Court Opinion

ID: 9533234
Source: CourtListenerOpinion
Date Created: 2023-08-07 04:29:38.303314+00
Date Added: 2024-06-11T13:28:58.530384
License: Public Domain

ELLETT, Justice:
State Automobile & Casualty Underwriters appeals from a judgment based on a jury verdict wherein it was held liable for a loss by fire. The policy of insurance was issued and signed by Diversified Insurance Agency for and on behalf of Guaranteed Surety Insurance Company. The policy was subsequently assumed by the appellant.
The policy by its terms was effective from October 1, 1964, to October 1, 1967. A fire destroyed the insured property on October 19, 1967, and this action was brought to recover on the policy.
In answer to an interrogatory, the plaintiff explained why the policy was in full force and effect at the time of the fire:
By custom and practice during the past twenty years, the policy would automatically be renewed and we would be billed either prior to the expiration date *171or subsequent to the expiration date. Since this arrangement had been made and carried on by the agent for the insurance company, then the insurance company is bound by it.
The court permitted a witness to testify that it was a custom of soliciting agents to notify clients thirty days prior to thé expiration of their insurance policies; that the insurance in the area was, with only two exceptions, solicited by independent agents who could place the insurance with any company they chose, and if they ceased to work with an insurer, the policyholders of that company were the clients of the agents; that the two exceptions were State Farm Insurance Company and Allstate Insurance Company; that it was the custom of those two companies to notify their insureds prior to expiration date; and that he had never heard of the appellant prior to the present action and knew nothing about it's methods of doing business.
The policy in question here was originally placed by a soliciting agent with another company and on February 28, 1966, was assumed by the appellant herein.
Utah has a statute1 which provides: -
No insurer or its agent, nor any solicitor or broker shall make any contract of insurance or agreement as to such contract, other than is plainly expressed in the policy issued thereon. Any such understanding or agreement not so expressed shall be invalid.
The policy in question had a provision as follows:
No permission affecting this insurance shall exist, or waiver of any provision be valid, unless granted herein or expressed in writing added hereto. * * *
Furthermore, Section 31-19-26, U.C.A. 1953 (Replacement Vol. 4), prevents any modification of an insurance contract unless it is in writing.
In Counts II and III of their second amended complaint, the plaintiffs charged the soliciting agent and his assigns with negligence in failing to notify pursuant to custom. Those two causes of action are not before us here. We are dealing only with the claim that the fire loss is covered by the policy written by another and thereafter assumed by the appellant.
A statement of the law is found in 43 Am.Jur.2d, Insurance, Sec. 204, p. 261, as follows:
* * * In the absence of express authority, an insurance agent has no apparent authority to make a contract for insurance to run from year to year for an indefinite period in the future. * * *
In regards to the effect of usages and customs on a contract, the law is stated in *17255 Am.Jur., Usages and Customs, Sec. 35, p. 296, as follows:
* * * The office of a trade custom or usage is to explain what otherwise would be inexplicable in the meaning and intention of the parties, on the theory that they knew of its existence and contracted with reference to it, and it is not admissible where there is no ambiguity in the contract and it contains no technical terms or expressions peculiar to any avocation or locality used [sic] in the contract. * * *
1 Couch on Insurance, 2d Ed., 757, Sec. 15:61, states:
If the contract is stated in clear, positive, and unambiguous terms, usage or custom cannot be permitted to vary or contradict the terms used. * * *
In the case of Thomas v. Guarantee Title & T. Co., 81 Ohio St. 432, 91 N.E. 183, 26 L.R.A.,N.S., 1210 (1910), the question of the effect of usage and custom on the liability of an abstracter was involved. It was there held that usage or custom could not create a contract or a liability where none otherwise existed, but could only be used to explain or aid in the interpretation of a contract or liability existing independently of it.
The Supreme Court of Hawaii had before it the question of the duty of an insurer to give notice of expiration of an insurance policy in the case of Kapahua v. Hawaiian Insurance and Guaranty Company, 50 Haw. 644, 447 P.2d 669 (1968). At page 671 the court said:
In modern times automobile accidents occur daily. It may well be in the public interest that automobile insurance policies should not lapse due to forgetfulness on the part of the insured, or inconsistent action of insurers and that a duty be imposed upon the insurers to give notice of expiration before terminating the current policies. But, unless expressly written in the insurance contract, such duty may only be imposed by the legislature.
Where a soliciting agent promises a customer that he will notify him before the contract of insurance expires, or where, as in this case, he permits a custom and usage to arise which requires him to give the insured notice of the expiration date, he is acting as the agent of the insured and not the insurer, since such an agent may place the next term of insurance with another company if he cares to to do so.2
The contract in the matter before us was clear and unambiguous and complied with the statutory requirements. It plainly stated that the policy would expire on October 1, 1967. By its terms it did ex*173pire on that date, and the appellant was not liable under the assumed contract to pay for a loss that occurred thereafter.
The trial court erred in instructing the jury in substance that it should return a verdict against the appellant if it should find by a preponderance of the evidence:
1. That prior to October 1, 1967, there existed a custom whereby agents would renew insurance upon expiration of the terms;
2. That Diversified Insurance Agency knew of the custom;
3. That appellant was on October 1, 1967,
(a) represented by Diversified Insurance Agency, or
(b) had failed to give plaintiffs notice of the termination of agency of Diversified Insurance Agency;
4. That on or before October 1, 1967, the appellant or its agent failed to renew the policy in accordance with the custom or to give notice that it did not intend to do so; and
5. That plaintiffs reasonably relied upon such custom and as a result thereof suffered damage.
The judgment is reversed with directions to enter an order granting appellant’s requested instruction for a directed verdict. Costs are awarded to the appellant.
CALLISTER, C. J., and TUCKETT and HENRIOD, JJ., concur.

. Sec. 31-19-18, U.C.A.1953 (Replacement Vol. 4).

. Dohlin v. Dwelling House Mut. Ins. Co. of Lincoln, 122 Neb. 47, 238 N.W. 921 (1931); Parker v. Knights Templars, etc., 70 Neb. 268, 97 N.W. 281.