Parks v. State Farm General Insurance

Judge Harold R. Banke.

Robert L. Parks sued State Farm General Insurance Company (“State Farm”) seeking payment under two insurance binders allegedly issued by State Farm. Parks appeals the trial court’s order granting State Farm summary judgment.

Viewed in a light most favorable to Parks, the non-movant, the evidence was as follows. In early February 1993, Parks met with his State Farm agent of fourteen years, Ronald Ray, to renew two State Farm insurance policies which had expired a few months earlier. Parks testified that when he informed Ray that his existing State Farm policies on two rental houses had lapsed and that he wanted to “get some coverage,” Ray responded, “Okay.” Parks did not recall that Ray told him that State Farm’s home office or that someone in State Farm’s underwriting department would have to make the decision to bind coverage. Parks testified that if Ray had so informed him he would have remembered that fact.

During their transactions, Parks gave a $500 check for the anticipated premiums to Ray, who retained the check, a fact admitted by State Farm. Although Ray did not provide a copy of the paperwork at issue to Parks, the application stated that “coverage is not provided until this application is approved by State Farm’s Underwriting *27Department.”1 According to Parks, this disclaimer language did not concern him because he had previously obtained insurance notwithstanding the same language. At the time Parks met with Ray, Parks had existing auto insurance and fire insurance with State Farm. Parks testified that when he left his agent’s office, he did so with the understanding that he had a binder for temporary insurance on both properties and that State Farm would subsequently issue written policies to him as it had done on previous occasions.

About ten days later, Ray appeared at Parks’ place of business and told Parks that he was returning his check and that State Farm “wouldn’t be able to write it.” Parks became angry because he felt that State Farm had suddenly left him stranded with no insurance. Almost immediately after Ray contacted him, believing that State Farm had left him stranded with no protection for his property, Parks sought and obtained coverage from Southern General Insurance Company (“Southern General”). About six days later, on February 21, 1993, a tornado virtually demolished both rental houses.

On March 6, about a month after Parks had applied for insurance, State Farm notified him in writing that it had decided to reject his applications for policies. In each of two letters, State Farm stated, “After careful review, we regret that we are unable to issue a policy as requested. The coverage provided under this application and binder is cancelled effective April 8, 1993. We are not able to issue a policy as requested due to not meeting underwriting requirements. For your continued protection, we urge you to secure other insurance to prevent any lapse in coverage.”

State Farm’s underwriter, Ruby Aldridge, testified that she made the decision to decline the requested coverage based on previous claims and losses and Parks’ inconsistent payment history. According to Aldridge, she contacted Ray so that he could notify Parks of State Farm’s decision. Aldridge claimed that State Farm sent these two letters to Parks by mistake. The rejection letters from State Farm clearly indicate that State Farm had agreed to provide temporary coverage and would continue to do so until April 8, well after the date of loss.

Ray disputed Parks’ version of events. Ray testified that when Parks came to him “seeking to put insurance coverage back on the two properties,” he informed Parks that the underwriting department would have to provide approval before any coverage would be provided. According to Ray, he returned Parks’ premium check before *28State Farm made its underwriting decision to decline Parks’ applications.

Under its insurance policy with Parks, Southern General paid Parks for the losses to both houses. Southern General then unsuccessfully sought reimbursement from State Farm as Parks’ subrogee. Southern General sued State Farm in the name of its insured, Parks, alleging that State Farm breached its contract to provide Parks with typical short-term binder coverage pending approval of the policies. The trial court determined that there was no meeting of the minds as to the creation of any binder prior to the time of the loss. Finding that Parks failed to prove that a contract had been formed, the trial court granted State Farm’s motion for summary judgment. Held:

In his sole enumeration of error, Parks contends that the trial court erred in ruling that State Farm did not issue a binder for insurance. We agree. Although the dissent declares that “there never was a binder,” that conclusion is unjustifiable given the disputed factual evidence showing the creation of a binder.

A binder is a contract for temporary insurance protection, the creation of which requires language or conduct sufficient to show that there has been a meeting of the minds. Peterson v. Liberty Mut. Ins. Co., 188 Ga. App. 420, 423 (373 SE2d 515) (1988). A binder can be oral or written. OCGA § 33-24-33; Thomas v. Union Fidelity Life Ins. Co., 168 Ga. App. 267, 268 (1) (308 SE2d 609) (1983). A binder is not a mere offer but is itself" ‘ “a contract — temporary, sketchy, and informal. . . .” ’ [Cit.]” Cincinnati Ins. Co. v. Stuart, 139 Ga. App. 80, 82 (1) (227 SE2d 771) (1976). A binder affords temporary protection pending the investigation of risk by an insurer or until the issuance of a formal policy. Id.

The language or conduct necessary to create an insurance binder is fact-specific. It is simply that which is enough to show that there has been a meeting of the minds, such as “you’re covered,” or a receipt for premiums or an extensive course of similar prior insurance transactions between the parties. Ray v. Ga. Farm &c. Ins. Co., 176 Ga. App. 776, 778 (337 SE2d 779) (1985); see Jenkins & Miller, Ga. Auto. Ins. Law Including Tort Law (1994 ed.), § 1-1. A receipt for premiums may in certain circumstances constitute a binder, provided that the surrounding circumstances would lead a reasonable person to conclude that such was the parties’ intention. Greene v. Commercial Union Ins. Co., 136 Ga. App. 346, 347 (1) (221 SE2d 479) (1975). Compare Peterson, 188 Ga. App. at 421. See Keeton & Widiss, Insurance Law, A Guide to Fundamental Principles, Legal Doctrines & Commercial Practices, 1988, p. 72, § 2.4 (a) (“An application for insurance is an offer which is regarded as having been accepted (that is, acceptance is inferred or implied) when an insurer remains silent after receiving the application, especially when such silence is accom*29panied by the retention of a premium payment.”).

Ray’s conduct, including his acceptance of the premium check, coupled with the parties’ past course of dealings, was sufficient evidence to foreclose summary judgment as to whether a binder for temporary protection had been created. State Farm’s correspondence, which stated “[f]or your continued protection, we urge you to secure other insurance to prevent any lapse in coverage [after April 8],” and State Farm’s admission that its agent retained a “check as a down payment” buttress Parks’ evidence that he had temporary protection for his property until State Farm provided legally sufficient notice of its cancellation. Therefore, a jury must resolve the facts in dispute to determine whether a binder was, in fact, created.

The dissent miscasts the entire controversy by commingling facts relating to the creation of a binder and facts regarding the issuance of a policy. No one claims that State Farm ultimately decided to issue a policy. In dispute is whether Parks obtained temporary protection from State Farm until April 8, coverage which the record fails to show that State Farm effectively cancelled in compliance with state law which requires that an insurer provide ten days’ written notice before cancellation. OCGA § 33-24-44 (d). Compare Goodley v. Fireman’s Fund &c. Ins. Co., 173 Ga. App. 277, 278 (1) (326 SE2d 7) (1985) (statutory notice requirement inapplicable where policy expired or lapsed due to policyholder’s failure to pay premiums). OCGA § 33-24-44.

Although it is true that Parks stated that he did not believe that he had coverage after Ray returned his check, neither Ray’s unilateral act of orally attempting to cancel the binder contract nor Parks’ belief, if mistaken, would have dissolved the binder if it had been in existence. OCGA § 13-2-4. See McDuffie v. Criterion Cas. Co., 214 Ga. App. 818, 821 (449 SE2d 133) (1994). As the dissent correctly notes, several days after the business had been transacted in Ray’s office, Ray returned the premium check to Parks and told him that State Farm would not provide coverage. State Farm failed to offer any explanation as to why Ray would suddenly feel compelled to seek out Parks to inform him that State Farm would not be able to issue a binder to him, unless Ray had earlier told Parks otherwise.

The record belies the dissent’s assertions that there is “not even a shadowy semblance” of acceptance and that “there is no evidence whatsoever that a binder with State Farm existed at the time of the loss.” Parks had a longstanding course of obtaining State Farm insurance through dealing with Ray as his agent for 14 years. According to Parks’ testimony, he went to his State Farm agent, applied for coverage, presented a premium check, and left with the understanding that his property was insured. Parks’ claim that he had obtained short-term binder protection is supported by the correspondence *30from State Farm which stated this temporary coverage would cease on April 8, approximately two months after Parks applied for binder protection, and well after the date of loss. As discussed above, under our law, a binder for temporary protection can be created with significantly less formality than a typical contract. Critical evidence remains in dispute as to what actually transpired between Parks and Ray during the application process. Whether there was a meeting of the minds sufficient to give rise to a binder is a jury question. In light of the disputed evidence as to whether Ray’s alleged conduct and the attendant circumstances would have led a reasonable person to conclude that a short-term binder had been created, it cannot be said that State Farm was entitled to summary judgment as a matter of law. Greene, 136 Ga. App. at 349 (1).

Judgment reversed.

McMurray, P. J., Ruffin and Eldridge, JJ., concur. Andrews, C. J., Birdsong, P. J., and Beasley, J., dissent.

Each Rental Dwelling Binder Receipt stated that this “[blinder is not valid unless signed by a State Farm Agent,” and neither contains a signature in the designated block.