Court Opinion

ID: 5253133
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:19:34.947584+00
Date Added: 2024-06-11T08:27:58.319405
License: Public Domain

Shearn, J. (dissenting):
Appeal by plaintiff from a judgment dismissing the complaint, entered upon a verdict directed by the court, in an action to recover a premium alleged to be due by the terms of a policy of insurance claimed to have been issued by the plaintiff to the defendant, insuring the latter against loss or damage by explosion to the amount of $1,000,000. ;
The transaction was conducted entirely by one Birkett, an independent insurance broker. Although Birkett is continually referred to by plaintiff’s counsel as a sort of general agent of the defendant, upon which supposition there is brought forth the familiar line of cases with regard to appearance of authority, Birkett had no connection whatsoever with the defendant, except that he had previously placed insurance of various other kinds for the defendant, as had other brokers. Birkett had also acted for the plaintiff in placing insurance in its behalf and deducted his commissions from the premiums paid. . This relation had been an extensive one and had aggregated payments of approximately $5,000 during the year preceding the controversy in question. The defendant was the owner of a large sugar refinery at Edgewater, N. J. Shortly after the outbreak of the war with Germany, explosion insurance for the first time began to be written to a considerable extent in this country. Birkett initiated the negotiations *497by going to the defendant and proposing that it take out insurance against damage by explosion. What followed is partly shown by stipulation of facts entered into by the attorneys for the respective parties set forth on pages 118 and 119 of the record. But this stipulation does not purport to set forth all of the facts, and, as shown by the uncontradicted testimony in behalf of the defendant, it omits facts of controlling importance. Birkett’s conversation was first had with the president of the defendant, Mr. Warner. The conversation was general and Warner said that if Birkett could get a rate of thirty to thirty-three the defendant would take $3,000,000. The matter was turned over to defendant’s secretary, Bell, who authorized the broker to procure explosion insurance to the amount of $3,500,000, but with the specific instruction that it should only be placed in such companies as would also assume the risk of loss by fire. This was a matter of practical importance to the defendant, for in case of an explosion followed by fire, it might be difficult for the insured to establish how much of the damage was caused by the explosion and how much by fire. Birkett testified: “ I went back to my office and gave the order to our placer to place $3,500,000 explosion insurance on the Warner Sugar Refining Company.” It appears that Birkett was then taken ill, had an operation, and was away from his office for two or three weeks. It does not appear that he informed his employees of the restrictive nature of the defendant’s order for insurance. One of his employees, named Charles Warner, applied to the plaintiff for $1,000,000 explosion insurance on the defendant’s property on April fourteenth (the negotiations were started about April 1, 1917), and the plaintiff issued a binder and delivered it to Birkett’s representative, who took it away with him at the time he made the application. No information was conveyed to the defendant concerning the insurance or issuance of the binder. On or about May 1, 1917, the plaintiff delivered to Birkett’s office its insurance policy for a term of one year beginning noon, May 1, 1917. Thereafter, and at some date not clearly established, but before Birkett’s return from his vacation or illness, the policy was sent to the defendant and was put among its papers by some office employee. It did not come to the *498attention of any of defendant’s officers until about June 28, 1917, when defendant’s secretary, Bell, had his attention called to it and noticed that'the policy was furnished by a company which had not written fire insurance upon the property. He immediately called up Birkett and was assured by Birkett that the company would write the fire insurance. He replied that he must have definite advice about the fire insurance, or the explosion policy would have to be returned. The broker interviewed the officers in regard to the issuance of the fire insurance, and the plaintiff refused to issue it. The next day, immediately upon being advised that the plaintiff would not write the fire insurance, the policy in suit was returned by defendant’s secretary to the broker, who after-wards delivered it to the plaintiff.
The plaintiff contends that as the broker was authorized to procure explosion insurance, and so far as plaintiff was concerned had apparent authority to make the contract of insurance, plaintiff’s rights cannot be affected by any secret instructions given by the defendant to the broker. As pointed out, there was no evidence warranting a finding that Birkett was in any sense a general agent of the defendant. As a general rule, agents can bind a principal only within the limits of the authority conferred. The exception to the rule is where there is an appearance of authority. But for the appearance of authority the principal is responsible only so far as he has caused that appearance. (Edwards v. Dooley, 120 N. Y. 551.) There is absolutely nothing in this case to show that the defendant caused any appearance of authority in Birkett. He was merely an independent insurance broker who persuaded the defendant that it was desirable to take out explosion insurance. True, he had written other insurance for the defendant, but so had other brokers. It may be that if the defendant had made Birkett its general insurance broker, and that if he had for a considerable period of time handled all of its business in a manner giving the appearance of authority and discretion, the defendant, by thus permitting him to be held out as its general insurance agent, might be held to have caused an appearance of authority on which insurance companies dealing with the broker might have relied. But this is not such a case. On the contrary, we are *499dealing with an ordinary independent insurance broker. Such a broker is a special agent for a single object, and he cannot bind the principal beyond the limit of his authority. (9 C. J. 524.) One who deals with such a broker is dealing with a special agent, specially authorized for that transaction, and is put on inquiry as to the extent of the agent's authority and deals with him at the risk of his authority being exceeded. (Nester v. Craig, 69 Hun, 543; Molloy v. Whitehall Portland Cement Co., 116 App. Div. 839, 843.) The rule contended for by the plaintiff would mean that a business man who employs a broker to obtain insurance, say, only in old line companies, and specially excludes Lloyds, could have foisted upon him against his will a Lloyds policy, simply because he had authorized the broker to obtain insurance.
The only possible ground upon which liability could be held to have been imposed upon the defendant in this case is that of ratification, growing out of the fact that it retained the policy for twenty-four hours after it learned that it was issued by a company which did not insure the defendant against fire loss. Of course there could be no ratification without knowledge, and, therefore, the defendant could not be said to have ratified the broker’s act by reason of the fact that the binder was held by the broker for three weeks without its knowledge, or by the fact that the policy had been received by a clerk and put in the defendant’s papers without the knowledge of any of its officers or managers. But there was no ratification in holding the policy for twenty-four hours, for it was held simply to enable the broker to get the plaintiff to insure against fire, as he stated that he could do, and the policy was promptly returned when the plaintiff refused such insurance.
It is contended by the plaintiff that, as it is stipulated that Birkett had authority to apply for explosion insurance, and as it appears that the defendant would be hable but for the fimitations placed upon the broker’s authority, and as these limitations are established by the testimony of interested witnesses, their credibility was involved and it should have been submitted to the jury to determine whether in fact such secret instructions were given. This question would not ordinarily arise, because the plaintiff, would, have to prove *500the actual authority conferred, and this was covered prima facie by the stipulation. I think that, as no attempt whatever was made to impugn the credibility of these witnesses, and as there is nothing to contradict their testimony, and as their testimony is so entirely reasonable and in accord with the probabilities and the acts of the parties, it should be held conclusive under the rule in Hull v. Littauer (162 N. Y. 569).
The judgment should be affirmed, with costs.
Smith, J., concurred.
Judgment reversed and new trial ordered, with costs to appellant to abide event.