Essington Enamel Co. v. Granite State Fire Insurance

Opinion by

Orlad y, J.,

The plaintiff was engaged, at North Essington, Delaware county, Pennsylvania, in the business of enameling leather for its own use, and for trade purposes. It applied for insurance on its stock, machinery and byproducts, to Clarke & Cortis, insurance agents and brokers of New York city, and employed them as its brokers to place $17,000 of insurance on the named property. These brokers made a specialty of lumber and tannery insuranee; and after placing $á,000 of the amount in New York city, on May 13, 1908, wired to William T. Henry (who was a well-known insurance agent and broker at Warren, Penna.) to bind $10,000 on the machinery and stock of the plaintiff company at Essington, Delaware county, in this state, and the same day received a wire reply binding the risk, and asking for a diagram and amount of other insurance. After some correspondence between these parties, the amount was increased to $13,000 and Henry sent to Clarke & Cortis the policy in suit, which policy, with others, Clarke & Cortis transmitted, on May 27, 1908, to the plaintiff at Essington. On June 9, following, the plant was entirely destroyed by fire, and so far as the defendant’s rights are concerned, it was a total loss.

It clearly appears that when Mr. Adams, who represented the plaintiff, solicited the insurance through Clarke & Cortis, he did not know the names of the companies in which it would be placed; he did not know Henry, the defendant’s agent at Warren, nor did he know of any custom, trade relation or business understanding between insurance agents or brokers in regard to the time when premiums were to be paid; he only knew that Clarke & Cortis, his brokers, extended to him a credit of thirty days, within which he was to pay his premiums to them, and it as clearly appears, that between Clarke & Cortis and Henry there was a business understanding and agreement, that had been in force for quite a while previous to issuing this policy, by which Clarke & Cortis had a credit of sixty days in their settlements with him. The defendant company supplied blank policies to Henry, which were signed by the president and secretary of the company, on which, immediately preceding their signatures, was the printed statement, “This policy shall not be valid until countersigned by the duly authorized agent of the company at Warren, Penna.” The concluding statement on the policy as delivered to the plaintiff being, “Countersigned- by W. F. Henry, Agent.” It is admitted that W. F. Henry was the legally authorized agent of the defendant at Warren, Penna., to solicit insurance, transact business, deliver policies and collect premiums. The policy is dated May 14, 1908, for $1,000, the term mentioned being for one year from May 13, 1908.

It is urged that the authority of Henry was limited to Warren and vicinity, but there is nothing in the request of the defendant to the insurance commissioner, by which Henry had been appointed its agent for the transaction of business in this state, to qualify or limit his authority as to the amount, locality or character of risk, save in the words, “in accordance with the powers and instructions given to them (him) by this company.”

This request to the insurance commissioner embraced a list of seventy-four other persons, as agents of the defendant in this state, who were indicated by name and the place of their residences, but none of whom resided in Delaware county. In some counties there is named one person, in others two, three, four, five and seven. If Henry had been known to be a local agent, with authority limited to Warren and vicinity, it is strange that so effective a defense would not have been urged by direct proof rather than by inference and construction of an alleged custom. But there is nothing to indicate that he was a local agent with limited authority. . He was certified by the defendant (and so far as the plaintiff could have knowledge on that subject), as a general agent with statewide authority. By the company’s certificate he was appointed its agent, “for the Commonwealth of Pennsylvania,” which was ratified by the insurance commissioner, who designated Henry “as an agent to solicit risks in this state.” Had the company intended tó inform a policy holder of a limitation of that apparent authority, it could and should have done so by appropriate words in the policy. The private instructions and secret rules that are known only by the company and its agent cannot be invoked to defeat the very contract it ostensibly holds the agent out with apparent power to make. Such rules may be effective in their personal transactions, but should not be extended to third parties who would not be informed of them, even if inquiry had been made. It is true that in the circular issued by the insurance department the word "agents ” is used and not "agent,” but there is nothing in the Act of April 4, 1873, P. L. 20, 26, that requires a foreign insurance company to name more than one agent for this state, or in any county in it. That matter is left with the company and it may name as many as it thinks proper.

This policy was issued in the regular course of business and the credit extended to the plaintiff of thirty days by the brokers, and the credit of sixty days by the agent of defendant to the brokers, was not contrary to any rule, instructions or custom shown to be in force between the parties so as to affect this plaintiff. The course of dealing as to credit and payment of premiums, was well established, so that the policy became a binding contract upon its delivery at the latest: Scott v. Sun Fire Office 133 Pa. 322; Susq. Mut. Ins. Co. v. Elkins, 124 Pa. 484.

When the usual course of dealing between an insurance company and its agent is for the company to treat the agent as its debtor for the premiums on policies delivered to him, and to render bills periodically for them, the payment of the premium by the assured to the agent is payment to the company: Penna. Ins. Co. v. Carter, 8 Sadler, 191; Elkins v. Ins. Co., 113 Pa. 386, and when a policy is delivered without exacting the payment of the premium, the presumption is raised that a credit is extended and is a waiver of a condition of prepayment: May on Insurance, sec. 360; Universal Fire Ins. Co. v. Block, 109 Pa. 535; Riley v. Ins. Co., 110 Pa. 144; Gosch v. Ins. Co., 33 Pa. Superior Ct. 496; Snyder v. Ins. Co., 202 Pa. 161.

If an agent extends credit for the premium to the assured, and pays the amount to or is charged with it by the company, such payment inures to the benefit of the assured and consummates the contract: 16 Am. & Eng. Ency. of Law (2d ed.), 859; 19 Cyc. 776. This policy recites that “in consideration of the stipulations herein named and of fifty dollars premium” does insure, etc., which in connection with the concluding clause, that the policy shall not be valid until countersigned by the duly authorized agent at Warren, and the countersigning of the policy and delivery of it by the specified agent, estops the company from now saying that the premium was not paid.

It has been held many times that even if the policy provides that it should not take effect until the premium is paid in cash, the general agent has power to give a credit, and will be held to have waived it, if he delivered the policy without enforcing payment of the premium, and that the countersigning agent is such an agent: Richards on Insurance, 205, 206; Hagan v. Ins. Co., 186 U. S. 423; Lebanon Mutual Ins. Co. v. Hoover, 113 Pa. 591; Elkins v. Ins. Co., 113 Pa. 386; Gosch v. Ins. Co., 33 Pa. Superior Ct. 496; Universal Fire Ins. Co. v. Block, 109 Pa. 535.

The liability of the principal is coextensive with the agent’s ostensible authority: Farmers’ Mutual Ins. Co. v. Taylor, 73 Pa. 342; Hoge v. Ins. Co., 138 Pa. 66. The question is not so much what authority the agent had in point of fact, as it is what powers a third party dealing with him had the right to suppose he possessed, judging from his acts and the acts of his principal. If the agent is apparently exercising general powers in respect to insurance, the principal cannot discharge himself from liability upon a contract made by the agent by setting up private instructions, which are wholly unknown to the insured: 16 Am. & Eng. Ency. of Law (2d ed.), 916; Walker v. Lion Fire Ins. Co., 175 Pa. 345; Standard Leather Co. v. Ins. Co., 224 Pa. 186.

There is nothing in this record to indicate that this insurance was effected in any other method than that in which such contracts are ordinarily made, or that there was any deceit or bad faith practiced by the plaintiff or his broker, or that Henry acted in excess or in violation of his general authority. He had issued policies outside of Warren county, and his acts in so doing were ratified by the company. The testimony relied on to establish a custom among agents to bind this plaintiff fell far short of what is required by the decisions. To establish a custom the evidence must establish clearly and convincingly such a usage as can fairly be presumed to have entered into the intention of the parties: Adams v. Ins. Co., 76 Pa. 411. The true test is, that it has existed a sufficient length of time, not only to have become generally known to the dealers who are to be affected by it, but also to' warrant the presumption that contracts are made in reference to such usage or custom: Adams v. Ins. Co., 95 Pa. 348. Particular usages and customs of trade or business must be known by the party to be affected by them or they will not be binding, unless they are so notorious, universal and well established that his knowledge of them will be conclusively presumed: Collins v. Mechling, 1 Pa. Superior Ct. 594.

The sixth point presented (sixth assignment) substantially concedes that the extent and character of Henry’s agency was for the jury, and that question was carefully submitted to that tribunal.

The insured property was stock and machinery in buildings of the plaintiff, one of which was known as the benzine house. Its relation to the others was not shown, but it does appear, that it was not covered by this policy, and the proof is not clear that it was burned. There is no evidence that there was any of the interdicted thing (benzine) in the building bearing its name at the time the policy was issued or at the time of the fire, and the trial judge was not asked to instruct the jury in regard to it. See Fire Assn. v. Williamson, 26 Pa. 196; Lancaster Silver Plate Co. v. Ins. Co., 170 Pa. 151; Citizens’ Ins. Co. v. McLaughlin, 53 Pa. 485.

The alleged overvaluation of the property was satfactorily explained by witnesses, who were evidently believed by the jury, and the true value of the property destroyed was clearly fixed. There was no error in the-manner in which that question was submitted to them.

The trial in the court below was fairly conducted, and the defendant had no ground for complaint as to the manner of its submission to the jury as it withdrew its motion for a new trial. We find no reversible error in this record and the judgment is affirmed.