ascertain some of the facts essential to the creation of the ultimate contract of insurance, such as the appraised value of the property to be covered or the most advantageous premium. . . . Obviously, liability for failure to procure insurance could not arise unless the agent had sufficiently definite directions from his principal to enable him to consummate the final insurance contract . . . . [A]n express agreement is not necessary; the scope of the risk, the subject matter to be covered, the duration of the insurance, and other elements can be found by implication. Id. (emphasis in original). Therefore, a contract to procure insurance may arise when the agent has definite directions from the insured to consummate a final contract, when the scope, subject matter, duration, and other elements can be found by implication, and when the insured gives the agent authority to ascertain some of the essential facts. Id. ¶ 12 In Hamacher, the plaintiff, a sawmill owner, contacted the defendant insurance agent after substantial improvements to his sawmill. Id. at 495. During the meeting at the plaintiff's office, the insurance agent suggested the plaintiff increase the insurable value from 90 percent to 95 percent. Id. The sawmill owner said, he thought [the increased coverage] was a good idea; he would do that. Id. At the conclusion of the meeting, the parties agreed to reconvene their conference the following morning once the agent had an opportunity to review the appraisal and determine the insurable value of [the plaintiff's] property. Id. at 496. The meeting did not occur, and a fire seriously damaged the sawmill the next day. Id. ¶ 13 The court found the existence of a contract to procure insurance because the sawmill owner already had policies with the agent, the additional coverage was based upon existing policies, the appraisal gave the agent the requisite information to add the additional coverage, and the parties specifically discussed different fire coverages. Id. at 498. ¶ 14 In the present case, Albrecht did not have sufficiently definite directions from Harris to consummate the final insurance contract. Harris requested fire coverage for the contents and equipment of his business and also asked for business insurance. In order for Albrecht to procure business insurance, he needed to know the type of coverage Harris desired, such as loss of income, earthquake, employee dishonesty, money and securities, and theft. Depending on the types of coverage desired, Albrecht potentially needed to know the value of all furniture and equipment, accounts receivable, and building improvements, as well as the amount of deductible Harris wanted, why Harris' business had never been insured, when Harris wanted the policy to go into effect, whether there had been any prior losses, and, crucially, the value of architectural documents and other valuable papers. Albrecht had none of this information because all of Harris' previous policies were personal. Furthermore, Harris has not cited any instance where a court has held that an insurance agent must procure part of an insurance policy while waiting for the remaining sections to be sufficiently identified. ¶ 15 For similar reasons, Albrecht could not identify the scope of the risk, the subject matter to be covered, the duration of the insurance, and other elements . . . by implication. Id. at 497. Although Harris requested fire insurance for the contents and equipment in his business, too many variables remained. The auto, home, boat and RV policies offered no information from which Albrecht could determine the missing terms of the contract. ¶ 16 Additionally, Harris failed to give authority for Albrecht to ascertain some of the essential facts. He merely made a general request for insurance, which falls short of giving Albrecht authority. Harris was required to give explicit instructions to Albrecht rather than make a blanket request for insurance. Giving authority to the agent requires more than such a blanket request. ¶ 17 The Hamacher court also noted that [p]revious dealings between the parties are the strongest and, in most instances, the most definite basis for implying terms of a contract. Id. at 498 (quotation omitted). In Hamacher, that made sense because the essential terms of the contract were clear based on the parties' prior dealings. However, in this case, the court of appeals relied too heavily on Harris' and Albrecht's prior dealings in concluding that a contract to procure insurance existed. Prior dealings are supportive only to the degree that they supply essential elements from which the agent can complete an insurance contract. Harris' personal insurance policies provided no information from which Albrecht could have inferred the necessary and missing terms for a business policy. ¶ 18 Albrecht lacked sufficient information from which the terms of a contract of insurance or a contract to procure insurance could be implied. The expression of a desire to procure business insurance followed by an oral affirmation of that desire is not enough to create a contract to procure insurance. Creation of a contract to procure insurance requires that the agent know or have ready access to the information needed to procure the insurance or be able to imply the terms from prior dealings. If the insured gives authority to the agent to obtain some information, he must do so explicitly.