Court Opinion

ID: 9831875
Source: CourtListenerOpinion
Date Created: 2023-09-01 21:26:54.441655+00
Date Added: 2024-06-11T07:43:38.771211
License: Public Domain

Findings of Fact.
JENKINS, J.
(1) On September 17, 1912, and thereafter until its destruction by fire, defendant in error was the owner of the property alleged to have been insured by plaintiff in error.
(2) On said date defendant in error applied to, and obtained from, Friedlander & Ludde, insurance agents in Waco, where defendant in error and Geo. S. McGee reside, additional insurance in the sum of $5,000 on the building subsequently burned. This was all the business transaction that defendant in error ever had with said agents, except as hereinafter set out.
(3) On November 6, 1912, defendant in error phoned Friedlander & Ludde that he had sold the building to Geo. S. McGee, that the deed had been executed and placed in escrow, and that he desired $5,000 additional insurance in favor of McGee and of himself as mortgagee, and that he would call the next day and furnish the' data from which to write the policy. A clerk in said agents’ office replied that the request would be granted, and immediately made the following memorandum in the book kept for such purpose:'
“November 6, 1912. Crate Dalton policy $5,-000.00 in F. F. transferred to Geo. S. McGee, purchaser; also write $5,000 additional insurance separate binder in Ga. Home and N. B. M.”
By “N. B. M.” was meant North British & Mercantile Insurance Company. At the same time he addressed a letter to each of *460¡¡aid companies, advising them of the binders, and stating that a daily report would follow on 'the morrow,
■ (4) On the next day defendant in error met Eriedlander on the street, and was informed by him that the binders had been written for $2,500 in each of the companies above named. Defendant in error replied that the deal had not been consummated, but was still pending, and reguested Eriedlander to keep him and McGee protected until such time as he might notify him how the policies should be written. Eriedlander promised to do so.
(5) On November 9th defendant in error called at the oflice of Friedlander & Ludde, and inguired if the policies had been written, and was informed that they had not, but that the binders were still in force. He stated that the trade with McGee was being held up, and reguested that no policies be issued for the present, but that in the meantime the property be protected. To this said agents assented.
(6) On November 11th, about 2 p. m., Eried-lander & Ludde received from the North British & Mercantile Insurance Company the following telegram:
“Please cancel binders sanitorium building favor McGee. Letter explains.”
The building upon which the binders had been issued was known as the Sanitorium. They immediately drew a pencil mark through “N. B. M.” as written in the memorandum, and interlined above it “Nor. Un.,” meaning thereby the Norwich Union Eire Insurance Society, and also addressed a letter to the general agents of plaintiff in error at Galveston, Tex., advising them that they had bound plaintiff in error in the sum of $2,500 on said property, and also addressed a letter to the North British & Mercantile Company advising them that their binder had been canceled.
(7) Defendant in error knew nothing as to any of the facts stated in the preceding paragraph of this statement of facts until after the fire. At the time of his conversation with Eriedlander on November 7th, and afterwards at the time of his conversation with both of said agents in their office, it was not in contemplation of either of said parties that the binder in the North British & Mercantile Company or in the Georgia Home Company would be canceled, nor that any other company would be substituted in lieu of either of such companies, or that any occasion would arise for such cancellation or substitution.
(8) Eriedlander & Ludde were the local agents in Waco of the Georgia Home Insurance Company, the North British & Mercantile Company, and of plaintiff in error.
. (9) On .November 11th, at about 9 o’clock p. m., the property was destroyed by fire.
(10)On November 12th Eriedlander & Ludde wired the general agents of plaintiff in error that the property had been destroyed, which telegram was received by them before notice of binder.
(11) On November 14th Eriedlander & Ludde issued a policy in the Norwich Union for $2,500 on the property in favor of Geo. S. McGee, for the term of one year, with a mortgage clause in favor of defendant in error, and dated the same November 11, 1912.
(12) On November 16th Friedlander & Ludde received a letter from the general agents of plaintiff in error, requesting them not to deliver the policy. On the same day, Friedlander & Ludde received the premium from defendant in error, and remitted the same by letter to the general agents of plaintiff in error, who declined to receive the same, and returned it to Eriedlander & Ludde.
(13) On December 12, 1912, defendant in error made proof of loss to plaintiff in error, and in January, 1913, made proof of loss to the North British & Mercantile Company.
(14) Defendant in error testified upon the trial hereof that he was not claiming the insurance against both the North British & Mercantile Company and plaintiff in error, but only against the one that was legally liable therefor. It was not the'intention of either the defendant in error or of Friedlander & Ludde that both policies should be in force at the same time.
(15) Eriedlander & Ludde, in issuing policies for the North British and for all other companies represented by them, used only the standard form of policy prescribed by the insurance commissioner of the state of Texas, which required five days’ notice in order to cancel a policy, and this would have been in the policy had one been written by them on the North British & Mercantile Insurance Company binder.
Opinion.
A number of legal questions are incidentally involved in this case, but a correct decision herein depends upon the issue as to whether the insurance agents Eriedlander & Ludde were, as a matter of law from the facts stated, authorized to cancel, without the knowledge or consent of the defendant in error, the binder issued by them in the North British & Mercantile Insurance Company, and substitute therefor the binder in the Norwich Union Eire Insurance Society.
The general principles of law involved are well settled, and may be stated as follows:
[1] 1. A written memorandum such as was made by the local insurance agents is known in insurance terminology as a “binder.” A binder is a verbal contract of insurance in prsesenti, temporary in its nature, intended to take the place of an ordinary policy until the same can be issued. It is a short method of issuing a temporary policy for the convenience of all parties, to continue, unless sooner canceled, until tke execution of a *461formal policy. It will be construed as containing all of the provisions of an ordinary policy, including the provision for cancellation. Lipman v. Insurance Co., 121 N. Y. 454, 24 N. E. 699, 8 L. R. A. 719; Cooley’s Ins. Briefs, 2790.
2. When a contract of insurance has been entered into, it cannot be annulled, except by the consent of the parties thereto, unless otherwise provided in the policy. This is but the statement of the elementary law of contracts, and will be found in a number of the cases herein cited, and in all of the textbooks on insurance.
3. Another elementary principle of the law of contracts applicable to insurance is that the property must be in existence at the time the policy is issued. As a corollary to this, the rights of the parties are fixed at the time the property is destroyed. Blake v. Insurance Co., 67 Tex. 165, 2 S. W. 369, 60 Am. Rep. 15; Insurance Co. v. McKenzie, 70 Ill. App. 615; Insurance Co. v. Turnbull, 86 Ky. 230, 5 S. W. 542; Insurance Co. v. Lumber Co., 89 Me. 26, 35 Atl. 1008, 35 L. R. A. 278; Kerr v. Insurance Co., 117 Fed. 447, 54 C. C. A. 616; Hermann v. Insurance Co., 100 N. Y. 411, 3 N. E. 341, 53 Am. Rep. 197; Cooley’s Ins. Briefs, 2790. A policy issued in lieu of another which has not been legally canceled is not a binding contract. Clark v. Insurance Co., 86 Me. 26, 35 Atl. 1008, 35 L. R. A. 276.
4. When one of the conditions for the cancellation of a policy is that notice must be given, the notice must be given for the full time, if any, specified in the policy. Insurance Co. v. Flippin, 4 Tex. Civ. App. 576, 23 S. W. 552; Insurance Co. v. Urbansky, 113 Ky. 624, 68 S. W. 654; Clark v. Insurance Co., supra; Insurance Co. v. McKenzie, 70 Ill. App. 615; Insurance Co. v. King, 108 Ark. 130, 156 S. W. 445; Yoshimi v. Insurance Co., 99 App. Div. 69, 91 N. Y. Supp. 393.
5. In insurance, as in all other contracts, notice to an agent is notice to his principal, but it must be within the scope of his authority to receive such notice. Lumber Co. v. Insurance Co., 158 Iowa, 563, 138 N. W. 504, 51 L. R. A. (N. S.) 539; Clark v. Insurance Co., supra; and other authorities herein cited.
6. A broker who is employed by the insured to attend to all of his insurance, and to keep his property insured, is the agent of the insured for the purpose of receiving notice of the cancellation of a policy, and may waive such notice, and surrender a policy for cancellation, and receive another in lieu thereof. Such authority may be presumed from a long- course of dealing between the parties. Johnson v. Insurance Co., 66 Ohio St. 6, 63 N. E. 612; Hamm v. Insurance Co., 80 Minn. 139, S3 N. W. 41; Dibble v. Insurance Co., 70 Mich. 1, 37 N. W. 704, 14 Am. St. Rep. 470; Buick v. Insurance Co., 103 Mich. 75, 61 N. W. 337; Kerr v. Insurance Co., 117 Fed. 447, 54 C. C. A. 616; Cooley’s Ins. Briefs, 2798; Lumber Co. v. Insurance Co., 158 Iowa, 563, 138 N. W. 504, 51 L. R. A. (N. S.) 539.
7. An agent of an insurance company may act as broker for the insured where his position is known to both parties to the contract, or where his acts are not detrimental to either party, but beneficial to both; as where he is applied to for insurance, and no company is named by the insured, and the risk is such as he would solicit, and he writes the policy in a solvent company. In the latter case his agency on behalf of the insured ceased when he has selected the company and placed the risk. Clark v. Insurance Co., supra; Insurance Co. v. Urbansky, 113 Ky. 624, 68 S. W. 653; Martin v. Insurance Co., 106 Tenn. 523, 61 S. W. 1024; Kerr v. Insurance Co., 54 C. C. A. 616,117 Fed. 446.
8. A broker (including the insurance agent, where he is authorized to act as such for the insured) who is not the general agent to place and manage the insurance business of his principal, but who is employed to secure insurance on certain property, exhausts his authority upon procuring such insurance, and notice to him thereafter, is not notice to the insured. Insurance Co. v. Blum, 76 Tex. 653, 13 S. W. 572; Rothschild v. Insurance Co., 74 Mo. 41, 41 Am. Rep. 305; Hermann v. Insurance Co., 100 N. Y. 411, 3 N. E. 341, 53 Am. Rep. 197; Martin v. Insurance Co., 106 Tenn. 523, 61 S. W. 1024; Cooley’s Ins. Briefs, 2819.
9. A broker such as is mentioned in the preceding paragraph of this opinion has no authority to consent to the cancellation of a policy issued to his principal, nor to issue nor to receive another policy issued in lieu of the policy sought to be canceled. Insurance Co. v. Urbansky, 113 Ky. 624, 68 S. W. 654;. Martin v. Insurance Co., 106 Tenn. 523, 61 S. W. 1025; Grace v. Insurance Co., 109 U. S. 278, 3 Sup. Ct. 207, 27 L. Ed. 932; Johnson v. Insurance Co., 66 Ohio St. 6, 63 N. E. 612; Clark v. Insurance Co., supra; Quong Tue Sing v. Insurance Co., 86 Cal. 566, 25 Pac. 58, 10 L. R. A. 144; Insurance Co. v. McKenzie, 70 Ill. App. 615; Massasoit v. Insurance Co., 125 Mass. 110; Yoshimi v. Insurance Co., 99 App. Div. 69, 91 N. Y. Supp. 393.
10. Notice by an insurance company to its agent, who is not also the agent of the insured for the purpose of receiving such notice is ineffectual and will not work a cancellation of the policy. Such notice is no more than notice by the company to itself that the policy must be canceled. Insurance Co. v. McKenzie, 70 Ill. App. 622; Insurance Co. v. Turnbull, 86 Ky. 230, 5 S. W. 542; Mill Co. v. Insurance Co., 105 Mo. App. 146, 79 S. W. 721; Lumber Co. v. Insurance Co., 158 Iowa, 563, 138 N. W. 504, 51 L. R. A. (N. S.) 539; May on Ins. (3d Ed.) 117; Cooley’s Ins. Briefs, 2796; Insurance Go. v. King, 108 Ark. 130, 156 S. W. 445.
Applying the foregoing rules of law to the *462facts of this case, we conclude that Fried-lander & Ludde were not the agents of defendant in error for the purpose of receiving notice of the cancellation of the binder issued by them in the North British & Mercantile Company, nor for the purpose of waiving the five days’ notice required by the implied terms of such binder, nor for canceling said binder and substituting the binder of plaintiff in error in lieu thereof. Therefore the binder in the North British & Mercantile Company was not legally canceled, and the attempted substitution of the binder on the part of the plaintiff in error was void.
As we construe the request of defendant in error, made first to Friedlander on the street, and afterwards to Friedlander & Ludde in their office, to keep him protected and to keep the property protected, it amounted to no more than to let the binders which had theretofore been issued remain in force; and it is apparent from the testimony that these agents so understood those requests at the time they were made. The parties to these conversations admit that they did not have in mind the cancellation of either of said binders, and the substitution of others in their place, nor the probability of any such cancellation or substitution being necessary. If Friedlander & Ludde had not undertaken to cancel the binder in the North British & Mercantile Company without giving the five days’ notice to which defendant in error was entitled, these requests would have been fully complied with, and defendant in error would have had ample time, as the law contemplates he should have had, to place the risk elsewhere'. A request to protect should not be construed as authority to destroy such protection. That the agents believed that they had such authority only shows their misapprehension of the law.
Had the defendant in error known of such cancellation and substitution prior to the fire, and made no objection thereto, it would have constituted a waiver on his part as to the binder in the North British & Mercantile Company, and an acceptance of the binder attempted to be substituted therefor. But, as the rights of all parties became fixed at the time of the destruction of the property, he could not thereafter give vitality to the unauthorized acts of the insurance agents by ratifying the same.
This ease must be viewed in the light of one who may have obtained insurance under circumstances similar to those of defendant in error, except the attempted issuance of the second binder. Had the agents, upon receiving the telegram to cancel the binder, undertaken to have done so without the knowledge or consent of the • defendant in error, and without issuing any other binder, and had the property been destroyed as it was, clearly the defendant in error would have' been entitled to recover on the first binder, for the reason that such binder would have remained in force until he had received five days’ notice of intention to cancel same, unless he had sooner voluntarily surrendered it. If the agents had no authority to cancel the first binder, their attempted issuance of the second one in lieu thereof, without the knowledge or consent of defendant in error, was a nullity.
The case of Insurance Co. v. Turner, 147 S. W. 625, may seem to be against the decision reached by us in this case. In that case it was alleged that the insurance agent was the agent of the insured for the purpose of keeping the property insured, and that “it was his duty to reinsure the house, if for any reason the insurance he had procured for appellee in the Farmers’ & Merchants’ Company should fail or become invalid.” We infer from the opinion that the court found this allegation to be true, and that such policy had failed on account of the insolvency of the company issuing the same. It does not appear to us that this finding was justified by the evidence, but, if so, the decision in that case is correct. We do not so find in the instant case, but to the contrary. It appears from the opinion in the Turner Case that the former policy was attempted to be canceled on account of the supposed insolvency of the company in which it had been issued, and that the company issuing the second policy knew, through its special agent, Hirsch, that it was issuing its policy in lieu of the former policy, without the knowledge or consent of the insured. These facts appear to differentiate the Turner Case from the instant case, but, if they do not, we decline to follow that case.
The disposition which we make of this case renders it unnecessary to pass on other assignments of error.
For the error of the court in refusing to instruct the jury to return a verdict for plaintiff in error, the judgment of the trial court is reversed, and judgment is here rendered for plaintiff in error.
Reversed and rendered.

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