Bernadine WILES, d/b/a Centerview Taxi
v.
Ralph P. MULLINAX, Jr. and Mullinax Insurance Agency, Inc.
No. 615.
Supreme Court of North Carolina.
June 20, 1967.*249 Hartsell, Hartsell & Mills and K. Michael Koontz, Concord, for defendant appellants.
Williams, Willeford & Boger, Concord, for plaintiff appellee.
LAKE, Justice.
This case was before us upon a former appeal from a judgment of nonsuit which we reversed in 267 N.C. 392, 148 S.E.2d 229. Upon the authority of Elam v. Smithdeal Realty & Insurance Co., 182 N.C. 599, 109 S.E. 632, 18 A.L.R. 1210, and other cases cited, we then held that, where an insurance agent or broker undertakes to procure a policy of insurance for another, it is his duty to use reasonable diligence to obtain it and, within the amount of the proposed policy, he may be held liable for a loss sustained by the proposed insured due to his negligent failure to do so. We further stated that if, in spite of reasonable diligence, such agent or broker is unable to procure the desired insurance coverage, it is his duty to so notify the proposed insured in order that the latter may take the necessary steps to protect himself otherwise. Since the record then before us was sufficient to permit a jury to find a breach of such duties by the defendants, resulting in loss to the plaintiff, we reversed the judgment of nonsuit, stating, "Defendants' asserted defenses are not pertinent to this decision, which relates only to the question of the sufficiency of the evidence to survive the motion for nonsuit."
The case having been retried and the jury having returned a verdict in favor of the plaintiff, the sufficiency of the asserted defense is now brought before us by the defendants' contention that they were not permitted by the trial judge to argue to the jury that they did, in fact, obtain for the plaintiff the desired insurance coverage.
At the close of all the evidence, in the absence of the jury, it was brought to the attention of the trial judge that the defendants' attorney intended to read to the jury, in the course of his argument, G.S. § 97-99(a), which concerns cancellation of a policy of workmen's compensation insurance, together with passages from the decision of this Court in Moore v. Adams *250 Electric Co., 264 N.C. 667, 142 S.E.2d 659, in which this statute was held to apply to the cancellation of a binder for such insurance. The court ruled that the reading of these authorities to the jury would not be allowed. Thereupon, the defendants' attorney inquired of the court "as to whether the defendants' contention that they had in fact obtained the insurance coverage by binders and that the evidence shows that the defendants had in fact procured the insurance by binders and that the plaintiff was insured at all times might be argued to the jury." The court ruled that such argument would be improper and not permitted. The defendants now assign these rulings as error.
The second issue submitted to the jury was, "Did the defendants negligently fail to procure such workmen's compensation insurance coverage, as alleged in the complaint?" Obviously, upon such issue, it was proper for the defendants to argue to the jury that they did procure the insurance and that it was in effect at the time of the injury to the plaintiff's employee, if there was any evidence from which the jury might so find. If the evidence would support such a finding, the defendants were entitled not only to argue their contention to the jury, but also to read to the jury, in the course of that argument, the pertinent statute and the decision of this Court upon the question. G.S. § 84-14; Wilcox v. Glover Motors Inc., 269 N.C. 473, 153 S.E.2d 76; Brown v. Vestal, 231 N.C. 56, 55 S.E.2d 797; Howard v. Western Union Telegraph Co., 170 N.C. 495, 87 S.E. 313.
The present record discloses that in the hearing by the Industrial Commission of the claim for compensation, filed by the widow of the deceased employee, the Commission found as a fact, and concluded as a matter of law, that at the time of the injury the present plaintiff had no workmen's compensation insurance coverage with either Royal or Dixie but was a noninsured. The Commission accordingly dismissed from the proceeding before it Royal and Dixie and awarded compensation to be paid by the present plaintiff. There was no appeal from the award of the Full Commission.
We need not determine whether, by reason of such award by the Industrial Commission, the question of the plaintiff's right against Royal or Dixie, or both of them, on the ground of the now alleged binder or binders is res judicata, as between the plaintiff and those companies. For the present, it is sufficient to note that the defendants were not parties to that proceeding. That being true, the question of the effectiveness of either or both of the alleged binders on the date of the injury to the employee is not res judicata as to the present defendants, even though the individual defendant testified as a witness in the hearing before the Commission. State ex rel. Northwestern Bank v. Fidelity and Casualty Co., 268 N.C. 234, 150 S.E.2d 396. To the general rule, that a judgment of a court is conclusive only as against the parties to the action and those in privity with them, there is an exception in favor of an employer whose alleged liability is, upon the principal of respondeat superior, derived through the alleged fault of an employee adjudged in a former action not to be at fault. See Queen City Coach Co. v. Burrell, 241 N.C. 432, 85 S.E.2d 688, and cases there cited. This exception to the general rule has no application to the facts of this case.
We turn, therefore, to the question of whether there is, upon the present record, sufficient evidence to support a finding that, at the time of the injury to the plaintiff's employee, the plaintiff actually had workmen's compensation insurance in force. The individual defendant testified that he had authority to bind both Royal and Dixie and that he issued a binder for each. The credibility of this testimony was for the jury. The construction of the documents and their legal effect was for the court.
*251 As to Royal, it is sufficient to note that the document which the defendants contend was a binder expressly provided for coverage from 8 November 1957 to 8 November 1958. Thus, by its terms, it would not constitute a binder in force at the time of the injury to the plaintiff's employee. Whether, upon a proper showing, it could be reformed for mistake is not a question now before us.
The document which the defendant contends bound Dixie upon this risk may not be disposed of in that manner. The individual defendant testified that he issued it as a binder and had authority from Dixie to do so. The record makes it clear that the plaintiff knew nothing whatever of the existence of this document until after her employee was injured, and after Dixie notified the defendants it rejected the risk, but this Court held in the first appeal in Moore v. Adams Electric Co., 259 N.C. 735, 131 S.E.2d 356, that knowledge by the contemplated insured of the issuance of a binder is not a prerequisite to the validity of the binder. It having been issued for his benefit, he may elect to accept the benefits it confers. It follows that a delivery of the binder to him is not essential. The extension of credit to the insured for the premium does not destroy the effectiveness of the binder. See Lea v. Insurance Co., 168 N.C. 478, 84 S.E. 813; Couch on Insurance, 2d ed., § 14:29. It is not necessary in order to constitute a valid binder that the document be written in the form of a complete contract or that it set forth all of the terms. A binder is "merely a written memorandum of the most important terms of a preliminary contract of insurance." State Distributing Corp. v. Travelers Indemnity Co., 224 N.C. 370, 30 S.E.2d 377. Where, as in the present instance, the policy contemplated is required by statute to be issued in a prescribed form, the binder is deemed to incorporate all of the terms of the statutory policy. Moore v. Adams Electric Co., first appeal, supra. No specific form or provision is necessary to constitute a memorandum, intended as a binder, a valid contract of insurance. As this Court said upon the second appeal in Moore v. Adams Electric Co., 264 N.C. 667, 142 S.E.2d 659:
"In insurance parlance, a `binder' is insurer's bare acknowledgment of its contract to protect the insured against casualty of a specified kind until a formal policy can be issued, or until insurer gives notice of its election to terminate. The binder may be oral or in writing."
The document which the defendants contend bound Dixie upon this risk is, in form and content, sufficient to constitute such memorandum of a contract for temporary coverage. Thus, the evidence introduced by the defendants was sufficient, if found by the jury to be true, to support a finding that a valid binder was issued by Dixie. In the second appeal in Moore v. Adams Electric Co., supra, this Court held that a valid binder for workmen's compensation insurance cannot be terminated except by the giving to the insured of the 30 days' notice required by G.S. § 97-99 for cancellation of a formal policy. It is not contended in this case that such notice was given by Dixie.
Consequently, there was evidence from which the jury could have found that, at the time the plaintiff's employee was injured, there was in effect a contract of workmen's compensation insurance procured for the plaintiff by the defendant. It follows that the defendants should have been permitted to argue this point to the jury in support of their position on the second issue and to read to the jury pertinent portions of the governing authorities. It also follows that the jury should have been instructed by the court upon the principles of law applicable to this contention of the defendants, which was not done.
We find no error in the rulings of the trial court with reference to the admission of evidence, but for the errors above noted there must be still another trial of this action.
New Trial.