Milwaukee Mechanics Ins. v. Graham

Me. Justice Haricer

delivered the opinion of the court.

Appellee is the owner of a fruit evaporating plant at Pittsfield, Ill. On the 27th of October, 1897, C. K. Graham, his operating manager,' procured from F. W. Niebur, agent of the Milwaukee Mechanics Insurance Company, a fire insurance policy on the machinery and fruit on hand. The policy was delivered, but the premium was not paid, the agent declining to receive it until he should learn from the company whether it would carry the risk. It was provided in the policy that the contract should become void if other insurance on the property should be procured without consent of the company, and that the policy might be canceled at any time by giving five days’ notice; On the 30th of October Niebur received notice from the company that it would not carry the risk, and directing him to cancel the policy. He at once sent a note to C. K. Graham informing him that his company declined the risk and requesting him to procure other insurance. Graham, at noon of the same day, called at the office of E. A. Burk, another insurance agent, showed the note to him, “ gave him the particulars,” and asked him if he could write the risk in some company represented by him. Burk replied that he' thought he could, whereupon Graham left the office, promising to call again. Burk at once wrote a policy in the Hanover Insurance Company of New York on one of the blanks furnished him, with the signatures of the president and secretary, covering the property from October 30 to November 30, 1897, countersigned it himself and entered it in his register of policies. The policy was not delivered to Graham, the premium was not paid by him, nor did he promise to pay it. That night the property was destroyed by fire.

This suit was commenced against appellant on the first named policy and was defended upon the ground that Graham had waived his right to have the policy continue in force five days after notice of cancellation, and that the policy became void by reason of a contract of insurance effected with the agent of the Hanover Insurance Company. A trial by jury resulted in a verdict and judgment against appellant for the full amount named in the policy.

It is clear that the right of appellee to recover depends entirely upon whether he consummated a contract of insurance with the Hanover Insurance Company. By its own terms,the policy sued on was to continue in force for five days after cancellation unless other insurance was effected. The risk was with appellant, within the five days, up to the instant that it should be assumed by another company and agreed to by the insured.

While it is not necessary in order to hold an insurance company to liability for a loss that the policy shall have been delivered or the premium paid, in a case where the policy has not been delivered nor the premium paid or tendered, a promise to pay the premium is necessary. Without a promise to pay for the insurance the undertaking of the company would be nudumpactum.

It is fundamental that unless the parties have come to an agreement as to the terms of their contract, so that nothing remains to be done but to execute what has been agreed upon, the contract is still incomplete and of no binding force upon either party. We can see no reason for departing from that familiar rule in the law of contracts in a case

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where the parties were negotiating over a contract of insurance.

In the case at bar there was neither a delivery of the policy, a payment of the premium, a tender of the premium^ nor a promise to pay. The matter was in an incomplete condition at the time of the fire, and there was no such contract effected as could render the Hanover company liable.

The trial court entertained the view that in order to render a contract of insurance valid and binding a delivery of a policy, a payment of the premium or a tender of it is necessary, and so told the jury in modified instructions. That, of course, was erroneous.

The right to make parol contracts of insurance is recognized by our courts, and the contract may be completed by the mere promise of the insured to pay the premium. But as there was not even a promise made to the agent of the Hanover company to pay the premium, and we are clearly of the opinion that the policy of appellant was in force at the time of the fire, no harm resulted from the modification of those instructions. The judgment is right and no such error intervened as would justify a reversal. Judgment affirmed.