Court Opinion

ID: 9695233
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:13:13.385011+00
Date Added: 2024-06-11T18:20:08.730783
License: Public Domain

Mulroney, J.
The pertinent facts in this case are not in dispute. One Cecil Wood secured a standard automobile liability policy of insurance in the Western Mutual Insurance Company of Des Moines, covering his Ford automobile. The policy was secured from H. C. B.atty, of Rockford, Iowa, who had acted for the company as an agent for about twenty-five years with authority to solicit applications for insurance. Mr. Batty’s agency arrangement with Western was the familiar one whereby he would take the proposed insured’s application, send it to Western in Des Moines, and when the policy would be sent to him he would countersign it and deliver it to the insured, and bill the insured for the premium; but Mr. Batty was to pay Western the premiums, less commission, on all policies delivered by him every thirty or forty-five days. The policy in this case was for one year, from November 3, 1950, and the premium which was charged by Mr. Batty to Cecil Wood was- $27.10, which was paid. It was renewed for a second year and an eighty-nine cent overpayment to Mr. Batty on the first year’s premium was credited by Mr. Batty to Cecil Wood on the second year’s premium.
The policy contained a so-called Automatic Insurance provision whereby the insurance afforded by the policy on the de*1145scribed automobile was-to apply during tbe policy period to a newly acquired automobile subject to certain conditions which, as applicable here, are “if the named insured notifies the company within thirty days following the date of its [the newly acquired automobile] delivery to him, and if * * * it replaces an automobile described in this policy * *
On or about January 23, 1952, some finance company repossessed the Ford and in the same month Cecil Wood acquired a Chevrolet, and later in January, Mrs. Cecil Wood, acting for the insured, came to Mr. Batty’s office and told him Cecil wanted to have the insurance transferred, to his newly acquired Chevrolet. Western furnished all of its agents, Mr. Batty included, with forms (Exhibit 3) for use in transmitting data to the home office when the described automobile is to be eliminated and a newly acquired automobile substituted. In this instance Mr. Batty refused to fill out or send in this form and he told Mrs. Wood of his refusal and he said it was because her husband had not paid the premium, and he told Mrs. Wood to have Cecil come and see him. Cecil did not go to see Mr. Batty and Mr. Batty did not notify the home office of Western of the newly acquired car. In March 1952 Cecil had an accident with the Chevrolet, and Donald and Marie Sebastian secured judgment against Cecil Wood as the outgrowth of this accident.
Western Mutual Insurance Company brought a declaratory-judgment action against the Sebastians and Cecil Wood seeking declaration of no liability on their policy on the ground it was not notified of the newly acquired Chevrolet within thirty days. The trial court held for defendants and the insurance company appeals.
I. We do not find where we have heretofore been called upon to interpret this so-called “automatic insurance” clause, but it seems to be a clause that is found in standard policies and the courts of many other states have rendered opinions involving its application under various fact situations. See note 34 A. L. R.2d 936. In Home Mut. Ins. Co. v. Rose (1945), 150 F.2d 201, 204, Circuit Judge Woodrough of our own 8th Circuit, said:
“The automatic insurance clause in standard policy forms is intended to meet the necessity for maintaining continuous in*1146surance on cars in the presence of the recognized custom among insured owners of acquiring other cars by replacements and new purchases during the life of their policies, and is intended to be and is worded so .as to afford proper insurance protection to such insured and at the same time to preserve the essentials of insurance for the insurer.”
The clause is usually called “automatic insurance” in the clause heading in the policy, but in any event courts generally hold it provides .automatic coverage within the notice period, (usually ten or thirty days) before any notice has been given. Merchants Mutual Casualty Co. v. Lambert, 90 N. H. 507, 11 A.2d 361, 127 A. L. R. 483 and note, page 486.
In Continental Casualty Co. v. Trenner, D. C. Pa., 35 F. Supp. 643, 644, it is said: “* * * insurance which can be extended by a mere notice from the insured and without any new contract can be fairly called ‘automatic’ insurance * *
Here the narrow question is as to the notice that was given during the thirty-day period. No particular form of notice is prescribed. The language of the policy is that the automatic coverage applies “if the named insured notifies the company” of the replacement. To notify the company simply means to make it known to the company. See Volume 28, Words and Phrases, Perm. Ed., pages 857, 858. Plaintiff does not argue Mr. Batty would not be its proper agent for an insured to notify of the replacement. Indeed it could, hardly do so in Anew of the fact it furnished him with forms such as Exhibit 3, and the Adce-president of Western testified the general operation of the company was for the agents, such as Mr. Batty, to get the information as to a policy covering replacement, and forward it to the company. He did say many agents did not use the form Exhibit 3; “just Avrite it in the form of a letter, the same effect.”
It is not questioned that the Chevrolet was a replacement for the Ford and it is not argued the policy was not in force. It had not been canceled for nonpayment of premium. Section 515.80, Code, 1954; Strahorn v. Kansas City Fire & Marine Ins. Co., 241 Iowa 991, 42 N.W.2d 903. It w.as canceled sometime after the accident. Thus we have a case where it is admitted the insured did notify the agent of the company of the replacement, the said agent being the one charged with the duty, as the vice-presi*1147dent said, “to get that information on the policies they have written and forward it to the company.” But the insurer argues it is not bound by the notice because Mr. Batty said to Mrs. Wood that he would not transmit the knowledge of the replacement she had given him to the company, and in fact did not communicate the fact of the replacement, of the Chevrolet for the Ford, to the home office.
There is no merit in the insurer’s argument. The notice was for the benefit of the insurer. Maryland Casualty Co. v. Toney, 178 Va. 196, 16 S.E.2d 340. The insured had a simple duty to impart knowledge. His duty to the insurer was fulfilled when he imparted that knowledge to the agent, who, under the undisputed record, was designated by the company to receive it. As the trial court held “notice to H. C. Batty was notice to the company.” Mr. Batty had no power to terminate the operation of a single clause of this policy for nonpayment of premiums to him without proceeding under section 515.80, Code, 1954, and giving the required thirty-day notice. The company cannot deny coverage because of the failure of its agent to communicate the knowledge he received from the insured. It would be a dangerous doctrine indeed to hold mere failure of the agent to communicate the knowledge he received would void the insurance. As the trial court observed, to so hold would mean the company could escape liability “if Mrs. Wood had given the information to the Vice-president, Albert H. Adams, and he in turn had said the company refused to accept the information until the policy was paid for.”
Plaintiff’s whole argument is built upon a premise of agency. It starts with a proposition that defendants’ case must rest entirely upon that doctrine of the law of agency called the “general presumption” that an agent, in the performance of his duty, will convey knowledge he receives to his principal. It goes on to point out the limitation to the rule to the effect that this general presumption, that an agent will pass on his information to his principal, will not apply when the circumstances plainly indicate the agent will not advise his principal. As applied to this case plaintiff contends the evidence plainly shows agent Batty would not impart the replacement knowledge he received to the home office, therefore the company was not notified.
The general principle of agency which plaintiff uses is sound *1148but not applicable here. The fallacy in plaintiff’s argument lies in the first premise. Defendants’ case does not rest entirely on a presumption that an agent will convey knowledge to his principal, although as a general rule “An insurance company is bound by knowledge of, or notice to, its agent within the general scope of his authority.” 44 C. J. S., Insurance, section 154. See also Cornett v. Farmers Mut. Fire Ins. Assn., 208 Iowa 450, 224 N.W. 524; Terry v. American Ins. Co., 202 Iowa 1291, 211 N.W. 716; Norem v. Iowa Implement Mut. Ins. Assn., 196 Iowa 983, 195 N.W. 725.
Actually the whole question here is one of contract— whether the provision to notify the company, in the contract of insurance, was complied with. Wood possessed a valid, unexpired and uncaneeled policy of insurance, covering a described car. It covered any replacement of the described car for a period of thirty days. And it covered any replacement after thirty days “if the named insured notifies the company.” The insured w.as not under a duty to notify the home office of the insurance company, or any department in the home office handling replacements. He was under a duty to impart knowledge to the corn-pans»'. Presumably he could have written a letter to the company giving the information. In a sense everyone who works for an insurance corporation is its agent. Surely the insured has complied with the provision to notify the company when he gives the knowledge to that employee, who, the vice-president said, was under a duty to get the information. The company devised its system of handling trairsfers of coverage to replacements by the insured notifying certain employees. When that is done the company is notified and no question of agency is involved. That employee is not at liberty to reject the information, and the company is not absolved because he tells the insured he will not pass on the information to other employees in the home office. The insured has carried out his contract duty of notifying the company, when he tells .the employee, whose duty it is to receive the information. The company cannot avoid the contract by saying it was not notified because that employee said he would not tell the home office. This is automatic insurance “if the named insured notifies the company” of the replacement. No new policy *1149is issued by tlie home office. Coverage fastens for the replacement under the very terms of the old policy when the company is notified of the replacement. The notice is complete when the information is given to the employee designated by the company to receive it. After that the insurer will not be allowed to say it was not notified because that employee said he would not pass it on to the home office. The judgment of the trial court is affirmed. —Affirmed.
Wennerstrum, C. J., and Bliss, Oliver, Smith, and Hays, JJ., concur.
Garfield, Thompson and Larson, JJ., dissent.