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INSURANCE COMPANY v. COLT.

October 1, 1874

INSURANCE COMPANY
v.
COLT.



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 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 26th, 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 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 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.

The opinion of the court was delivered by: A parol preliminary contract was made through an agent, and a loss having occurred, and the company having refused to pay, the assured field a bill in equity to compel the company to execute the policy and for relief. Mr. Justice Grier, indeed, said that––

Messrs. F. Chamberlin and E. Hall, for the plaintiff in error:

When the charter of a corporation prescribes to it in terms plainly mandatory a particular mode and manner in which all its contracts shall be executed and delivered, such prescription operates as a limit upon the mode in which such contracts shall be executed and delivered, and all persons dealing with a corporation (even a foreign one) are bound to take notice of every limitation upon its powers contained in its charter.*fn1

Now, the eighth section of this company's charter declares not only that every 'policy to be made by said corporation shall be in writing or in print,' but that every 'contract, bargain, agreement,' shall be just as much so. The only question therefore is, Was what was done by Nevers & Havens any kind of a contract, bargain, or agreement made by the corporation? The whole case of the plaintiff rests upon an assumption that it was completely a contract, bargain, and agreement made by it. He has no case whatever but on that assumption. The language of this section has an emphasis of comprehension. It is that 'every' contract, bargain, or agreement–contracts, bargains, and agreements howsoever made–whether made by the company, at its office in Philadelphia, or in other places, and by its agents whether preliminary or final–all must be 'in writing,' &c. The legislature and the insurance company doubtless knew that thes requirements would cause a certain amount of delay to the company in transacting the business of insurance. But they considered this to be far less injurious and far less embarrassing than continual lawsuits arising on disputes of what it was that agents had done, and whether, in what they had done, they had transcended their authority or not.

The reason of this requirement in the case of this particular company is specially obvious. The Franklin Insurance Company was chartered to do business in every State of the Uniion as much as in Pennsylvania; in States far from its home as well as in its home. 'Agents' are part of its machinery as chartered. Now, it is notorious that the business of agents is not to 'execute and perfect policies,' but to 'make contracts, bargains, agreements,' preliminary to the 'execution and perfecting of policies,' and it is equally notorious that the actions of agents of insurance companies in making such preliminary 'contracts, bargains, and agreements' are among the most fertile sources of litigation in insurance cases. A wise policy of the legislature of Pennsylvania therefore required these, as well as that which was but the executing and perfecting of them, to be in a formal shape, and signed in the way prescribed, before they should become binding.

Can it be supposed that the same legislature which requires policies to have form and to be in writing, meant to leave all the preliminary contracts, bargains, and agreements on which polices were to issue, loose and open to parol? these preliminary contracts, bargains, and agreements especially being made by mere agents, persons in distant places, and of necessity unknown to the company. The preliminary contracts, bargains, and agreements are the foundation of the policies. They are the essential and only essential portions of what is done. When they are clear and undisputed, the policy is but a form. Equity will regard it as executed and perfected, though not one word of it has been written. Nay, though it be all written and printed, and sealed and attested, yet if it differ from the preliminary agreement it is nought, and will be made to conform to it. Now, did the legislature mean to sweep away all protection to the company by leaving every important thing to rest in parol, and requiring that which was but form, to be in writing and solemnly executed?

Some reliance will perhaps be placed by opposing counsel on what was said by the late Mr. Justice Grier of this court, in the case of Constant v. Alleghany Insurance Company, ruled in the Pennsylvania circuit.*fn2 There a statute of Pennsylvania empowered an insurance company

'To make, execute, and perfect such contracts, bargains, agreements, policies, and other instruments as shall or may be necessary, and as the nature of the case may require, and every such contract, bargain, policy, and other agreement shall be in writing or print, under the corporate seal, and signed by the president or, in his inability, by the vice-president.'

'Before such instruments are attested in due form, the president or secretary, or whoever else may act as a general agent of the company, may make agreements, and even parol promises, as to the terms on which a policy shall be issued, so that a court of equity will compel the company to execute the contract specifically; and that where the loss had happened–to avoid circuity of action–the chancellor will enter a decree directly for the amount of the insurance for which the company ought to have delivered their policy, properly attested.'

Whether this position is correct we need not inquire further than we have done. Conceding it to be correct, the case does not touch ours. The case before Grier, J., was a proceeding in equity. Our case is at law, and though the reverend justice, of whom we speak, abhorred every sort of technicality that sought to entangle justice in its meshes, he yet noted how different the case would have been had the suit been like this, one at law. He says:

'By its act of incorporation, this company could make insurance which would be legally valid, only by a policy attested by the president, secretary, and the seal of the corporation.'

The case, therefore, is in our favor, not against us.

Messrs. H. C. Robinson and R. D. Hubbard, contra.

Mr. Justice FIELD delivered the opinion ...


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