Kelly v. Commonwealth Insurance of Pennsylvania

1. A mere oral contract of insurance, supported by a sufficient consideration, which is to take effect forthwith, although it may be entered into cotemporaneously with an agreement by .the insurers to deliver, and the assured to accept subsequently, as a substitute therefor, a written policy by the former in the form usually adopted by them, becomes binding and remains in force until the delivery or tender of such policy. Until then, the condition usually inserted in such policies, requiring prepayment of the premium to make them binding, unless expressly adopted by the parties in such oral contract, forms no. part of the contract of insurance between them. 2. A mere demand of the premium, without insisting upon it or tendering a valid policy, does not terminate the oral insurance.- 3. Under such oral insurance, the insured may recover for a loss, although after it occurred, and while the insurers were ignorant of it, he paid them the premium, and received from them a written policy which was not binding on them, by reason of not being countersigned by one of their officers as was required in the body of it. 4. Whether an exception lies to the admission of testimony elicited by questions put by a juror ? (Query.)

This was an action upon a contract of insurance, to recover for damage by fire to a stock of goods of the plaintiffs, in a store in the City of Yew York, on the, 11th of July, 1860. The character of the contract appears by the pleadings and evidence hereinafter stated. The defendants were a corporation, chartered by the State of Pennsylvania; the plaintiffs were partners under the firm of “ Joseph Kelly & do.” . Policies of insurance issued by the former, in the State of Yew York, according to their usual form, contained provisions that they are “not to “ be valid until countersigned by their duly authorized agent, “and are to be made and accepted in reference to conditions “thereto annexed, which are to be used and resorted to, in “order to explain the rights and obligations of the parties “thereto, in all cases not therein otherwise specially provided “for.” They commenced with witnessing that the defend- , ants had received a certain premium from the insured, for insuring the described subject of insurance, but had also a condition annexed, that “no insurance, original or continued, should (shall) be considered as binding until the “actual payment of the premium.” In the year 1.860, one David C. Hewson was the agent of the defendants, in the City of Yew York. In June of that year the agent of another insurance company, (Francis Campbell,) proposed to Hewson that the latter should take all the risks the former had obtained as such agent, and among others» an insurance on the plaintiffs’ stock and store, and subsequently sent a written application to Hewson, for insurance for the plaintiffs. Afterwards, about the 26th of that month, Hewson went, as testified to by one of the plaintiffs, (Kelly,)' to their store, told him he had come to make a survey; actually examined such store, and thereupon stated that he “ ivould take the risk * * make out the policy and send it down at seventy cents, (fourteen dollars on two thousand;) he would make it binding from the first of July,” and that the plaintiff (Kelly) “ should ha^e the policy.” Hewson, when examined as a witness, narrated his conversation at that time with Kelly, but could not recollect anything else of it but what he so narrated, which did not embrace any such promises. He admitted, however, that he transmitted the application to the defendants the same day, and told Campbell he “ would take the risk.” Before the first of July he obtained a written policy from the defendants, as applied for, signed by the other officers, but not countersigned by him, which he left with Campbell, directing him not to deliver it without payment of the premium, and stating that until then he would not countersign it. A clerk of Campbell, (Crary.) by his direction, took such policy on the day he received it, and again a day or two afterwards, but before the fire, to the plaintiff Kelly, and offered it to him, but he was not ready to pay the premium. He again took it to him on the ninth of July, when the same plaintiff promised to call next day and pay such premium, but he did not. This was denied by the plaintiff Kelly, in his testimony. He stated that such clerk only told him to come to Campbell’s office to get the policy. A.statement of such clerk, under oath, was also read, to the effect that it was on or about the 10th of July that he had notified the plaintiff Kelly, that such policy was ready to be delivered to him. Some time in July, before the 10th, the plaintiff Kelly had a conversation in the office of Mr. Campbell, respecting such written policy, with a Mr. Brewster, who had his office on the same floor with Campbell, and was requested by him, on account of Illness, to ascertain what the plaintiff, who was there, wanted. According to such plaintiff’s testimony, he desired to transfer certain machinery, on which he had an insurance for five hundred dollars, to the store in question, and said to Brewster, in reference to such policy, which was then present, “add five hundred dollars more to this and I will pay you the whole of it now, and you can send it to my store, as I am going out of town and will not be back for a week.” Brewster declined this proposal, but promised “to take the memorandum down and put it in it (the policy) with the direction to send it to the plaintiff Kelly’s store, and collect the premium there for the whole.” Brewster, in his testimony, stated that he did not recollect that Kelly said anything about paying the premium or transferring the insurance, although he remembered that he desired some alteration. He made a memorandum of the plaintiff’s request, put it in the policy and redelivered both to Campbell. The latter directed his clerk to take such policy to Hewson to get it altered, but by mistake he carried and delivered it to the plaintiff Kelly. On the next morning after the fire, (July 12th,) before Campbell had heard of it, the plaintiff Kelly applied to him for the policy, which he gave him, but asked for fourteen dollars. The plaintiff looked at it and said, “ This five hundred dollars that I applied for has never “ been put into which Campbell replied, “ No," congratulating him, however, on having a cover of $2,000 from a good company. On the same morning the same plaintiff called on Hewson to countersign the policy, which he refused, because the premium had not been paid. In relation to the party for whom he acted as agent, Campbell testified that, his commissions as a broker were paid by the compan;-; when he wanted his commission he went to them; that “it is the custom among insurance companies to pay a commission to brokers. They send the policy to the broker, and he collects the premium from the assured and pays it over to the company, deducting his premium.” The plaintiff Kelly did not agree to pay him. commission in this case, and he had not been paid by either party. One of the conditions attached to the written policy in question was, that “the persons, if any other than the assured, who procured the insurance in it to be taken by the company, should be deemed to be the agents of the insured, and not of the company, in any transaction relating to such insurance.” After setting out the incorporation of the defendants, the partnership of the plaintiffs, and the application by the latter to the former for the insurance in question, the complaint alleged, in substance, as follows: That the defendants, on or about the 28th of June, 1860, agreed to insure the plaintiffs against loss by fire to the amount of two thousand dollars, on their stock, materials in and interest in the lease of the store in question, for a year from the first of July following, at a premium of fourteen dollars; which the plaintiffs agreed to pay as a consideration for such agreement to insure, and neglected to insure themselves in any other way on the same subject matter. That it was then and there agreed between both parties, that such -insurance should be valid and binding on the part of the defendants, for such time and sum. That the plaintiffs owned such stock and lease. That the fire, which it mentioned, produced the loss for which indemnity was claimed. That the plaintiffs duly fulfilled all the conditions of such agreement and insurance on their part, tendered such premium on the 12th of July, which the defendants refused to accept; gave notice of their loss, and proof of the fire and damage, more than sixty days before the commencement of the action, and demanded payment. The complaint also, in addition to such agreement to insure, set forth another agreement by the defendants, in consideration of the premises, to deliver to. the plaintiff a policy of insurance, in the usual form of poli cies issued by them, for the like amount and term, in a reasonable and convenient time. It further alleged, that they executed and delivered an instrument, whereof a copy was annexed to the complaint, and waived the payment of the premiums and the countersigning of the policy, as conditions precedent; which policy, so annexed, was alleged to be in the usual form of policies issued by the defendants, except that it was not countersigned. The original policy, of which a copy was thus annexed to the complaint, contained the provisions before stated, that it should not be binding until the premium was paid, nor unless it was countersigned by the agent of the defendants in New York, and that the persons procuring the insurance should be deemed the agents of the insured. ' The answer contained a general denial of each allegation in the complaint, not previously therein “well and “ sufficiently answered unto, confessed and avoided, tra- “ versed or denied.” It alleged, however, before such denial, that an application was made to the defendants for insurance, by the plaintiffs, upon the subject mentioned in the complaint; that they thereupon agreed to deliver to the latter a policy of insurance, in the usual form, and containing the usual clauses and conditions of policies made by them for the State of New York, upon the property, for the amount and term mentioned in the complaint, upon the express condition, however, that the plaintiffs should, as a condition precedent to the delivery and binding effect of such policy, pay the premium required as a consideration for making such insurance; and that the insurance should not be binding until the payment of such premium, and until the policy should be countersigned by their agent in New York; that the defendants made the instrument set out in, and of which a copy was annexed to, the complaint, notified the plaintiffs that they were ready to execute such agreement on their part, and have the policy countersigned on payment of the premium, and offered to have it so countersigned and delivered on such payment, and demanded the same; but the plaintiffs refused to pay such premium, and the defendants never waived the payment thereof, or the countersigning of such policy, as conditions precedent of such insurance. An exception was taken by the defendants’ counsel, to the admission of the conversation before mentioned, between the plaintiff, Kelly and Brewster, in reference to such policy of insurance. The Court allowed the former to state the transaction, saying that if it should not be connected with the defendants, the Court would strike it out. Ho subsequent application was made on the subject. Both Brewster and Campbell were subsequently examined by the defendants as to such conversation. Various requests were made by the counsel for the defendants to the Court, to instruct the Jury upon various points as follows: First: In regard to Campbell’s agency: (1.) That if he. had been requested to procure insurance for the plaintiffs, he was their agent; (2.) That the provision in the policy made him so; Secondly. In regard to the payment of the premium: (1.) That there was no sufficient proof of an agreement by the defendants to make the insurance binding, without receiving the premium; (2.) That Hewson had no authority to waive its prepayment; (3.) That there was no insurance, if the parties did not intend to make the contract binding without payment of the premium; Thirdly. In regard to the oral contract: (1.) That all the conditions of a policy in the usual form, would apply to an oral contract which contemplated the execution of such a policy; (2.) That no oral contract was made between the parties, except to insure by a policy from the 1st of July, following; (3.) That the oral contract ceased to operate, when such policy was ready and offered for delivery; (4.) That there was no existing contract to insure, if the policy was to be received by the plaintiffs, and the premium paid before the loss occurred; Fourthly. In relation to the delivery of the policy; that leaving it with Campbell, or the handing of it by the latter to Kelly, was no delivery; Fifthly. In regard to the effect of the policy ; that it was inoperative even if delivered, both because it wanted the agent’s signature, and because the premium had not been .paid; Lastly. In regard to the interview between Kelly and Brewster; that no proper tender then took place, because the latter was not the defendant’s agent. After stating that the plaintiff, Kelly, had stated on his examination as a witness, that Hewson came to the store of the plaintiffs, and after examining it and the stock, promised, that the defendants would insure them for a certain sum at a certain rate, and for a certain time, and said “ that they might consider themselves insured from that time,” the Court charged the Jury, “that if they should find the facts as stated by Kelly to be true, this would constitute a contract between the parties, and the defendants would be liable, because under such a state of facts,” the delivery of a policy “would be immaterial.” And, also, that the plaintiffs would be entitled to recover, even if there had been “no such arrangement as to make a binding agreement to insure as of that date,” but merely a proposition to insure sent on to Philadelphia, and “ the policy came back and was delivered to the plaintiffs, no premium being exacted or anything remaining to be done;” or, “if the policy was handed to the plaintiffs, as intended to be an effectual agreement, binding on the defendants, insuring the plaintiffs;” but that the defendants were not liable “if there was no delivery of the policy.” It also charged, that “the effect of what passed between Kelly and Brewster * * was not material in any aspect of the case.” It refused to charge in any other manner the propositions requested by the counsel for the defendants, to be given to the Jur$* as instructions, to which the latter excepted. A verdict having been given for the plaintiffs, the defendants appealed from the judgment entered thereon, as well as from an order denying a new trial, which appeals were now heard. I. The complaint alleges nothing more than an agreement of the defendants to execute and deliver to the plaintiffs, a policy of insurance in the usual form of policies issued by thern. This was not a consummated insurance, but, at most, an executory agreement. (Sandford v. Trust Fire Ins. Co., 11 Paige, 547.) II. The action is brought to recover on an alleged actual insurance of the premises, and not to compel the performance of an agreement to execute and deliver a policy whereby the plaintiffs should, be insured. The agreement alleged and proved according to the plaintiffs’ own testinjony, does not sustain the action. ... This is not in form or substance an action to compel the delivery of a policy. Such an action is to be tried .by the Court and cannot be tried by a Jury unless issues are framed or specific questions ordered to be tried by Jury. Besides, in order to set up such a cause of action the plaintiffs should aver that within a reasonable time after the making of the agreement, and before the occurrence of the loss, they tendered the premium and demanded the policy, and should require the delivery of a policy and. payment of the loss. (Perkins v. The Washington Insurance Co., 4 Cow., 645; Lightbody v. North American Insurance Co., 23 Wend., 18; Carpenter v. Mutual Safety Insurance Co., 4 Sandf. Ch. R., 408 ; Rockwell v. Hartford Fire Insurance Co., 4 Abbotts’ Pr., 179.) The plaintiffs are therefore not at liberty to say, on this appeal; that this action is at all founded on an executory agreement, by which the defendants became bound to insure them by a policy to be thereafter executed and delivered. They have no right of recovery unless they have established an actual insurance by a policy duly delivered. (Bunten v. The Orient Insurance Co., 8 Bosw., 448.) III. The defendants never delivered a policy, and the * plaintiffs have no cause of action founded thereon. It never became operative or of any force as a consummated contract of insurance. 1. The plaintiffs obtained possession of the policy by a fraudulent concealment of the fact that a fire had occurred. 2. The act of Campbell in giving the policy to the plaintiffs in no wise - bound the defendants,— both Campbell and the defendants being ignorant that, before the plaintiffs handed the premium to Campbell, the condition of the premises had wholly changed. 3. Until the plaintiffs performed the conditions, they acquired no right; and after the fire the defendants had a right to decline accepting payment; and they did so. 4. The plaintiffs could not by obtaining manual possession from Campbell, in the manner they did, defeat the condition of the policy which required it be countersigned. 5. Nor that which declared that it should not be binding until payment of premium. 6. There never was a moment when defendants were consenting that plaintiffs should have possession of the policy in its then condition, nor without payment of the premium before a loss. IV. The conditions of the insurance were not performed. The premium was not paid before the fire, and the policy was never countersigned by the agent. The policy could not become binding unless these conditions were performed, or were waived. (New York Central Insurance Co. v. National Protection Insurance Co., 20 Barb., 468; Jube v. Brooklyn Insurance Co., 28 Barb., 412.) 1. No agent of the company in New York had authority to waive the expressed conditions of the policy which the defendants had signed in Philadelphia. (Dawes v. N. R. Ins. Co., 7 Cow., 462; Lightbody v. N. Am. Ins. Co., 23 Wend., 18; McEvers v. Lawrence, Hoffm. Ch. R., 171; Chase v. Hamilton Mutt Ins. Co., 22 Barb., 527.) 2. The agent did not in fact waive the conditions, nor is there any evidence that he attempted to do so. V. If the action could be regarded as an equity suit, to compel the execution of a policy and to obtain a recovery for the loss, still the alleged agreement for insurance involved the same conditions, (as the complaint itself admits and avers,) and the plaintiffs were not entitled to recover. VI. It is not regarded as essential to the defense, or a necessary condition to the grounds urged on this appeal, but is nevertheless submitted as quite clear, that Campbell, (the broker,) was in the transactions in question, the agent of the plaintiffs, and not of the defendants. VIL The testimony of Kelly to the conversation between him and Brewster, who had no authority whatever to act for the defendants, was erroneously received, and the defendants’ exception was well taken. Hewson should have been permitted to state the reason why he did not countersign the policy. So also Hewson, the agent of the company, and their surveyor, should have been permitted -to estimate the damage done by the fire. The question put by the juror, whether the policy “would have been a perfect policy,” was not competent, and the defendant’s objection should have been sustained. The question sought and elicited nothing but the opinion of -the witness, and that opinion was upon a question of law only. (Frith v. Barker, 2 Johns., 327; Mills v. Hallock, 2 Edw. Ch. R., 652; Allen v. Merchants’ Bank, 22 Wend., 215; 15 Id., 482; Hinton v. Locke, 5 Hill, 437.) To answer the question of the juror affirmatively, was to contradict the very terms of the policy, which declared that it should not be valid. (Cortelyou v. Van Brundt, 2 Johns., 357; Hinton v. Locke, 5 Hill, 437; Parsons v. Miller, 15 Wend., 561.) VIII. The several requests of the defendants, for specific instructions to the Jury, were proper and in accordance with the law, and the refusal of the Judge to give those instructions was error. IX. The charge was itself erroneous: 1. In the particulars in which it differed from the requests for instructions; 2. It was error to state that the defendants are unqualifiedly liable, if the facts stated by Kelly were true; This assumed that the plaintiffs were relieved from the performance of any conditions: 1 3. The charge treats the possession of the policy by the plaintiffs, as an actual and legal delivery, and as the voluntary act of the defendants; 4. It disregards wholly the fact that it never was delivered by the consent of the defendants or of Hewson, their agent, in respect to which there was no conflicting evidence; 5. It also disregards the fact that it was obtained horn Campbell after the Are; and by concealing the fact of the fire; 6. It substantially directed a verdict for the plaintiffs; 7. It was erroneous to say that there was no difference between an oral and a written insurance. On the contrary, it is submitted that there is no such thing as an oral insurance. (11 Paige, 547, [supra] ; 1 Phillips on Ins., 8; Morgan v. Mather, 2 Ves., 15; Smith v. Odlin, 4 Yeates, 468; Cockerill v. Cincinnati Ins. Co., 16 Ohio R., 148; Perkins v. Washington Ins. Co., 4 Cow., 645.) And although there may be a binding verbal agreement upon sufficient considerations to execute a policy, the operative contract by which a party is actually insured, is, and must be, a policy in writing The charge was erroneous in instructing the Jury that it was immaterial whether there was- an actual insurance by policy delivered, or an agreement to insure. The form of the action; the mode of trial; the statement of’the-cause of action, and the relief, are different. I. The evidence abundantly sustains the verdict, and the correctness of the law as laid down by the Judge is well settled. (Lightbody v. N. Am. Ins. Co., 23 Wend., 24; Bidwell v. Astor Ins. Co., 16 N. Y. R., 263; Carpenter v. Mutual Safety Ins. Co., 4 Sandf. Ch., 408; 1 Duer on Ins., 66, § 11; First Baptist Church v. Brooklyn Ins. Co., 19 N. Y. R., 305; 18 Barb., 69; Perkins v. Washington Ins. Co., 4 Cow., 645; N. Y. Ice Company v. A. Western Ins. Co., 23 N. Y. R., 357; S. C., 12 Abbotts’ Pr., 417; Rockwell v. Hartford Ins. Co., 4 Id., 179.) II. The contract of insurance is like any other contract, and is to be governed by precisely the same rules. (19 N. Y. R., 305.) III. Hr. Campbell was the agent of the insurance company. Upon this point there is no contradictory evidence. IV. After Kelly had paid his money and received the policy, he learned that it was imperfect, and called upon the agent and asked him to countersign it, which the agent refused to do. V. The plaintiff’s right to a perfect and valid policy depended upon the contract, and the defendants’ right to their premium depended upon the same contract. Neither the right to the policy nor the right to the premium depended upon the fire at all—those rights were fixed before the fire, and were in no respect altered by its occurrence. Had there been no fire, the insurance company could ' have collected their premium, and the plaintiffs could have compelled delivery of a perfect policy. VI. The insurance contract was complete, and took effect on the first of July. The fact that the fire happened before the time when the premium was paid, and the policy delivered, does not change the rights of the parties.