Court Opinion

ID: 9695234
Source: CourtListenerOpinion
Date Created: 2023-08-25 18:13:13.395845+00
Date Added: 2024-06-11T18:20:08.733164
License: Public Domain

Garfield, J.
(dissenting) — I think the majority opinion is unsound. Not a single authority is cited that supports it.
As the majority observes, the facts are not in dispute. No witness testified for defendants. The policy covered defendant Wood’s 1941 Super De Luxe Ford sedan but provided it would cover a newly acquired automobile “if the named insured notifies the company within thirty days following the date of its delivery to him, and if * * * it replaces an automobile described in this policy * * *” (i.e., the Ford).
January 23, 1952, a finance company repossessed the Ford and Wood acquired a 1937 Chevrolet with which, on March 20, 1952, he collided with another car when he was drunk. As a result of this collision judgment was rendered against Wood for $14,427.16, including $2000 exemplary damages. (Sebastian v. Wood, 246 Iowa 94, 66 N.W.2d 841.)
The controversy here is whether the policy covered the Chevrolet on March 20, 1952, and it turns upon whether plaintiff-company was properly notified of its acquisition. We are not concerned with whether the insurance was in effect on the Chevrolet during the thirty-day period following its delivery to Wood on January 23. The majority’s expression on that question is obviously mere dictum. See Mitcham v. Travelers Indemnity Co., 4 Cir., N. Car., 127 F.2d 27, 29. In Merchants Mut. Cas. Co. v. Lambert, 90 N. H. 507, 11 A.2d 361, 127 A. L. R. 483, cited by the majority, the accident occurred the day the newly acquired automobile was delivered and the dispute was whether the insurance *1150covered it on that day. I repeat, no such question is presented here.
It was stipulated the only notice to the company, prior to the collision, of Wood’s acquisition of the Chevrolet is the notice to the agent Batty, if it constituted notice to the company. Batty was a banker, in the small town of Rockford, who as a sideline solicited insurance for five automobile insurance companies including plaintiff. He was required by section 515.52, Codes, 1950, 1954, to countersign policies solicited by him. The only evidence of any notice of Wood’s acquisition of the Chevrolet is that of Batty concerning Mrs. Wood’s talk with him late in January.
Because it pertains to the vital point in the ease Batty’s testimony as to this talk is here quoted: “* * * his wife came in the latter part of January, 1952, and asked that the policy be changed to a different car, asked that I write the company to that e;ffect; I told her no, this policy was. not paid and I would do- nothing further in regard to it; I told her I would not write the compcmy; I told her to have Cecil come in and she said she would; Cecil did not come in.” On cross-examination Batty said “I emuhatically told her I wouldn’t do it.”
Later, after the collision in March, Mrs. Wood informed Batty she had told Cecil to go see Batty. It is shown without dispute that Batty, true to his word, did not advise the company Wood had acquired another car and it had no knowledge or notice of such fact until after the collision.
The position the agent Batty took in his talk with Mrs. Wood is entirely understandable in view of Wood’s persistent failure to pay any of the premium of $59.40 for the year in question except for. a credit of 89 cents from an overpayment on the first (previous) year’s premium. Further explanation for Batty’s attitude is found in undisputed evidence that Wood procured the renewal policy in the first instance by his false representation that the premium would be paid by the dealer from which he purchased the Ford. These circumstances may well account for the fact Wood sent his wife to notify Batty he desired his insurance changed to cover the Chevrolet while he (Wood) kept in the background and did not go to' see Batty as the latter requested. .
Undoubtedly it was necessary for Wood to notify the insurance company prior to the collision he had acquired the Chevrolet *1151in order for the insurance to cover it, at least after the thirty-day period following its delivery. The annotation in 34 A. L. R.2d 936, 943, referred to by the majority, says: “It is well established that where the ‘automatic insurance’ clause requires notice of the acquisition of a new automobile to be given the insurer within a specified time after delivery, the period generally being either ten or thirty days, a failure to give notice prior to an accident occurring after the expiration of the designated period precludes coverage of the new automobile.”
As to the importance of notice to the company of the insured’s acquisition of another car Mitcham v. Travelers Indemnity Co., supra, 4 Cir., N. Car., 127 F.2d 27, 29, states: “The requirement of notice was of obvious importance to the company. Amongst other purposes it served to inform the company of the identity and character of the vehicle to be covered by its policy and to enable the company to exercise the rights reserved to it in the policy and to ascertain whether the insured had complied with his obligations thereunder. It cannot be said that the policy provision was so immaterial to the risk that it could not be invoked for the purpose of avoiding the company’s contractual liability.”
Undisputed testimony of plaintiff’s vice-president is, “A 1937 Chevrolet, an older car, would not be as desirable a risk as a 1941 Ford.” This would seem to be an obvious truth.
It is of course the general rule, as the majority states, that an insurance company is bound by notice to or knowledge of its agent within the scope of his authority even though the agent fails to communicate such notice or knowledge to the company. Obviously it is only where there is such failure that the general rule need be invoked. Where the notice or knowledge is communicated to the company no question arises as to whether it is bound by notice to or knowledge of the agent. No one contends, as the majority seems to think and as the learned trial court apparently thought, mere failure of the agent to comnrqnicate to the company the knowledge he received from the insured constitutes an avoidance of the policy.
Only by application of the general rule just referred to may it be claimed Wood notified the company he had acquired the *1152Chevrolet. Plaintiff-company concedes the general rale substantially as stated above. However, it is thoroughly settled the general rule is not of universal application, or, stated differently, there are several limitations upon or qualifications of it. 2 Am. Jur., Agency, section 372, says: “There are many limitations upon, and qualifications of, the general rule which imputes an agent’s knowledge to his principal.” To substantially the same effect is 3 C. J. S., Agency, section 262.
Perhaps the most widely recognized limitation upon the general rule is that it does not apply where the person dealing with the agent is acquainted with circumstances plainly indicating that the agent will not advise his principal. 3 C. J. S., Agency, section 262, pages 196, 197, and cases cited notes 76 and 77, and 1955 Pocket Part. Several of the decisions cited involve insurance agents. To the same effect are 16 Appleman Insurance Law and Practice (1944 Ed.), section 9102, page 640; 2 Couch Cyc. Insurance Law (1929 Ed.), section 525, page 1550. See also Id., section 525d, page 1576. It is this qualification of the general rule on which the company relies.
We have recognized virtually the same qualification of the general rule relied on by the company here (although stated somewhat more broadly) in Hummel v. Bank of Monroe, 75 Iowa 689, 37 N.W. 954; Watt v. German Savings Bank (Ladd, J.), 183 Iowa 346, 364, 165 N.W. 897; Laird & Keehner v. McCord, 196 Iowa 972, 976, 195 N.W. 517, and other decisions.
The majority says the principle of agency the insurance company urges is sound but not applicable here. Are we to understand the principles of agency are not applicable to insurance companies? I think it is the majority’s decision, not plaintiff’s argument, that is based on a fallacy.
From 44 C. J. S., Insurance, section 154, the majority quotes: “An insurance company is bound by knowledge of, or notice to, its agent within the general scope of his authority.” The principle — or perhaps more accurately, the qualification of or limitation upon the general rule — the company invokes that seems applicable here is stated in, the same section of C. J. S., one sentence removed, from, the one the majority quotes* It reads, “Likewise, the agent’s knowledge or notice will not be imputed to *1153insurer where the circumstances are such as to put the person dealing with the agent on notice that the agent will not advise his principal.”
One of the decisions cited in support of the text just quoted is Mutual Life Ins. Co. of N. Y. v. Hilton-Green, 241 U. S. 613, 622, 623, 36 S.Ct. 676, 680, 60 L. Ed. 1202, 1211, a leading ease also cited by plaintiff here. It states: “The general rule which imputes an agent’s knowledge to the principal is well established. The underlying reason for it is that an innocent third party may properly presume the agent will perform his duty and report all facts which affect the principal’s interest. But this general rule does not apply when the third party knows there is no foundation for the ordinary presumption — when he is acquainted with circumstances plainly indicating that the agent will not advise his principal.”
Other precedents to the same effect include Gill v. Mutual Life Ins. Co. of N. Y., 8 Cir., Neb., 63 F.2d 967, 970; Pioneer Mut. Comp. Co. v. Smith, 117 Colo. 275, 186 P.2d 225; Rushville Nat. Bk. v. State Life Ins. Co., Ind. App., 197 N.E. 740, 743; Jacobs v. Metropolitan Life Ins. Co., La. App., 39 So.2d 346, 350-352; Martin v. Provident Life & Acc. Ins. Co., 242 Ky. 667, 47 S.W.2d 524, 526; DeFord v. National Life & Acc. Ins. Co., 182 Tenn. 255, 185 S.W.2d 617, 620; Mutual Benefit Health & Acc. Assn. v. Ratcliffe, 163 Va. 325, 175 S.E. 870, 874.
The three Iowa decisions cited by the majority, found in note 98 to 44 C. J. S., Insurance, section 154, merely follow the general rule that an insurance company is bound by the knowledge of its authorized agent. They do not involve the question presented here and are in no way inconsistent with the authorities the company cited. In fact defendants, the trial court or the majority here have cited no authority which even considers the legal principle relied on by plaintiff.
It is apparent that where, ás here, it is undisputed the agent refuses to notify the company of the information giyen him by the insured and the agent plainly and emphatically tells the insured (acting through his wife) of his refitsal, the circumstances are such the insured knows the agent will not notify his principal.
*1154The only answer defendants, the trial court or the majority here attempt to make to the company’s main contention and the authorities supporting it is that Batty was acting within the scope of his authority in receiving notice from Mrs. Wood her husband had acquired the Chevrolet. Of course this is no answer at all. It is- not surprising that not a single authority is cited, in support of the, majority’s, holding it is an answer.
The general rule defendants invoke clearly could not be invoked unless Batty were acting within the scope of his authority in receiving notice of the replacement. But the fact Batty may have been acting within the scope of his authority does not render inapplicable the qualification of the general rule the company relies upon. When Batty told Mrs. Wood (for understandable reasons) he would not notify the company her husband had acquired the Chevrolet the company was not chargeable with the notice to Batty.
The majority’s holding that notice to H. C. Batty was notice to the company is necessarily based solely on the general rule of law that the principal is bound by notice to its agent acting within the scope of his authority. The underlying reason for this rule (not the rule itself, as the majority asserts) is that the third party may ordinarily presume the agent will transmit the notice to Ms principal. It is obvious, and the authorities plainly so hold, the reason for the rule fails and the rule is inapplicable where, as here, the third party knows the agent will not transmit the notice. Nevertheless the majority insists on giving the insured the benefit of this general rule but arbitrarily refuses to give the insurer the benefit of a well-settled qualification of the rule which the undisputed facts make applicable.
I would adhere to an established, applicable legal principle and therefore
I would reverse.
Thompson and Larson, JJ., join in this dissent.