W. Indem. Co. v. Indus. Accident Comm'n

—This is a writ of review issued upon the application of petitioner, the Western Indemnity Company, a corporation. The Industrial Accident Commission, on April 23, 1918, made an award in the sum of $2,596.14 against the petitioner and in favor of Ethel Lamb, for the accidental death of her husband, John Lamb, an employee of Dr. Pond, of Napa County, it having been found by the commission that petitioner was the insurance carrier of Dr. Pond at the time of the injury. It appears that Dr. Pond had been engaged in operating a small farm and fruit orchard some ten or twelve miles from the city of Napa. John Lamb was employed on the place as a man of all work, and, although that kind of occupation does not fall . within the Workmen’s Compensation Act, both Dr. Pond and Lamb nevertheless elected to come under its provisions.

The principal contention of petitioner is that it was not the insurance carrier of Dr. Pond when the accident occurred, and in this connection petitioner makes the claim that the following findings of the commission are without support in the evidence:

“6. That prior to the said second day of October, 1917, and on or about the twenty-fourth day of September, 1917, the defendant M. B. Pond had applied to Arthur H. Smith of Napa, the duly accredited and authorized agent of the defendant Western Indemnity Company, for a renewal of a then expiring policy of insurance covering his liability for injury to his employees, and had requested said agent to procure for him such policy, to take effect upon the expiration of his then existing policy, which would expire on September 25, 1917. That at that time it was the custom and the practice that an assured was covered by the insurance subsequently provided in the policy, from the date of his application. That after the application by said defendant Pond, and before the said second day of' October, 1917, said defendant Pond was notified by said agent Smith that the premium or rate of said insurance had increased, the exact amount of such increase being at that time not known to said agent. That thereupon said defendant Pond stated his willingness and consent to pay the increased rate and again requested that the policy be issued. That thereafter, and on or about the tenth day of October, 1917, the general agents of said Western Indemnity Company duly issued their policy of insurance dated the twenty-fifth day of September, 1917, to the said defendant Pond, insuring him against his liability for injuries to his employees, and that on the tenth day of October, 1917, _ said defendant duly paid to said agent Smith the full premium for said insurance, which premium was duly received and accepted by said agent. 7. That by reason of the facts as set forth in paragraph 6 hereof, the defendant Western Indemnity Company was the insurance carrier of said defendant employer at the time of said injury and had insured said employer

against liability for full compensation for said injury, and said employer is entitled to be relieved from such liability under the provisions of subdivision (e) (2) of section 30 of the Workmen’s Compensation, Insurance and Safety Act of 1917.” The evidence will sufficiently appear in the discussion.

Arthur H. Smith, doing business under the name of “Arthur H. Smith & Co.,” in the city of Napa, was engaged in placing insurance for various companies, including the Western Indemnity Company. Upon the filing by petitioner with the state insurance commissioner of “a duplicate power of attorney” on July 1, 1917, a license was issued to Smith for the term of one year in compliance with the provisions of section 633 of the Political Code. The license gave Smith authority “to solicit applications for insurance or surety bonds or to effect insurance or surety bonds in the name of said company.” This power of attorney was not introduced in evidence, but we shall assume that it corresponded with the license.

In September, 1916, Smith secured for Dr. Pond a policy of compensation insurance in “The Massachusetts Company.” That policy expired on September 25, 1917. On September 24, 1917, Dr. Pond went to the office of Smith and “verbally” requested that such policy be “renewed.” There is a dispute in =the testimony of Dr. Pond and Smith as to whether on this occasion Dr. Pond saw Smith personally or dealt with an employee in Smith’s office. Dr. Pond testified that “some time in September, I think after the 15th, I received a letter from Mr. Smith stating that my policy terminated . . . asking me ... if I wanted a renewal. I gave the letter to Mr. Smith when I went and ordered a renewal of insurance. I left it as a reminder. . . . He says: ‘The premium will be raised.’ I was informed that the last premium would be $10 for farmers, and it would be probably $15. . . . Any discussion we had was simply his statement to me that it would be probably not less than $15, and I told him to go ahead. I wanted, to be insured even if it was more. He told me right on the start it would probably be that much, ‘ possibly more, ’ is the way he put it.” Smith was asked: “At the time you took that application from Dr. Pond, was there any question about the issuance of a policy on account of the pre

Smith stated further that, as “The Massachusetts Company” had discontinued writing compensation insurance, on September 24th he forwarded to the general agent a written' application for coverage for Dr. Pond to begin on September 25, 1917, the application being signed by Smith alone, and in item 14 thereof, opposite the printed words “the minimum premium for this policy,” appearing the figures “$10.00.” This application was received on September 25th in the office of the general agent, Arthur G. Nason, who conducted the agency as “Arthur G. Nason & Co.” In due course Smith received an answer to the application under date of September 26th to the effect that the minimum premium on farm labor policies was $15, and stating: “We shall hold the application pending receipt of your advices as to whether or not we may write at this rate.” On September 29th Smith wrote to Dr. Pond: “We are in receipt of a letter from the company stating that the least they can write a compensation policy on farm labor is $15 minimum premium. Kindly advise us by return mail if this is satisfactory to you.”

There is a further lack of agreement in the testimony of Dr. Pond and Smith as to what occurred after September 24th. Smith testified as follows: “Q. Did you not see him between September 24th and October 2d? A. Me? No. ... Q. Do you know whether he came to your office during that interval? A. I couldn’t say. Q. Was it reported to you that he had been in there? A. No. I don’t recall it if it was. . . . Q. Then he didn’t answer your letter of September -29th until after the accident on October 2d? A. That is right. . . . Q. Did you see him on the afternoon of October 2d? A. I did. ... In my office. . . . He said it would be all right at the $15 premium. . . . Q. When

On the afternoon of October 2d, after Dr. Pond had called on Smith and they were both aware of the injury to Lamb, Smith wrote the following letter to the general agent: “In answer to your favor of the 26th of September in regard to application of Milo B. Pond, would ask that you kindly issue policy at the $15 minimum.” No mention of the accident was made in this letter. On October 3d Smith wrote again to the general agent: “We herewith enclose you report of accident to John Lamb, employed by Dr. M. B. Pond. Kindly give this your attention.” Before the receipt of this letter, and in response to that of October 2d, the office of the general agent issued a policy at the $15 rate and dated it October 3d. This was received by Smith on October 4th. On October 5th he sent the following letter to the general agent: “We herewith return you policy No. CC-14425, Milo B. Pond, as you have made an error in dating same. Under date of September 24, 1917, we sent you application asking you to issue the policy, and under date of September 26th you wrote us advising us of the increase in the minimum charge and also stating that you would hold the application pending receipt of our advices. Kindly issue this policy from date of application.” No written reply was made to this letter, but Smith testified that the date of the policy was changed from October 3d to September 25th, while he was in the office of the general agent on October 8th or 9th. Prom the testimony that follows it would appear that the actual date of this meeting and the alteration of the policy was October 9th. A report of the results of the post-mortem examination was forwarded from Smith’s office to the general agent on the last-mentioned date. On October 10th Dr. Pond paid the $15 premium to Smith, who issued a receipt therefor and delivered the policy to him.

Charles M. Wilson, manager of Nason’s office, and head of the indemnity insurance department thereof, testified

Nason himself testified that he did not learn of the accident until “after October 3d. . . . The first that came to my attention was that I was informed that the claim adjuster was called upon by Mr. Wilson to go to Napa to attend the coroner’s inquest. . . . That was the first that I knew. ... Q. As a matter of fact, you are not familiar with the details of your office? A. Absolutelyi^ot. Q. You left it to your manager, did you not? A. Yes; unless some trouble arose over a matter I wouldn’t interfere at all.’.’

The following testimony was given by Russell B. Adams:

“Q. State whether or not on behalf of Arthur G. Nason & Company you accepted said application . . . from . . . Dr. Milo B. Pond. A. The application was not accepted. Q. Please state what action you took upon the said application. ... A. On receipt of the application I noted the premium specified was not up to our charge. A letter was written by me to Smith advising of this and saying the application would be held pending his advices. Q. In acknowledging the said letter from . . . Smith . . . state whether or not it was your intention as representative of . . . Nason ... to hold . . . Dr. Pond covered under a policy. A. It was not my intention to cover the risk. Q. Please state what your intentions were as to the said application. A. To hold it until advised by our agent as to whether the insurance was desired at the higher rate. Q. Was it at any time subsequently to the receipt of the application your intention to bind or consider said application of any force or effect, or as constituting any insurance covering Dr. Pond? A. No. ... No instructions were

ever given me to bind this risk or to write a policy. Q. In issuing a binder for such policy . . . what has been your custom while employed by Nason? A. A record of risks bound was kept by Nason. The name, date covered, and nature of covering was always kept. Q. Please state fully what course you would have taken had you intended . . . to hold Dr. Pond covered under a policy. ... A. A binder would have been issued and recorded as above; in any case there would have been a record of any covering granted.”

The respondents in their reply to petitioner’s supplemental brief take a different position with regard to the evidence as to when Dr. Pond expressed his willingness to accept the $15 rate from that stated in their first brief. It is insisted in their last position that “at the time of the application for a renewal Dr. Pond was told by Mr. Smith that the premium would be raised and that it would be probably $15 as a minimum. Dr. Pond thereupon informed Mr. Smith that the amount of the premium was immaterial —that he wanted a policy. . . Respondents contend that this made a complete meeting of minds on the only issue— the premium.”

From this it is argued that the letter of September 29th “was superfluous and should not in any way be considered in this cause, for the reason that Smith had already been told by Dr. Pond that he wanted the policy regardless of the amount of the premium.” (Italics ours.) In their first brief respondents state that, “On September 24, 1917, Pond applied to Smith at Napa for a policy. . . . There may or may not have been some discussion between Smith and Pond . . . concerning the 'premium ... at the time the application was made. It is immaterial. . . . The offer of Dr. Pond when it reached the office of the general agent . . . was refused. . . . The petitioner made a new offer to extend coverage to Dr. Pond ... at an increased price. . . . This offer of petitioner is contained in the letter tos Smith . . . under date of September 26th . . . and in the letter from Smith to Dr. Pond under date of September 29th. The offer thus made by petitioner was never at any time withdrawn. Indisputably it was accepted by Dr. Pond. . . . What happened in the interim is of no consequence.” (Italics ours.)

We have said that the finding cannot be interpreted to mean that the contract was concluded on September 24th, nor do we think it can be ascertained therefrom when, according to the commission, Dr. Pond consented to the rate. And, unless the conjunctive “thereupon” connotates an interval between the notification and the consent, it cannot be determined whether the commission found that the rate was agreed upon before or after the injury. Do the findings refer to the second occasion mentioned in Dr. Pond’s testimony? The plausible theory is that they do. The word “thereupon” could properly have reference only to an occasion where there was at once a proposal and an

[2] It is well settled that the findings of the commission upon questions of fact are conclusive where there is any substantial evidence to support the award. (Western Indemnity Co. v. Pillsbury et al., 172 Cal. 807 , [ 159 Pac. 721 ]; Massachusetts B. & I. Co. v. Industrial Acc. Com., 176 Cal. 488 , [ 168 Pac. 1050 ].) [3] Upon the question of fact we have been discussing, however, taking into account all the pertinent evidence bearing on the point, the apparently consistent and convincing testimony of Smith—supported as it is by the correspondence and the sequence and import of events concerning which there is no dispute, the uncertain testimony of Dr. Pond in most particulars—especially in respect to the time when he acted upon the letter of September 29th, and the lack of clearness and definiteness in the findings on the conflict in the evidence—if it can be said that the evidence is really involved in conflict as to "the time of his acceptance, we are constrained to declare that even if the findings are ■ to be interpreted as meaning that Dr. Pond had accepted the counter-offer prior to the accident, they are, nevertheless, without support in the evidence. We are not prepared to say, however, that if Dr. Pond had, with some regard for certainty and precision, fixed, his acceptance as of a time prior to the casualty we would set aside the finding. We do not think that his testimony can be said to con

Having reached the conclusion that a contract was not concluded prior to the injury, we shall now dispose of petitioner’s objection to the finding that Smith was the agent of the company in the transaction. It is claimed in the brief of petitioner that “Smith had not been given, and did not have, and never attempted to exercise any power or authority over the policies of the company, except to receive and deliver the same, . . . and at no time did he have or claim that he had the right to fix the rate or to execute, issue, sign, countersign, or modify a policy issued by this company. ...” Smith testified that he was the agent of petitioner and not of Dr. Pond. If this be true it might be held that if Dr. Pond had, prior to the accident, notified Smith of his acceptance of the counter-offer the contract would thereupon have been completed, notwithstanding that Smith did not communicate such acceptance to his principal before the loss occurred. [4] “If the applicant accepts the terms granted by the company the contract is considered complete, without waiting for the local agent to communicate the acceptance to the company.” (1 Cooley’s Briefs on Insurance, p. 425. See Tayloe v. Merchants’ etc. Co., 50 U. S. (9 How.) 390, [ 13 L. Ed. 187 , see, also, Rose’s U. S. Notes]; Carter v. Bankers L. I. Co., 83 Neb. 810 , [ 120 N. W. 455 ]; 1 Joyce on Insurance, p. 230.) But on this question it must be kept in view, as tending to show that in the mind of at least one of the parties the contract was not complete, that Smith waited until he heard from Dr. Pond concerning the counter-offer before ordering the policy, and that when he did hear from him he promptly notified the general agent.

It is to be noted, however, that the commission did not in its findings determine the character and scope of Smith’s authority as agent for petitioner, and this renders it necessary next to consider whether he could bind petitioner by a parol contract of insurance. Smith testified that “binders” were used in San Francisco, but not in Napa; that he issued none in this instance, but that he had been “advised by Mr. Nason and Mr. Wilson . . . that before the policy is issued the applicant is covered . . . from the date of the applica

It only remains to consider whether, where the loss has occurred before the parties had come to an understanding upon the terms of the contract, the general agent has authority to issue a policy so as to cover the uncovered loss.

The cause was argued before this court and submitted for decision. The submission was subsequently vacated and the cause set for further argument upon the questions: “ (1) As to the authority of the general agent of a foreign insurance company after a loss not amounting to a total loss has occurred to the knowledge of the agent, to deliver a policy of insurance antedated so as to cover the loss, there being at the time no binding agreement for the insurance between the insured and the company, and (2) as to the authority in the particular case of Wilson, the employee of the general agent, to make such delivery on behalf of the

The policy was introduced in evidence and contained the following provisions: “K: No assignment or change of interest and no change, waiver, or extension of any of the terms or conditions of this policy shall be valid, unless endorsed hereon and signed by an officer of the Company, nor shall notice to any agent or any other person be held to effect a waiver or change in any part of the policy. . . . M. The term of this policy shall be twelve months from October 3, 1917, beginning and ending at twelve o’clock noon, standard time, at the assured’s business address stated herein.” It is contended by petitioner that as Nason, according to his own testimony, was not an officer of the company," the alteration of the date of the policy was not binding on the petitioner, the policy did not cover liability prior to October 3d, and, therefore, petitioner was not the insurance carrier of Dr. Pond at the time of the accident. But, as the decisive question here is whether the general agent had authority to issue a policy covering a known loss, rather than whether he was authorized to alter a policy properly issued in the first place, we are not called upon to discuss the provision in clause “K.”

The general rule covering this question is thus stated in Cooley’s Briefs on Insurance, volume 1,\ at page 354: “It may ... be regarded as elementary that an agent has no authority to insure goods which he knows to have already

Whether or not the insurer, under all the circumstances, could have issued a policy which covered the loss—either total or partial—the authorities we have cited sustain the proposition that, unless there is a subsisting contract of insurance when the loss occurs, a general agent, in the absence of express authority, has no power to issue a policy. We think it has been made clear that in this case there was no contract in force at the time of the injury. One was written on the day following the loss, but was never “issued” until it was delivered to Smith on October 9th. Before that time the date of the application had been changed from September 25th to October 3d and the policy from October 3d to September 25th.

The following authorities are cited in the brief filed by the respondent commission in support of the proposition that a general agent has authority to issue a policy covering a known loss and binding on his principal: New York Ins. Co. v. Russell, 77 Fed. 103 , [ 23 C. C. A. 43 ]; Insurance Co. v. Colt, 87 U. S. (20 Wall.) 560, 567, [ 22 L. Ed. 423 ]; Dames v. Some Ins. Co., 94 U. S. 621 , [ 24 L. Ed. 298 ; see, also, Rose’s U. S. Notes]; Schultz v. Phoenix Ins. Go., 77 Fed. 374 , 392; Kennebec v. Augusta Ins. Co., 6 Gray (Mass.), 204; Warner v. Peoria etc. Ins. Co., 14 Wis. 345 ; Komula v. General Assur. Co., 165 Wis. 520 , [ 162 N. W. 919 ]. These authorities are distinguishable from the case here in that in each of them, prior to the loss, the insured had signified his acceptance of the terms offered by the insurance company and thus a contract of insurance had been concluded. No authority has been cited, and we are aware of none, holding that a general agent, unless specially authorized,

[7] The general rule is that' whenever the parties have entered into a contract before the loss occurs or the policy has been issued, unless the authority of the general agent is expressly delimited, the policy, when issued, by operation of law relates back to the application and is dated accordingly—the policy being thereafter merely evidence of the contract; but this general rule has no application where the parties were not under contract at the time of the injury, and the general agent is without special authority to issue a policy to cover the loss.

Since it appears, then, that no contract of insurance was concluded prior to the accident, that Smith had no authority to bind petitioner by a parol contract of insurance, that the “custom and the practice” found by the commission to have been followed did not extend to a case where, at the time of the loss, the parties had not agreed upon the terms of the contract, and that the general agent was, in such circumstances, without authority to issue a policy, it follows that the findings cannot be sustained.

The award is annulled.

Shaw, J., Olney, J., Lennon, J., and Angcllotti. O. J.. concurred.

—Idissent. The evidence shows that the workmen’s compensation law did not apply to Dr. Pond until, at the solicitation of the agent Smith, he elected to be bound by its terms. The effect of his election was to charge him with responsibility for the injury to his employees under the terms of that law,.even if he was wholly without fault, as in this case. Because of such election Dr. Pond evidently intended to keep covered by insurance. Accordingly he notified Smith, petitioner’s agent, that he desired an indemnity policy, dating from the expiration of his existing insurance, and that he was willing to pay whatever premium was charged by the company. The petitioner offered its insurance policies for sale to the public generally at a fixed and uniform rate. The terms and provisions of the policy being thus fixed, the question of insurance turned upon the willingness .of the prospective