Opinion
No. 3031.
Decided February 7, 1939.
An insurance company is chargeable with the knowledge of its agent as to facts and matters relating to the issuance and attempted cancellation of its policies.
A policy is not cancelled where the agent of an insurer, instructed by his principal to cancel a policy and obtain possession of it, leaves it in the hands of the assured pending the placing of the insurance by the agent in another company at the request of the assured.
In such case the agent acts as a broker in the negotiation for the new insurance and is the agent of his employer and not of the original insurer.
If in such case the second company issues a policy with instructions to the broker not to deliver it until further investigation, the policy is delivered in escrow to the broker and does not take effect until the company's investigation is completed.
The rule that an instrument cannot be deposited as an escrow with the agent of the grantee does not apply if the agent's relation to his principal is such that his acting as depositary involves no violation of his duty to his principal.
An instrument delivered in escrow has no validity until the condition is performed, though the depositary in violation of his duty delivers the instrument to the grantee or promisee who takes it in good faith and in ignorance of the condition.
Registration of a motor vehicle by a married woman in her maiden name does not affect the validity of her liability insurance thereon if the insurer's agent is fully aware of her act.
A general finding by the trial court will not be sustained if inconsistent with the special findings.
PETITION, for a declaratory judgment (Laws 1929, c. 86) to determine the validity and effect of certain motor vehicle liability policies issued by the Hartford Accident Indemnity Company and the Standard Accident Insurance Company, each purporting to provide protection to the plaintiff in the operation of her automobile. The plaintiff had both policies in her possession on October 30, 1937, when her husband, while driving the car with her permission, was involved in an accident. Actions to recover damages caused by the accident have been brought against both the plaintiff and her husband. Trial by the court, who made the following findings and rulings:
"Mrs. McCabe owned a Chevrolet automobile registered in her maiden name, Ann Reynolds. Shortly prior to Sept. 4, 1937, she requested her husband to apply to Jeremiah Sheehan of Manchester, an insurance agent for the Hartford Company for an automobile liability policy of insurance on the car. Mr. Sheehan understood that the policy would cover the Chevrolet owned by Mrs. McCabe.
"On Sept. 4, 1937, the Hartford Company through its agent, Mr. Sheehan, delivered a policy to Mrs. McCabe covering the named assured, Ann Reynolds. Mr. Sheehan took the name Ann Reynolds from the name appearing on the car registration certificate. He knew the owner and the named assured was the wife of Bernard McCabe.
"The Hartford Company decided to cancel the risk as undesirable. On Sept. 25, 1937, it notified Mr. Sheehan to obtain the policy. He never obtained it. Mr. Sheehan wished to have the insurance placed in some other company before picking up the policy. He knew that the McCabes did not care what company carried the risk so long as they were insured.
"On Oct. 19, 1937, Mr. Sheehan interviewed Mr. Shaw, an insurance broker, regarding insurance for the McCabes with the Standard Accident Insurance Company. Mr. Sheehan explained to Mr. Shaw the history of the case and the attitude of the Hartford Company.
"On Oct. 22, 1937, Mr. Shaw wrote the following letter to Mr. Sadler of Nashua, general agent in this state for the Standard Company:
`. . . I am enclosing two dailies for Edwin Arthur Sandwell and Ann Reynolds, issued by the Hartford. This is a brokered line coming to me from J. A. Sheehan . . . .
`On Ann Reynolds, the report shows that her husband is in the habit of drinking week ends. He occasionally drives her car, although I understand that he does not drink when he drives. Mr. Sheehan has told me that the Hartford wishes to get off the risks, and asked me if I could do something with them, so I am passing them on to you to place them if you can.
`Write them on the same plan as written, if you think that you can handle them. You could issue the policies, and keep them in your office until you find out if they stick.
`I understand that they are covered in the Hartford at the present time. This will save picking them up, in case the company requests cancellation.
`I am giving you the story as I know it, and if you can place them, I would appreciate it.
`Kindly return the enclosed Hartford dailies. . . .'
"The Standard Company wrote a policy dated Oct. 27, 1937, covering the named assured, Ann Reynolds, from Oct. 23, 1937. Mr. Shaw received this policy from Mr. Sadler with instructions not to deliver it pending further investigation by the Standard Company.
"On Oct. 29, 1937, the policy was delivered to Mr. Sheehan with instructions not to deliver it to Mrs. McCabe pending further investigation by the Standard Company. Mr. Sheehan immediately took it to the restaurant where Mrs. McCabe worked and informed her that it replaced the Hartford policy and that `this is new coverage.' She accepted the policy. She had expected a possible change in the insurance because Mr. Sheehan had told her husband to hold up the premium payment for a time. Mr. Sheehan did not ask her to surrender the Hartford Company policy. He told her to have her husband see him regarding the insurance.
"At the time of the accident, Oct. 30, 1937, Mrs. McCabe held both policies.
"Neither Mr. nor Mrs. McCabe intended to defraud either insurance company by having the policies written in the name of Ann Reynolds. Mrs. McCabe had her car registered under her maiden name because she believed her husband could not then sell it without her consent whereas she believed he could sell it if she registered the car under her married name.
"Neither Mr. nor Mrs. McCabe had any knowledge of any instructions from Mr. Sadler to Mr. Shaw or from Mr. Shaw to Mr. Sheehan that the Standard policy should not be delivered to Mrs. McCabe until the company further investigated the risk.
"The most reasonable inferences the Court can draw from the transaction between Mr. Sheehan and Mrs. McCabe on Oct. 29, 1937, are that it constituted a delivery and acceptance of the Standard policy taking effect at that time and covering the assured from Oct. 23, 1937, and a cancellation of the Hartford policy taking effect at the time of acceptance and delivery of the Standard policy provided the Standard policy was valid.
"The Court rules that the Standard Accident Insurance Company policy covered the accident on Oct. 30, 1937, and that the Hartford Accident Indemnity Company policy did not cover the accident on Oct. 30, 1937."
At the trial the Standard company moved "that the petition be dismissed as to the Standard Accident Insurance Company." This motion was denied subject to exception. The Presiding Justice granted various requests made by the plaintiff and by the Hartford company. The Standard company excepted to the ruling, made at the Hartford company's request, that the Standard company issued a valid and binding policy of insurance effective as of October 23, 1937, and to the further ruling that upon all the facts the Hartford company was not bound to defend the pending actions against the plaintiff and her husband. A bill of exceptions was allowed by Lorimer, J.
John J. Sheehan and William L. Phinney (Mr. Phinney orally), for the plaintiff.
Demond, Woodworth, Sulloway, Piper Jones (Mr. Franklin Hollis orally), for the Hartford Accident Indemnity Company.
Paul E. Nourie (by brief and orally), for the Standard Accident Insurance Company.
"Insurance brokers are those who effect insurance for their employers and act as middlemen between the insurer and insured." 1 Rapalje Lawrence's Law Dictionary, 154. See, also, Davis v. Insurance Co., 67 N.H. 335.
"The insurance broker is ordinarily employed by the person seeking the insurance, that is by the insured, and when so employed is to be distinguished from the ordinary insurance agent, who is commissioned and employed by the insurance company to solicit and write insurance by and in the company. The former is the agent of the insured; the latter is the agent of the insurers.
"It is, of course, entirely possible for the insurer, e. g., the insurance company, `though having regularly appointed agents to also employ brokers upon particular occasions and in that event the broker will be primarily the agent of the insurer. . . .
"It is also possible for an insurance broker, though first employed by one party, to become, during the progress of the negotiations, the agent of the other; and in that event, he may acquire rights, have powers and incur obligations with respect of both insurer and insured." 2 Mechem, Agency (2d ed.), s. 2366.
The foregoing principles of law may be readily applied to the facts of the present controversy. It is undisputed that Sheehan was the holder of an insurance broker's license under the provisions of P. L., c. 275, s. 28. In negotiating the policy of insurance with the Standard company he was acting as the plaintiff's agent. The plaintiff expected that the policy she held might be replaced by another. She "did not care what company carried the risk" and was willing to let Sheehan make the change. Sheehan stated without objection that he understood that he had "general authority to place this insurance anywhere" and purported to act in the plaintiff's behalf.
Shaw was also an insurance broker, and the Standard company, by placing the plaintiff's policy in his hands "with instructions not to deliver it pending further investigation," thereby constituted him a depositary for the purpose of holding the policy and delivering it only when the condition had been fulfilled.
Although Sheehan testified that his understanding of the transaction was that the policy should be effective when issued, and that the only reason for withholding delivery to the plaintiff was to save the bother of "picking up" the policy in case cancellation later became advisable, this was not the only conclusion fairly to be drawn from the evidence. It could also be found that the policy was entrusted trust to Shaw in escrow, to take effect only after the Standard company had completed its investigation of the risk. "There is no doubt that a policy of insurance may be made out complete, in all its forms, and upon its face taking effect from the date therein mentioned, but with an understanding that it should not become operative and binding upon either party until the happening of some certain event." Atlantic c. Ins. Co. v. Goodall, 29 N.H. 182, 193.
The trial court has found, in effect, that such was the situation here. The Hartford company does not question this finding. On the contrary, it makes the following concession in its brief: "It is of course obvious that until this policy was delivered to and accepted by Mrs. McCabe it was not an effective insurance policy."
The court erred, however, in predicating liability upon the plaintiff's ignorance of the condition on which the policy was placed in Shaw's and in Sheehan's hands. A deed deposited with a third person, to be held by him and not delivered to the grantee until some other thing is done, will have no validity until that thing is accomplished, even though the depositary in violation of his duty to the grantor delivers the deed to the grantee who takes it in good faith and in ignorance of the condition imposed. Smith v. Bank, 32 Vt. 341. See, also, Bickford v. Daniels, 2 N.H. 71, 74; Ela v. Kimball, 30 N.H. 126, 133.
It may be objected that the depositary here was the plaintiff's agent and not a third person, the existence of the agency being inferred from the fact that the plaintiff must have understood that the procurement of insurance for her would be difficult on account of the hazard insured against and that, therefor, the successful accomplishment of Sheehan's undertaking might well require the services of another broker.
But the fact that Shaw, in applying to Sadler for the policy in question, may have been acting as the plaintiff's agent did not preclude him from also acting as custodian of the policy at Sadler's request. The general rule that an instrument cannot be deposited as an escrow with the agent of the grantee does not apply if the agent's relation to his principal is such that his acting as custodian of the document involves no violation of his duty to the grantee. 10 R. C. L. 631; 21 C. J. 877; Note, Ann. Cas. 250, 251. See, also, Federal Ins. Co. v. Sydeman, 82 N.H. 482, 484. Nor should the result be otherwise merely because the depositary of the instrument is an agent to procure it. Alabama c. Co. v. Company, 165 Ala. 304, 307. "In many business transactions the same person frequently acts as agent for both of the parties under specific instructions from each as to his duties, and when the nature of the employment or transaction is such that he can faithfully discharge his obligations to the one without conflicting with his fidelity to the other." J. I. Case c. Co. v. Barnes, 133 Ky. 321, 332, 333.
The fact that Shaw was acting for both the insurer and the insured did not mean that he was thereby assuming incompatible duties. It was not his duty to obtain a policy for the plaintiff by hook or by crook. He could be faithful to both the plaintiff and the insurance company by holding the policy on the stipulated condition. This, however, he failed to do, and the policy "having been delivered in violation of the trust reposed in the depositary, the delivery was void." Price v. Insurance Co., 54 Mo. App. 119, 123, 124.
Sheehan was the agent of the Hartford company, and in matters relating to the issuance and attempted cancellation of the Hartford company's policy that company was charged with knowledge of all facts known to him. Ostroff v. Hustis, 80 N.H. 141, 143, and cases cited.
Although a policy may be canceled by mutual consent without a formal surrender of the policy by the insured or a tender of the unearned premium by the insurer (32 C. J. 1244), the findings in the present proceeding do not warrant a ruling that the Hartford policy was ever canceled. The plaintiff accepted the Standard company's policy on Sheehan's representation that it replaced the Hartford policy and was "new coverage." There is no claim that the plaintiff intended to consent to the Substitution of the new policy for the old unless the new policy was valid and in force. While the court has found that Sheehan knew that "the McCabes did not care what company carried the risk," he has also found that Sheehan knew that they did not intend to be uninsured.
It is unnecessary to decide whether the plaintiff's car was registered in her name within the meaning of P. L., c. 100, ss. 1, 2, 5 (see Bacon v. Railway, 256 Mass. 30), since Sheehan, at the time he obtained the policy from the Hartford company, was fully aware that the car was registered in the plaintiff's maiden name.
The general conclusion of the trial court is unwarranted by the special findings. The Standard company excepted to the ruling that its policy was valid and binding and that the Hartford policy was not. The prayer of the petition is that "one or the other or both of these two insurance companies be found liable for coverage." The issues have been fully tried. The special `findings, which are supported by the evidence, comprise all facts necessary to be found, and on those findings but one conclusion can properly be reached. Under these circumstances a new trial is not required.
Judgment for the plaintiff against the Hartford Accident Indemnity Company, Judgment for the Standard Accident Insurance Company.
All concurred.