1. When the charter of an insurance company, in the same clause
which authorized its president and directors to make insurance
against fire, and for that purpose to execute such "contracts,
bargains, agreements, policies, and other instruments" as might be
necessary, declared that every such contract, bargain, agreement,
and policy should be in writing or in print and be under the seal
of the corporation and be signed by the president and attested by
the secretary or other officer appointed for that purpose,
held that this requirement of the charter had reference
only to executed contracts or policies of insurance, and not to the
initial or preliminary arrangements for insurance which precede the
execution of the formal instrument by the officers of the
company.
2. An agent for an insurance company authorized to take and
approve risks and to insure is by general usage also authorized to
allow credit for the premium. Its allowance does not impair the
validity of the preliminary contract to insure.
3. When a preliminary contract for insurance is valid, it may be
enforced in a court of equity against the company, and being
enforced by the procurement of a policy, an action can be
maintained upon the instrument, or the court, in enforcing the
execution of the contract, may enter a decree for the amount of the
insurance.
4. When an agent is authorized, after a preliminary contract for
an insurance is made by him, to fill up a blank policy duly signed
and attested by the officers of the company sent to him for the
purpose, he is authorized to fill up such policy after a loss has
occurred. When thus filled up, the policy becomes the property of
the assured, and upon a refusal of the company to surrender it, two
courses are open to him: either to proceed by action to recover the
possession of the policy or to sue upon the policy to recover for
the loss, and in the latter case to prove its contents upon failure
of the company to produce the instrument on the trial.
6. Where, at the time the preliminary contract for an insurance
is made, it is expressly stipulated that the policy when filled up
shall be held by the agent in his safe for the assured, no actual
manual transfer of the policy to the assured after its execution is
essential to perfect his title.
Error to the Circuit Court for the District of Connecticut, in
which court Colt sued the Franklin Insurance Company of
Philadelphia on a policy of insurance which he alleged had been
executed by the company, an allegation on its part denied.
The uncontradicted case was thus:
The insurance company aforesaid was one incorporated
Page 87 U. S. 561
by Pennsylvania and having its principal office in Philadelphia.
One section of its charter gave to its president and directors
power to appoint such "agents" as should be necessary for
conducting and executing its business elsewhere than in
Philadelphia as well as in that city, and the company accordingly
was doing business in Hartford, Connecticut, and had as its general
agents there for the transaction of its business of fire insurance,
with power to take and approve risks and insure and countersign
policies, a firm known as Nevers & Havens.
Another section of the charter, the eighth, was in these
words:
"§ 8. The said president and directors shall have full
powers on behalf of the said corporation to make insurance against
losses by fire on any house, tenement, manufactory, or other
building . . . and to
make, execute, and perfect such and so
many contracts, bargains, agreements, policies, and other
instruments, as shall or may be necessary and as the nature of the
case shall or may require, and every such contract, bargain,
agreement, and policy to be made by said corporation shall be in
writing or in print and shall be under the seal of the said
corporation, signed by the president and attested and signed by the
secretary or other officer who may be appointed by the president
and directors for that purpose."
With this charter in force, the said Nevers & Havens, as
agents of the company, on the 26th of August, 1870, made proposals
to Colt to insure certain premises belonging to him. He thereupon
made an application for insurance for the sum of $10,375, from
August 26, 1870, for a term of five years, to be placed in the
company. And a parol contract of insurance was then completed with
the said Nevers & Havens, agents as aforesaid, to insure this
said property with the company for five years from the said date,
the insurance to be binding on and from that date, at a premium
then fixed and agreed to. Credit was given for the payment of the
premium till the 1st of October then next, and it was agreed that a
policy should be made and that Nevers & Havens should keep it
in their possession for Colt till the
Page 87 U. S. 562
1st of October, for his convenience, he saying that he had then
no safe and convenient place in which to keep papers of that
character.
The property was destroyed by fire without fault of Colt, on the
20th day of September, 1870, and proofs of loss were duly made and
presented.
No policy was made until after the fire, when Nevers &
Havens, upon the request of Colt, filled out a blank policy of the
company, properly signed and countersigned. They declined, however,
to surrender the possession of the same to Colt till they should
have consulted the company.
The company had no knowledge of the said negotiations or of the
contract to insure (except as the knowledge of the said agents
might be the knowledge of the company) till after the fire, and no
communication respecting the negotiations or contract had been made
by Nevers & Havens to it till after the fire.
The policy was subsequently, after such consultation, returned
by the agents to the company.
Colt tendered to the agents the premium on the 22d of September,
1870, and demanded the policy, and it not having been produced, he
demanded the insurance money (again tendering the premium), and,
the insurance money being refused, he brought suit against the
company at law, and on the trial proved the contents of the
policy.
The counsel for the defendant requested the court to charge the
jury:
1st. That the eighth section of the company's charter prescribed
the manner in which every contract, bargain, and agreement of
insurance should be made, and that no contract having been made in
writing or print and executed as therein required during the
existence of the property claimed to have been insured, the company
was not liable in the action.
2d. That under and by virtue of the charter of the company, it
was not authorized to make a parol contract of insurance, and that
any such contract was void at law.
3d. That under the said charter an action at law could not
Page 87 U. S. 563
be sustained against the company upon a parol agreement to
insure or a parol contract of insurance.
4th. That it being a fact in this case admitted by the plaintiff
that the parol contract of insurance was not executed or evidenced
by a written policy until after the destruction of the property by
fire, the company's agent had no authority subsequent to the fire
to make and execute a written policy which should be binding upon
it.
The court refused thus to charge the jury, and charged,
contrariwise, that upon the uncontradicted case, the plaintiff was
entitled to their verdict. To this charge the company excepted, and
verdict and judgment having gone against it, it brought the case
here.
Page 87 U. S. 566
MR. JUSTICE FIELD delivered the opinion of the Court.
The charter of the company defendant, in the same clause which
authorizes its president and directors to make insurance against
fire and for that purpose to execute such "contracts, bargains,
agreements, policies, and other instruments" as may be necessary,
declares that every such contract, bargain, agreement, and policy
shall be in writing or in print and be under the seal of the
corporation and be signed by the president and attested by the
secretary or other officer appointed for that purpose.
Where similar language as to the form of the contract or policy
was used in connection with a like grant of power to insure in a
general statute of Pennsylvania respecting insurance companies, it
was held by the late Mr. Justice Grier, in a case before the
circuit court of the United States, that a company to which the law
applied could make an insurance which would be legally valid only
by a policy attested by the officers and seal of the corporation.
[
Footnote 1] The learned
Justice undoubtedly considered that the mode in which the contract
or policy could be made was so associated with the grant of power
as to be essential to a valid exercise of the power. And such
appears to be the natural import of the language of the clause of
the charter of the defendant under
Page 87 U. S. 567
consideration in this case, when the whole clause, that which
confers the power and that which prescribes the mode of its
exercise, is read.
But the learned Justice at the same time very justly observed
that before the policy was attested in due form, the president or
secretary or whoever else might act as general agent of the company
might make agreements and parol promises as to the terms on which a
policy should be issued, so that a court of equity would compel the
company to execute the contract specifically, and that where a loss
had happened, to avoid circuity of action, the chancellor would
enter a decree directly for the amount of the insurance for which
the company ought to have delivered its policy properly
attested.
The requirement of the charter in this case has reference, in
our judgment, only to executed contracts or policies of insurance
by which the company is legally bound to indemnify against loss,
and not to those initial or preliminary arrangements which
necessarily precede the execution of the formal instrument by the
officers of the company. The preliminary arrangements for the
amount and conditions of insurance are in a great majority of
instances made by agents. It is always so where the insurance is
effected out of the state where the company is incorporated and has
its principal place of business. The charter of the company in this
case authorized the president and directors to appoint officers and
agents for conducting its business in other places than the City of
Philadelphia. And it would be impracticable to carry on its
business in other cities and states, or at least the business would
be attended with great embarrassment and inconvenience, if such
preliminary arrangements required for their validity and efficacy
the formalities essential to the executed contract. The law
distinguishes between the preliminary contract to make insurance or
issue a policy and the executed contract or policy. And we are not
aware that in any case, either by usage or the bylaw of any company
or by any judicial decision, it has ever been held essential to the
validity of these initial contracts that they should
Page 87 U. S. 568
be attested by the officers and seal of the company. Any usage
or decision to that effect would break up or greatly impair the
business of insurance as transacted by agents of insurance
companies.
In a recent case in the Court of Appeals of Kentucky, this
precise question was considered, and its determination was in
accordance with the views we have expressed. [
Footnote 2] There, the suit was to enforce a parol
contract of insurance made by the agent of the company, whose
charter provided that all policies or contracts of insurance made
by the corporation should be "subscribed by the president, or
president
pro tem., and signed and attested by the
secretary, and being so signed and attested," should he binding and
obligatory upon the corporation without its seal, according to the
tenor, extent, and meaning of the policies or contracts. And the
court held that this clause did not require an executory contract
for an insurance to be in writing, and said that it knew of no
American charter which did so require, observing that whilst a
policy as an executed contract of insurance was defined to be
documentary and authenticated by the underwriter's signature, yet a
contract to issue a policy as an executory agreement to insure
might be binding without a written memorial of it, that no statute
of frauds applied, and that the common law did not require
writing.
There is no suggestion that the preliminary contract in this
case was not made in perfect good faith on both sides, with full
knowledge by the agents of the condition, character, and value of
the property insured. The credit allowed for the payment of the
premium was an indulgence which the agents were authorized by
general usage to give. Its allowance did not impair the preliminary
contract; that, being valid, could have been enforced in a court of
equity against the company; and having been enforced by the
procurement of a policy, an action could have been maintained upon
the instrument, or the court in enforcing the execution of the
contract might have entered a decree for the
Page 87 U. S. 569
amount of the insurance. But no resort to a court of equity for
specific performance was necessary in this case by reason of the
action of the agents in filling up the blank policy, which was duly
attested, as they should have done immediately after the
preliminary arrangement with the assured. The agents were
authorized to do after the fire that which they had previously
stipulated to do on behalf of the company. The original neglect to
fill up the blank policy at once constituted no valid reason for
further delay. If the policy filled up at once would have bound the
company, so must the policy subsequently filled up. The relations
of the parties and the obligations of the company were not changed
by the neglect of the agents. The filling up of the policy was a
voluntary specific performance of the preliminary agreement. And,
when filled up, the policy was by express stipulation to be held by
the agents in their safe for the assured, and no actual manual
transfer was, under these circumstances, essential to perfect the
latter's title. It then became his property, and upon a refusal of
the defendant to surrender it, two courses were open to him: either
to proceed by action to recover the possession of the policy or to
sue upon the policy to recover for the loss, and in the latter case
to prove its contents upon failure of the company to produce the
instrument on the trial.
In
Kohne v. Insurance Company, [
Footnote 3] the terms of insurance upon a vessel were
agreed upon between the agent of the plaintiff and the company. For
the premium a note was to be received with approved security. A
policy was accordingly filled up by the president in conformity
with the agreement, and notice thereof given to the agent. Three
days afterwards, the agent called at the office of the company to
deliver the note and receive the policy. The company had in the
meantime heard of the loss of the property insured, a fact which
was unknown to either party when the agreement was made, and
refused to deliver the policy, asserting that the agreement for the
insurance was inchoate,
Page 87 U. S. 570
which it had a right to retract. The assured then brought trover
for the policy, and Mr. Justice Washington, presiding in the
circuit court, sustained the action, holding that the contract was
perfected when the policy was executed, and, of course, that the
possession of the instrument by the company, after giving notice of
its execution, did not impair the title of the assured. [
Footnote 4]
In
Lightbody v. North American Insurance Company,
[
Footnote 5] the agent of the
plaintiff made a contract of insurance of certain buildings with
the agent of the defendant on the 30th of March, and paid the
required premium. On the following morning, the buildings were
destroyed by fire. The policy was made out and delivered by the
agent on the 21st of April following, after the company had refused
to pay the loss, and the court held that the policy took effect by
relation from the day of its date, which was the day the premium
was paid and the contract concluded; that it was the manifest
intent of the parties that the contract should operate from its
date, so as to give the plaintiff the same legal remedy which he
would have had if the policy had been then delivered; that the
agent pursued his authority in delivering the policy after the
loss, and that the delivery bound the defendants.
In the case of
City of Davenport v. Peoria Marine & Fire
Insurance Company, [
Footnote
6] the power of an agent to issue a policy after a loss,
pursuant to his agreement, was very fully and ably considered with
reference to the principal decisions on the subject. There, the
agreement for insurance was made between the parties by their
agents on the 20th of March; on the night of the same day, the
property was destroyed by fire; on the following morning, the
policy was executed and delivered in accordance with the agreement,
both parties at the time being ignorant of the loss. The court held
that the policy was valid and binding; that the doctrine that an
act done at one time may take effect as of a
Page 87 U. S. 571
prior time, by relation back, was applicable to contracts of
insurance; that the agreement to insure was the principal act, and
that the formal execution of the policy might be concurrent
therewith, or subsequent thereto, and when subsequent, and made as
of the date of the principal act, took effect by relation as of
that date.
Numerous other authorities to the same purport were cited on the
argument, but we do not deem it necessary to pursue the subject
further. We see no error in the ruling of the court below, and its
judgment must therefore be affirmed, and it is so ordered.
Judgment affirmed.
[
Footnote 1]
Constant v. Insurance Company, 3 Wall.C.C. 316.
[
Footnote 2]
Security Fire Insurance Co. of New York v. Kentucky Marine
& Fire Insurance Co., 7 Bush 81.
[
Footnote 3]
1 Wash.C.C. 93.
[
Footnote 4]
See also Sheldon v. Connecticut Mutual Insurance Co.,
25 Conn. 207.
[
Footnote 5]
23 Wend. 18.
[
Footnote 6]
17 Ia. 277.
