Jacaman v. Fidelity & Guaranty Insurance Underwriters, Inc.

Dissenting Opinion

NORVELL, Justice.

Both of the insurance polices upon which petitioner sued were issued by R. E. Laurel, doing business as Laurel Insurance Agency, in his capacity as recording agent for the respondent insurance companies. As to the authority of a statutory recording agent, see Shaller v. Commercial Standard Insurance Company, 158 Tex. 143, 309 S.W. 2d 59 (1958). The policies were issued in 1958. The loss by fire occurred in 1963 within the five year term prescribed in the policies. The crucial conversation between R. E. Laurel and petitioner took place about two months before the fire. At that time, Laurel purported to act on behalf of the respondents and as it was shown that the relationship of principal and agent existed between respondents and Laurel in 1958, it will be presumed or inferred, in the absence of rebuttal testimony, that such legal relationship continued and was in existence at the time of petitioner’s conversation with Laurel in 1963. McCormick and Ray, Texas Law of Evidence (2d Ed.) § 81.

My difference with the court lies in the interpretation of the conversation between petitioner and Laurel. The court holds that the effect of this conversation was to modify the terms of the policies as originally written so as to provide for coverage of only that portion of the “contents” remaining on hand at the time of the fire which had been removed from La Popular Store to the Frontier Shop. To me, this view is highly unrealistic and in effect creates a most unusual type of insurance which is wholly unsuited to the business of retail merchandising. We are here dealing with a “contents” policy covering a stock of goods. In Appleman, Insurance Law and Practice, § 2296, it is said:

“A fire policy on a stock of goods which, in the nature of the business, will be continuously changed is insurance of stock in general, and not of the specific items on hand at the time of the issuance of the contract; it will, accordingly, cover new goods as acquired. Nor is this result changed by a moving permit endorsement. And a policy upon stock in trade may cover the aggregate stock of a vendor and vendee, when assembled together for carrying on the same business.”

We have a merger of stocks of merchandise, so to speak. Had the stock of merchandise in the Frontier Shop been moved to La Popular store, there could be little doubt that the policies as originally written would have covered the goods brought in from the Frontier Shop just as if they had been purchased from a wholesaler. I see no difference between this stated situation and the one now before us where with the knowledge and consent of the recording agent, the stock of La Popular was merged with that of the Frontier Shop at the location of the latter establishment. The obvious result of the conversation and agreement between petitioner and the agent Laurel (by whichever theory that may be selected — waiver, estoppel or change in policy provision) was to provide coverage up to $15,000.00 upon a changing stock of merchandise then located at the Frontier Shop just as the original policies provided for coverage of a changing stock of merchandise of approximately $15,000.00 in value located at La Popular.¹ The change was one of location of the insured “contents” and not one which wholly changed the nature of the contract to cover only a stock of merchandise that was constantly being diminished by sales therefrom.

I cannot accept the thesis that after the Popular store merchandise was moved to the Frontier Shop, the parties intended that for insurance purposes the merchandise then in the Frontier Shop should be considered as two stocks of merchandise, one stock being covered by one group of policies and the other stock covered by an entirely' separate group of policies. Certainly, merchants do not procure such a type of insurance upon stocks of merchandise owned by a single individual, located in a single store and handled as a single merchandising unit.

Both policies were written upon the Texas standard form designed to cover stocks of goods of mercantile establishments and provided coverage “On Contents — in the two-story, metal roof, brick building, location, 415-417 Convent Avenue, Lardeo, Texas.” In both policies the occupancy was stated as “dry goods store and hotel above.” The policies contained the following provisions:

“Insurance on stock shall include all stocks of merchandise (finished, in process, or unfinished) including packaging materials, * * *.”

“Contents — Insurance on ‘Contents’ shall include all property included above in ‘Stock/ * *

Some time before the fire, M. S. Jacaman (petitioner’s father) moved the contents of La Popular store located at 415-417 Convent Avenue to the Frontier Shop which was also owned by Jacaman. This was done to remove any question of homestead claim to La Popular premises so that Jacaman could mortgage the same in order to secure funds to purchase a vacant bank building.

Some time before the fire and after Laurel knew that the contents of La Popular had been moved to the Frontier Shop, he had a conversation with petitioner and mentioned the circumstance that the La Popular was now vacant. There was also some discussion concerning a balance which Laurel claimed was due him on the Jaca-man insurance account. The question then arose as to policies covering the “contents” of La Popular which had been moved to the Frontier Shop. Laurel, according to Miss Jacaman, said “that does not affect anything as they are under your father’s name, as long as they are under your father’s name.” At that time, nor thereafter, were the policies cancelled nor were any unearned premiums returned or tendered to petitioner. In view of the peremptory instruction, we should view the testimony in the light most favorable to petitioner. When this is done, the conclusion seems inescapable that a change in the location of the insured “contents” or stock of merchandise was effected by oral agreement or by means of waiver or estoppel. Such change may be validly made orally by a recording agent.

Change of location is the important element in this case. I agree with petitioner’s argument that, “Agent Laurel impliedly gave his consent to this change of location, or at least waived any objection to same by his conduct. The effect of that consent was exactly as if he would have written an endorsement to the policy granting consent to a change of location. The end result was simply that an insurance policy on the ‘contents’ of a retail store at one location became an insurance policy on the ‘contents’ of a retail store at the changed location. It is as simple as that.”

I respectfully dissent from the order affirming the judgment of the courts below.

SMITH and STEAKLEY JJ., join in this dissent.

1 . The value of the stock of merchandise and goods destroyed by the Are was in excess of the insurance carried thereon, considering the policies originally issued to cover “contents” at the Frontier Shop location, plus the two policies involved in this litigation. If liable at all, respondents are liable for the full amount of the policies issued by them.