Globe & Rutgers Fire Ins. Co. of New York v. McGinnis

RUDKIN, Circuit Judge.

This is an appeal to review a judgment in favor of the plaintiff on an oral contract of insurance. The sufficiency of the testimony to support the verdict is the only question presented for consideration. Taking the view of the testimony most favorable to the appellee, as we must, the facts are substantially as follows: March 26, 1927, the appellant, through Commercial Realty & Trust Company, its agency at Douglas, Ariz., issued a policy of insurance to T. P. McGinnis, the husband of the appellee, insuring him in the sum of $2,500 against loss or damage by fire on a store building, merchandise, and fixtures for a period of one year from that date. June 10, 1927, the agency at Douglas notified Mc-Ginnis of the cancellation of this policy, to take effect five days after the date of service of notice. While not so stated in the notice, the apparent reason for the cancellation was that the insured had been convicted of the crime of receiving stolen property and the company deemed the risk a bad one. June 18, 1927, the appellee called at the office of the agency of the company at Douglas and found in charge of the office a girl of about 17 years of age, who was employed there as a stenographer or clerk. The appellee produced the insurance policy theretofore issued to her husband, -which had been canceled about a week before, stating that she Wanted one like it in her own name. The girl answered, “All right,” and informed the appellee that the amount of the premium was $103.75. The appellee gave a cheek for this amount, taking a receipt therefor signed by the agency, and was informed by the girl that she would mail the policy out in a few days. All this occurred between 9 and 10 o’clock on Saturday morning, and the manager of the agency found the cheek on his desk at about 12:30 p. m., after the girl had left the office for the day. On the Monday morning following, the manager mailed a letter to the appellee returning the cheek and informing her that the notice of cancellation, to which we have referred, was not to make collection, but was sent out at the' request of the company, and that the company was compelled to cancel the policy as stated in the former notice. It is apparent from this letter that the writer was under the impression that the check had been left at the office in payment of the premium on the old policy which had been canceled and not for new insurance, but this fact is not material. On Monday night, after the mailing of this letter, but before its receipt by the appellee, the property covered by the old policy was destroyed by fire.

It is an elementary rule of law that an insurance company, or other corporation, is not bound by a contract entered into in its behalf, unless the person making the contract had either actual or apparent authority to make it, or unless the unauthorized contract has been ratified by the company, and the. burden of proof is on the party claiming under the contract to prove not only the making of it, but the authority of the person by or through whom it was made. Lauridsen v. Bowden, Gazzam & Arnold, 107 Wash. 310, 181 P. 885.

Ordinarily, an agent possesses the powers conferred directly upon him by his principal and certain incidental powers based on necessity or custom; and such other powers as the principal has, by his direct act or by negligent omission or acquiescence, caused or permitted persons dealing with the agent reasonably to believe that the principal had conferred and upon which such persons have relied. Mechem on Agency (2d Ed.) § 729.

Here, the testimony shows conclusively that the girl was without authority in fact to bind the insurance company by contract, and there was no direct act of the principal that would reasonably induce any person to believe that she had such authority. Nor was there negligent omission or acquiescence on its part such as would lead any person so to believe. It was never represented by the company or otherwise that she had authority to make contracts in its behalf, and so far as the record discloses she had never made a like contract before, either with or without the knowledge of the company. In short, there is nothing in the record to support a finding of authority aside from the bare fact that the girl was found in the insurance office alone. As is customary in such places, the general business transacted in the office in which the girl was employed was real estate, rentals, loans, and insurance, and had she undertaken to contract in behalf of her employer in any other branch of its business, it would scarcely be claimed that the employer would be bound by her act. Contracts of insurance do not stand upon any different footing. It may be that persons dealing with clerks employed in insurance offices take too much for granted and assume that such clerks have authority which they do not in fact possess, but unless they are justified in this course by some direct act of the company, or by some negligent omission or acquiescence on its part, the misfortune is their own, if they find themselves in possession of contracts of insurance made without authority, or even the semblance of authority. Gude v. Exchange Fire Ins. Co., 53 Minn. 220, 54 N. W. 1117; Meadows v. American Eagle Fire Ins. Co., 104 W. Va. 580, 140 S. E. 552; Delaware Ins. Co. of Philadelphia v. S. S. White Dental Co. (C. C. A.) 109 F. 334, 65 L. R. A. 387; Maryland Casualty Co. v. City of Cincinnati (D. C.) 291 F. 825; Morse v. St. Paul Fire & Marine Ins. Co., 21 Minn. 407; Fleming v. Hartford Fire Ins. Co., 42 Wis. 616.

The two eases eited by the appellee are not to the contrary. Southern Life Insurance Co. v. McCain, 96 U. S. 84, 24 L. Ed. 653, but states the familiar rule that no company can be allowed to hold out another as its agent and then disavow responsibility for his acts, and that after it has appointed an agent in a particular business, parties dealing with him in that business have a right to rely upon a continuance of his authority until in some way informed of its revocation. International Trust Co. v. Norwich Union Fire Ins. Society (C. C. A.) 71 F. 81, simply holds that an insurance company is bound by a notice that a policy had been renewed when information to that effect was given by an employe of the agent of the company in the line of his duty. Here, as we have seen, there was no holding out, and the act of the girl in making the contract of insurance, if one was in fact made, was not in the line of duty.

The court below erred, therefore, in refusing to direct a verdict for the defendant; and for this error the judgment is reversed.