Progressive Fire Insurance v. Morrison , 72 Ga. App. 473 ( 1945 )

1. If a policy of insurance be lapsed for nonpayment of a premium, an unconditional acceptance of payment of the premium by the insurer after such default revives the policy.

2. The principle that the insured is bound by the express limitations in a policy of insurance on the authority of an agent is not involved under the facts of this case. We are dealing here with the conduct of the president of the company, in connection with the approved activities of the agency.

DECIDED MAY 16, 1945. L. F. Morrison, whom we will call the plaintiff, obtained a judgment against Progressive Fire Insurance Company, whom we will call the defendant, on a fire-insurance policy covering household furniture. At the time this policy was issued one was also issued on the dwelling house. The defendant filed a motion for a new trial, which was overruled, and he complains of this judgment.

It appears from the evidence that the policy was issued on March 22, 1943. At the time the policy was issued the plaintiff's address was LaFayette, Georgia. The premium was 27 cents per week, with four weeks grace period. The premiums on both policies, it appears, were payable at the same time, and the payments involved here on both policies, were mailed, at the instance of the insurer, to its agency in Dalton, Georgia. It appears that from the time the policy was issued until June, 1943, the plaintiff himself paid the premiums in cash to the agent of the company. These payments were never allowed to become more than two weeks in arrears, that is, within the grace period. In June, the plaintiff left for Detroit. Arrangements were made with the agent to furnish the plaintiff's wife self-addressed, stamped envelopes for the purpose of remitting the premiums to the defendant through its agency at Dalton, Georgia. It is conceded that Mrs. Morrison made these payments sufficiently to carry the policy until November 8, 1943. It is from this point until the fire on January 20, 1944, which involves the controversy as to whether the premiums had been paid and whether the policy was in force at the date of the fire.

The plaintiff's evidence is to the effect that on November 21, 1943, she sent a post-office money order for the premium in an envelope furnished by the company, and along with it she sent her receipt book, as was the custom; that this premium was for the months of October and November; that the company retained and cashed the money order and returned her receipt book; that on January 11, 1944, she mailed to the company another post-office money order covering the premiums for December, 1943, and January, 1944; that the company cashed this money order, but did not return her receipt book; that the household effects were destroyed by fire on January 20; that thereafter she wrote the company a number of letters requesting the return of the receipt book, but could get no response, and appealed to the postal authorities, who traced the money orders referred to and furnished information that the November money order was cashed on November 29, 1943, and the other on January 16, 1944. It appears that the envelope furnished by the company in which the November payment was sent was directed to Progressive Life Insurance Company rather than to Progressive Fire Insurance Company. It does not appear that the company through any agent or agency notified the plaintiff until May, 1944, that the policy had lapsed for non-payment of premiums. Here it may be well to set out the testimony of the president of the defendant as to his explanation of the transaction: "With reference to the L. F. Morrison policy, as to why my company has denied to pay anything under the terms of this fire-insurance policy: well, this is a weekly premium policy which was issued by the Progressive Fire Insurance Company on March 26, 1943, with a weekly premium of 27 cents a week; this premium was paid according to our records through the week of October 4th, 1943. The policy itself provides for four weeks grace period. There was no premium received by Progressive Fire Insurance Company, direct to Progressive Fire Insurance Company, until January 11, 1944. The policy was canceled by the company on November 8th, due to the fact that the premium was four weeks in arrears, and the Progressive Fire Insurance Company received no other premium until January 16th, it actually came into the company on January 16th, 1944; the amount of that was $4.36. When that $4.36 came in January, 1944, as to what the company did with that money: well, it went in the suspension item; it went on the cash book we have for applications for new policies, or a revival on that particular policy. Yes, my company had lapsed the policy for nonpayment of the premium on November 8th, and the Progressive Fire Insurance Company received no premium until the one I testified about, on January 11, 1944. With reference to the testimony of Mrs. Morrison as to a payment which she claimed to have made in November, as to what I know about that: well, after we were notified of the fire, and after May, I believe it was, when Mr. Morrison produced the receipt, the post-office money order [was] bought for the name of Progressive Life Insurance Company, for $4.36. I know that the Progressive fire Insurance Company did not receive the money order in November. If the premium had been paid on November 21st to the Progressive Fire Insurance Company, the policy would have already been lapsed; in other words, had the money been tendered to Progressive Fire Insurance Company in November, it would not have been accepted. My company had not received any new application for a revival of the policy after it had been lapsed on November 8th . . I said that the money which was received by the Progressive Fire Insurance Company in January was held in suspension. As to whether or not I know that it was not accepted in payment of the premium on this policy: well, we couldn't have accepted it because the policy had been canceled. I know that the money was not accepted by the company as a premium. As to what reason I gave that the money was held in suspension: well, because there was no application accompanying the money for a new policy; we couldn't act on it until we received an application. Yes, I offered to return that money to Mr. Morrison; I offered to return it to him either on the 9th or 10th of May, when he was in my office; that was the first time I saw the money in the other company . . . After a policy is lapsed with my company we have no further record of the policy, have no record of anything, any money being collected on it; we would have no record because we do not charge it to the agent any more; we have certain records, the original application, but it is stricken from our records, from the active records. . . When we got the money in January, as to whether or not I sent Mr. Morrison an application for revival, or whether I had time to do that before the fire: no, the money first came into the fire company on January 16, 1944; it was put on the cashbook as a suspension item; that money, of course, was sent in by an agent (sometimes the application comes in a week or two later), and four days later we were notified of the fire; you see it takes from two to three weeks after a person makes application for an industrial fire policy, if it doesn't hang up anywhere before the policy is issued; the reason for the difference in weeks variation for two or three weeks, the agent doesn't send in applications except on Thursday of each week. That reaches the home office on Saturday, then if the application is in shape and is acceptable, then it starts through the mill, and would be issued the following week; so the closest time that any application, that is, if it was made on Thursday, if it was made on Monday of that same week, the agent wouldn't mail it until Thursday, and for that reason it takes from two to three weeks from the time the application is filed before the policy could be issued, under the terms of the policy. As to whether or not the Progressive Fire Insurance Company is what is known as an industrial company: no, we are a regular fire-insurance company; we sell industrial fire insurance. As to what is meant by industrial fire insurance and what my system of accounting is: well, in other words, industrial fire business is a weekly policy; the policy is issued for a period of one week, and renewable at the option of the company from week to week, with a grace period of four weeks to pay the premium so as to protect the insured in that four weeks should there be a loss under the contract. Under that system we issue our fire policies — for an illustration there are four Mondays in a month, we have four issuing dates; if it is five Mondays, we have five issuing dates; it is not like the regular fire policies due to the fact that we give a grace period, the regular fire policies don't give a grace period; we operate on a accounting system whereby we debit these policies when issued to the agent in handling the accounting end of it, whether the fire or life, operate on the same basis; we charge out to the agent the number of policies issued to that account from week to week; for illustration, we say this agent has 100 policies issued to that time, then he comes along and sends in 10 applications, maybe won't issue but 8 of them, then that makes him up to 108; the premium is added up, that money totals the amount issued to that account; if somebody is in arrears four weeks then that agent must lapse that policy; he has a regular schedule that he sends in on that policy for four weeks; all agents are instructed to receive no premium more than four weeks in arrears, and he must send in that schedule; that comes up to the home office; we make up what we call official action. Now, if he says in his report he has lapsed policy premiums of $4, then that is in his lapse schedule. To get the amount of that account you deduct the number of policies, eight from 100 to be 92, and $4 lapse would leave him $36 instead of $40 debit, when that is done; but from the accounting standpoint he remits money; that amount of premiums collected on that, he remits as a total amount and not as an individual amount; the agent sends in $36, $36 debit that week; we don't actually know whose premium that is; in other words, the account calls for $36; we get $36. The only way the actual premium is known is to look at the agent's collection book. When a policy is lapsed then we send the agent the official lapse schedule, he takes it out of collection; he can not put that back in his collection book until on filing a revival application and we act at the home office, and it can be put back again; we do not deal in names, except the agent's book; they might have a thousand-dollar policy holder and he sends the actual amount he collects of everybody in one sum, but the accounting system, it is perfect, except we can never tell at the home office until the agent's account book is referred to as to where the premium is. That is the reason if the agent makes an error any time we always go back and correct that error — we are all human. That is the same principle on which all industrial-insurance companies operate, maybe one or two per cent. that do not have the advantage of errors, handled in cash. . . Yes, I am the president of this insurance company. I hold the office of president with the life-insurance company. As president of this fire-insurance company I have supervision of its records, and through that supervision I know all about the business of this fire-insurance company. I know what money is received, and under my direction that money is disposed of. The same knowledge I have with respect to the fire-insurance company I have with respect to the life-insurance company . . . Yes, there was a premium of $4.36 that got lost. As to whether or not I have given L. F. Morrison credit for it; well, it wasn't received in the grace period of the policy. Yes, that is the reason. I don't may any point about it being sent to the wrong company, none at all. As to whether or not for the purpose of this case we can treat that premium as having been received by the progressive Fire Insurance Company: well, not to our knowledge, until May, 1944. As to whether or not I said a minute ago I wasn't making any point about it going to the life-insurance company instead of the fire-insurance company: well, if you will let me explain what I am trying to say, if that money had been received by the life-insurance company in October, during the grace period, even though if we didn't know it then we would give it to him; it belonged to Mr. Morrison, not to us. . . I don't advertise that I am the same company, but we do advertise that we are affiliated. Yes, the home office is in the same building, and the president sits in the same office every day, and both companies keep a desk for the same president, and they keep their records in the same safe. Both companies do not hire the same secretary, but my secretary's wages are paid by both funds, every employee in the home office is paid by both companies; all employees on the fire-insurance company and the life-insurance company are joint employees for both. Yes, Paul McNally was selling life insurance while he was selling fire insurance, as to whether or not he had envelopes with the name of the fire-insurance company on them and the name of the life-insurance company; well, yes, should have. Those envelopes were furnished to him to give to policyholders in order to send premiums in . . . As to whether or not the Progressive Fire Insurance Company in Atlanta cashed both money orders: well, Progressive Fire Insurance cashed the one that went to it, and the life company the other that went to it. Yes, the Progressive Insurance Companies cashed both money orders in Atlanta; in other words two items went through and were credited to those accounts."

It further appears from the defendant's evidence that the January premium was transferred from Progressive Life Insurance Company to Progressive Fire Insurance Company in May. It appears that there is a provision in the insurance policy as follows: "If any premiums shall not be paid when due, this policy shall be void except as hereinafter provided, and it is agreed that this provision shall not be considered in any respect waived by the acceptance of overdue premiums upon this policy, or by the agreement of any agent, unless same is entered in the space for endorsement and signed by the president and secretary."

The defendant also introduced a registry of policies issued and the name of L. F. Morrison appeared thereon; also, a schedule of lapsed policies which included the plaintiff's; also a registry of lapsed and cancellations in which the plaintiff was included. These documents purported to show that the agency at Dalton had lapsed the policy as of November 8, 1943. 1. From the record set forth above the question here is whether the policy sued upon was of force on the date of the fire. In determining this question it depends, not so much on a calculation as to whether the premiums had been paid within the grace period as the plaintiff's evidence tends to show, but whether or not the defendant by its conduct is estopped from contending that they were not paid and that the policy was not of force on the date of the fire. If the policy was not of force because it had lapsed for the nonpayment of premiums on November 8, 1943, it is undisputed that the money order for the premium of November 21st was cashed under the official direction of the president of the defendant company and the policy thus revived. From his own testimony he knew — certainly from the records of the company — that L. F. Morrison had no life-insurance policy. The premium payment was forwarded to the agency of the company at Dalton, Georgia, in a self-addressed, stamped envelope furnished by the company for the very purpose of having its policy holders make remittances. The president directed the affairs of the two companies, Progressive Life Insurance Company and Progressive Fire Insurance Company, affiliated companies. Should the policy holder in this instance be chargeable with the misplacement of this premium, mailed to the life-insurance branch of the company? All of the mail went into the same office; the books were kept in the same safe; the money was deposited and expended with the knowledge and under the direction of the president as he walked from one desk to the other, in the same room. Each company paid half of the president's salary, as well as half of the salaries of the other employees of the companies. We deem it inescapable that the November payment, as a matter of fact and of law under this record, must be considered as a payment made by the insured to the insurer, Progressive Fire Insurance Company. Moreover, more than a month thereafter, on January 11th, the defendant received another two-months payment in the form of a post-office money order. This money order for premium payment was cashed under the direction of the president of the company and deposited in its funds, according to the president's own testimony, on January 16, 1944. It is true that his explanation is that it was marked on the books of Progressive Fire Insurance Company in the suspension fund awaiting an application for reinstatement. Yet, according to the company's own records at Dalton, Georgia, the policy had lapsed on November 8, 1943. Just how long was this item to be held in suspension? No word or notice of any kind was given the insured that the policy had lapsed for nonpayment of the premium. No opportunity was given to procure insurance elsewhere from November 8, 1943, nearly two months before the fire, and until the date of the fire, January 20, 1944, yet two premiums of two months each had been received and deposited, one on November 29, 1943, and another on January 16, 1944, the latter six days before the fire, the former nearly two months. We are speaking now of the dates, not when the agency at Dalton received the remittances, but the dates when the defendant actually received the money. Moreover it appears that the tender of the premiums paid was not made by the defendant to the plaintiff for approximately four months after the fire. There appears no sufficient reason why the insurer should not have notified the insured in some manner of the lapse of his policy, either through the Dalton agency or the home office in Atlanta, or have returned the money orders to him, or have notified him that the remittance was being held pending an application for reinstatement.

In our opinion this case is controlled in principle by GermanAmerican Mutual Life Assn. v. Farley, 102 Ga. 720, 743 (29 S.E. 615), wherein the court said: "In the present case, an offer of restitution of premiums was made by the plea of the defendant, but the difficulty with this offer of restitution is that it came too late. The reception by it of the premiums which the contract required the assured to pay, with knowledge that false representations had been made in order to induce the contract, was an approval, in law, of the contract thus made, and operated as an estoppel upon the insurer thereafter to insist upon the invalidity of the policy. To allow it now to recede from its contract would be to permit it, during the lifetime of the assured, to lead him to believe that he was in fact insured, and receive his money, taking the chances of his surviving the life of the policy. Had it rescinded or repudiated the contract when its president discovered the false representations, assuming that under the facts it would have had the right of repudiation, the assured might have taken the precaution to have procured elsewhere insurance upon his life; and to allow it, at this late day, to escape liability upon such a pretext would operate as a gross fraud upon the assured. The law will not presume that the insurer intended to perpetrate a fraud; but will rather presume, in favor of innocence of an evil intent, that when it failed to notify the assured of its purpose to repudiate the agreement, it intended to waive any breach of the warranty which might have occurred in consequence of the representations made in the application." In our opinion the acceptance of the premiums and placing the money in the general funds of the defendant amounted to such an unconditional acceptance as to estop the defendant to contend that the policy was not in force at the date of the fire. See in this connectionKelley v. Carolina Life Ins. Co., 48 Ga. App. 106 (171 S.E. 847), wherein it is said: "While an insurance agent is without authority to bind his principal by any waiver of the terms of the policy after a forfeiture has already taken place (Finleyson v.Liverpool c. Ins. Co., 16 Ga. App. 53, 84 S.E. 311;Volunteer State Life Ins. Co. v. McGinnis, 29 Ga. App. 370,374, 115 S.E. 287), yet a forfeiture of the policy for nonpayment of a premium when due is waived by an unconditional acceptance of payment of the premium by the principal after such default. Georgia Masonic Mutual Life Ins. Co. v. Gibson,52 Ga. 640; German c. Life Ins. Assn. v. Farley, 102 Ga. 720 (3) (29 S.E. 615); Neal v. Gray, 124 Ga. 510 (52 S.E. 62); 32 C. J., §§ 625, 628." See also Causey v. Gulf LifeInsurance Co., 62 Ga. App. 378, 380 (8 S.E.2d 535), where it is said that, "The general rule is that an insurer which receives, accepts, and retains past-due premiums, assessments, or dues, paid subsequent to the due date and the expiration of the days of grace, if any, renews the contract and waives the forfeiture for nonpayment, provided such acceptance is unconditional and the facts are known, since an insurer which accepts past-due premiums or assessments, in violation of its own regulations, can not invoke the same in order to avoid liability."

2. Counsel for the defendant cite us to the case of Plumer v. Continental Casualty Co., 12 Ga. App. 594 (77 S.E. 917). The facts of that case are so different from the case at bar that we can not discern its application. In the case at bar the defendant, the principal, through its president, had knowledge of the facts. Also, as to Union Central Life Ins. Co. v. Merrell, 52 Ga. App. 831 (184 S.E. 655). In the Merrell case the company furnished receipts to the agent and he received the premium from the policyholder and issued an unconditional receipt. The court held that this bound the principal, since they received the premium and by way of explanation said that if the receipt had brought home to the insured that it was only a suspense payment, then the company would not have been bound. In the instant case there was no receipt of any kind issued to the insured. According to her testimony her receipt book was not returned by the agent at Dalton, to whom she mailed it, and the post-office money order for the payment was forwarded to the home office, where it was cashed and deposited in the general funds of the company; and the testimony as to a suspense payment was that it was a mere entry on the books of the company, under the direction of the president, at the home office. Again, counsel for the defendant cite us to Rome Industrial Insurance Co. v. Eidson, 138 Ga. 592 (75 S.E. 657), and New York Life Insurance Co. v.Patten, 151 Ga. 185 (106 S.E. 183). Both of those cases dealt with the limitations on the authority of an agent, and as above stated, that question is not here involved. We are dealing with the conduct of the principal who had the authority to subject the defendant to such conduct as would estop it.

In conclusion, we may take an overall summary of the facts: The insurance was procured on March 22, 1943, through the Dalton agency, the insured living at LaFayette, Georgia. The premiums were paid by the insured in person to the agents of the Dalton agency until the following June. Then the insured went to Detroit to work. The agent then furnished stamped, addressed envelopes to the wife of the insured for the purpose of mailing the remittances to the agency in Dalton, Georgia. She admittedly did this sufficiently to carry the policy until November 8th, which date included the grace period. Then the records of the agency at Dalton show the policy was lapsed for nonpayment of premiums on this date. The insured's evidence shows the policy was not lapsed, for the premiums had been paid. Thereafter, on November 21, the wife of the insured mailed a post-office money order for the November and December premiums to the agency at Dalton, in an envelope furnished by the agency and directed to the Progressive Life Insurance Company there. The insured did not have a life policy. Like the home office, the personnel of the agency at Dalton attended to the affairs of both affiliates. Notwithstanding the fact that the agency's records showed that the policy of the insured had been lapsed on November 8th, and that the records showed the absence of a life-insurance policy, the post-office money order was sent to the home office, and the receipt book returned to the wife of the insured (according to her testimony), and was properly credited. The home office cashed the money order and placed the proceeds to the general funds of the life affiliate on November 29, 1943. It was interned as a foreign payment. The president testified it was the same as if a stranger had made a payment. Thereafter, on January 11, the wife of the insured, having no knowledge or information as to the fate of the November 21 payment, forwarded to the Dalton agency another post-office money order for the December and January premiums, together with the receipt book. This was sent to the fire-insurance affiliate. The receipt book was never returned to her. The money order was forwarded by the agency to the home office, where it was cashed on January 16, 1944, and deposited to the general funds of the defendant, and a book entry "suspension" was made, awaiting, the president testified, for a revival application.

Under this situation, the court did not err in overruling the motion for a new trial.

Judgment affirmed. Broyles, C. J., and Parker, J., concur.