Miller v. Northwestern Mut. Life Ins. Co. of Milwaukee , 49 C.C.A. 330 ( 1901 )

BOYD, District Judge

(after stating the facts). The application consisting of the three parts put in course of preparation on the 7th of June, with John’s receipt for the first premium, given June 14th, and forwarded together on the last-named date to the state agent at Richmond, constituted th^ initial step of the parties in this transaction. This was the proposal of Miller, the applicant, for a policy of insurance upon his life in the defendant’s company, and, according to the terms of the application, the right was reserved to the company to accept or reject the proposition; for it is set forth in express terms that the statements and representations made either to or by the agent taking the application should not be binding on the company, or in any way affect its right, unless reduced to writing and approved by the company at its home office, which was in Milwaukee, Wis. Certainly, so far there was no obligation resting on the company, for the application had not yet reached the place for approval. There was no unreasonable delay on the part of the company’s agents, under the circumstances, in forwarding the application to the home office; for when Cary received it at Richmond, on the 16th of June, two days after it was sent from Coeburn, he discovered inaccuracies and returned it for correction. The corrections were mades the application sent to him, he mailed it at once, and it was received at the home office in Milwaukee on June 22d. After an examination the company, through its chief medical officer, by letter dated June 24th, called for further information in regard to applicant’s use of intoxicating liquors. The state agent at Richmond received the letter asking this information on June 27th, and at once communicated its contents to John, the agent at Coeburn. John called upon the applicant, and the latter answered the inquiiy by his letter of July 1st. In this letter the applicant reiterates, in substance, the answers he had given to questions upon the same subject in the application, and goes further and admits in his letter that his application is only pending the action of the company, and asks, if his explanation is not satisfactory, that the company will return his check and consider the application withdrawn. We think the court may take judicial notice of the way in which contracts for insurance are usually regulated. Abb. Tr. Ev. (2d Ed.) p. 590, par. 5. There is nothing here to support the theory that John was invested by this company with any power or authority beyond that usually confided to local life insurance agents; that is, to explain the character of their principal’s business and operations, and to solicit and forward applications or proposals for policies, accompanied by 'the statements of applicants and the necessary medical examinations. It is true that John stated to the applicant at the time of the payment of the premium, or about that time, that if the premium was paid the insurance would take effect from that time; but he then and there qualified this statement by saying that the company would have to approve it, to which the applicant assented. It is thus shown that applicant understood fully at the time the premium was paid to John and the application forwarded that there was no contract, and that the application must be passed upon and approved by the company at its home office before it became binding upon the latter. If there was any uncertainty as to how the applicant regarded the situation when he paid the premium, he himself has set the matter at rest by his letter of July 1st, in which he gives additional explanation as to his use of intoxicants, and, after expressing the hope that his statement would be satisfactory, says, if it is not, to return his check and consider his application withdrawn. Here the applicant in unmistakable terms admits that there was no contract; that the matter was still in fieri, and dependent upon the action of the company for its completion. The acceptance by the company of the applicant’s proposal was essential to the creation of a contract of insurance. Insurance Co. v. Young, 23 Wall. 85, 23 L. Ed. 152; Insurance Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610; Giddings v. Insurance Co., 102 U. S. 108, 26 L. Ed. 92.

Under the circumstances, we do not deem it necessary to discuss at length the power of the agent to bind his principal. It is well settled that he can only do so when acting within the scope of his agency. An oral contract of insurance, in order to be valid, must be definite as to time, rate of premium, etc., and the evidence adduced to establish such contract must justify the inference that the same was completed. Was there any completed contract in this case? The plaintiff in error relies on the statement of John, the local agent, that the insurance would take effect from the payment of the premium. This action of John, taken alone, is not sufficient to bind his principal; for neither the fact nor the scope of agency can be proved by the agent’s acts, representations, declarations, or admissions. The agency must first be established, and either a specific authority, or one of so general a nature as to give him authority to do the act in question, or a subsequent ratification with full knowledge, or a holding out to the world, must be proved. It is a settled principle that:

“Third parties dealing with an agent are put upon their guard by the very fact, and do so at their own risk. They cannot rely upon the agent’s assumption of authority, but. are to be regarded as dealing with the power before them, and must, at their peril, observe that the act done by the agent is legally identical with the act authorized by the power. Especially is this the case with one dealing with an agent whose authority he knows to bo special. And it is the duty of all having transactions with an agent in his representative capacity to inquire into the extent of his authority.” 1 Am. & Eng. Enc. Law, p. 987, and cases cited in note.

The whole course of the transaction under consideration, in our opinion, supports' the conclusion that the applicant fully understood John’s position,—that he was merely the instrument of negotiation, and that no contract of insurance was effected until the application ■ was approved by the company at its home office, and the policy issued. The conversation between John and the applicant with reference to the payment of the premium bears out this conclusion; for, although John told applicant that the insurance would take effect from the time of the payment of the premium, he qualified this statement by saying that the company would have to approve .the application, to which the applicant assented. The receipt given by John does not sustain the contention that the payment of premium at that time bound the company. The receipt does not in itself contain any terms which can be construed into a contract to insure. On the other hand, it expressly recites that the money paid by the applicant to John was paid as the first annual premium on policy for $5,000 with the Northwestern Mutual. No policy was in existence when the receipt was given, because none had been issued. The application which accompanied the premium was applicant’s proposal for insurance, subject to the approval of the company ; the approval to be in the form of a policy, which, when issued,, became the evidence of the company’s obligation. It was the first premium upon this policy, when issued, that the applicant was paying, and we are unable to find any other conclusion consistent with reason and intelligent business dealing.

The judgment of the circuit court is affirmed.