Smith v. Provident Sav. Life Assur. Soc.

65 F. 765, 8 Ohio F. Dec. 417, 1895 U.S. App. LEXIS 2261

• Court: Court of Appeals for the Sixth Circuit
• Decided: February 5, 1895
• Docket: No. 213
• Status: Published

Opinion

TAFT, Circuit Judge,

after stating the facts as above, delivered the opinion of the court.

The sole issue in the court below was whether the policy took effect as a contract, and it depended on two questions: First. Had Spink, as general agent of the defendant company, authority to bind it by delivering the policy and receipt to the applicant without receiving the premium in cash? Second. Did Spink and Smith intend a binding delivery and receipt of the policy? If, in every reasonable view of the evidence, either question must he answered in the negative, the action of the court below was right. But if, in any reasonable view of the evidence, both may he answered in. the affirmative, then the judgment of the circuit court must be reversed.

1. Section 5 of Spink's instructions from his principal was:

“Ageuls crediting or remitting premiums not actually received do so at their own risk, and must look to the policy holder for reimbursement. The society does not ask or desire you to take this risk.”

This rule assumes that an agent may have.made one a policy holder by delivery of the policy without actually receiving the premium. The effect of it is lhat in such a case the a gent becomes absolutely liable to the company for the premium, and must pay it exactly as if he had received it, his only recourse being against the policy holder. But such a condition is wholly inconsistent with the contention for defendant that, wilhout actual payment of the premium by the applicant, the delivery by the agent is without authority, and void, giving no life to the policy as a contract. It is true that the contract of Spink with the company expressly withholds any authority to give credit, but, iu view of section 5, this must; be interpreted to mean credit for the company. His right to assume the payment of the premium himself and deliver the policy, taking the risk of collecting from the policy holder, is plainly recognized, though his exercise of it is not apparently encouraged. Spink had given bond to the company for the faithful performance of his duties and the prompt payment of all moneys received. He had also given the company a lien on all commissions due him, to secure all his liabilities to the company. The power of the company to enforce payment of any obligation assumed by him under section 5 was ample. It is said that section 5 can have no effect to give the agent any additional authority in Ms dealings with the applicants for policies, but is only intended as a penalty to be visited on the agent for exceeding his authority, and that the company may keep the money paid or credited by the agent on account of the policy, and at the' same time refuse to ratify his act in delivering it. It seems to ns that the mere statement of the proposition is its refutation. The words of section 5 are carefully selected not to forbid the practice of agents to deliver policies without actually receiving the premiums, while at the same time they shift all danger of loss from such a practice to the agent. The offering of credit on the first payment is a tempting inducement to many intending to take a policy, and in the strenuous competition between life insurance companies for business is a consideration which may often turn the scale in favor of the more accommodating company. The defendant company could be reasonably sure that, if the authority to give credit at their own risk was not absolutely denied to their agents, their desire to increase their commissions by a large business would be motive enough for them to assume the risk. Section 5 is strong evidence that the company was aware of the practice of their agents to give credit, and justified the introduction of testimony that it was Spink’s practice to do so. It is argued that the evidence of Spink’s practice of giving credit is confined to three cases. The statement of one witness is much more general than this, and justifies the inference that the specific instances testified-to were not by any means isolated or exceptional cases.

In Miller v. Insurance Co., 12 Wall. 285, 303, which was a case very like this in its facts, Mr. Justice Clifford, speaking for the supreme court, said:

“Evidence of the most convincing character is reported, showing that it ■was the custom of the agents to give credit in certain cases to persons with whom they were well acquainted, and knew to be responsible, and not to call for the money at the time the policy was delivered; and one of the instructions given to such agents affords a strong presumption that the custom was known to the company, as the instruction states that agents must not deliver policies until the whole premiums are .paid, as the same will stand charged to their account until the premiums are received or the policies are returned to the office.”

If such an instruction afforded a presumption of knowledge by the company of the practice of agents to deliver policies without receiving premiums, the instruction we have in this case is even more significant. For this reason we are of the opinion that the court below, erred in excluding evidence of Spink’s practice of giving credit on first premiums. On the whole evidence, both that admitted and that erroneously excluded, it seems clear to us that the circuit court should have submitted to the jury the issue whether Spink had actual authority to deliver binding policies without actually receiving the premiums. The provision in the policy that it shall not take effect unless the premium is actually paid, if it stood alone, would, of course, limit the agent’s authority to deliver a policy until he had received a cash premium; but the section 5, and the practice already referred to, show a greater actual authority than the words of the policy would imply, so that a delivery by the agent of a policy without receiving payment would constitute a waiver of any such provision. Smith, to whom the policy in this case was delivered, was a subagent of Spink, and had a set of the company’s instructions, including section o, in his possession, for his guidance, for nearly six months. More than this, he was in Spink’s office every day, and may be presumed to have known Spink’s practice in giving short credit for first premiums by virtue of section 5.

In Miller v. Insurance Co., supra, which was a case involving the power of a general agent to deliver a policy without receiving the cash premium, the instructions to the agent were as follows;

“Agents must not deliver policies until the whole premiums are paid, as the .same will stand charged to their accounts until the premiums are received, or the policies returned to the office. Agents are not authorized to make, alter, or discharge contracts, waive forfeitures, name an extra rate for special risks, or bind the company in any way; tlieir duties being simply to obtain applications for insurance, to collect and transmit premiums, and generally to be the medium of communication between the policy holder and the company. Agents are not authorized to write the receipt of premium, or make any indorsement whatever on the policy. The president and secretary are alone authorized to sign receipts for premiums on the part of the company. When a receipt is delivered to a policy holder by an agent, such agent must countersign the same as an evidence of payment to him.”

And the condition of tlie policy was as follows;

“It is agreed by the undersigned * * * that the policy of assurance hereby applied for shall not be binding upon this company until the amount of premium as stated therein shall have been received by said company, or some authorized agent thereof, during- the lifetime of the party therein assured.”

Said Mr. Justice Clifford (page 808):

“Attempt is made in argument to show that general agents have no power to waive such a requirement, or to deliver the policy to the insured without first exacting the payment of the cash premium; but the court here, in view of the circumstances of this case, is entirely of a different opinion. Where the policy is delivered without requiring payment, the presumption is— especially if it is a stock company — that a credit was intended; and the rule is well settled, where a credit is intended, that the policy is valid though the premium was not paid at the time the policy was delivered, as, where credit is given by the general agent, and the amount is charged to him by the company, the transaction is equivalent to payment;” citing Boehen v. Insurance Co., 35 N. Y. 131; Sheldon v. Insurance Co., 26 N. Y. 460; Wood v. Insurance Co., 32 N. Y. 619; Trustees of First Baptist Church v. Brooklyn Fire Ins. Co., 19 N. Y. 305; Bragdon v. Insurance Co., 42 Me. 259.

While there is some difference between the case at bar and Miller v. Insurance Co. in the facts, (he ruling of the supreme court in that case is controlling in this. There is stronger ground in this case for lidding that the general agent had actual authority to waive the jrayment of premium, and to substitute therefor Ms personal obligation to the company, than in the case cited, for the instruction in the Miller Case forbade agents to deliver policies until the whole premium was paid, while here the instruction is carefully framed not to forbid i t, and impliedly permits it, but holds the agent resjronsible for task of loss.

2. The evidence upon the point whether what transpired between Spink and Smith was intended to be a delivery of the policy would doubtless not justify a peremptory instruction to the jury that it was, in legal effect, a delivery; but it is quite clear that the evidence did not justify the instruction which was given. It is admitted that Spink handed the policy to Smith, and that Smith kept it. Unexplained, that would have been a delivery. The cases already cited show that, in the absence of evidence to the contrary, the intention of the agent to deliver will be presumed from a manual tradition of the policy. We certainly find nothing- in the record in this case which so completely overcomes this presumption as to justify a withdrawal of the issue from the jury.

Spink says that he made a calculation to show Smith how much, was due on the premium after crediting his commission, and that Smith agreed that it was right. The whole claim for the defendant rests on Smith’s expression of disappointment that Spink had not succeeded in getting him a form of policy which he liked. But it is to be observed that the policy which he got was the one called for by his application. This circumstance justifies the inference that he feared he could not get the other form of policy, and, if he could not, that he intended to take the one for which he had made formal application. The remark, “I do not like it all the same,” a jury might fairly construe to be a merely grumbling remark, not intended to qualify his acceptance of the policy as a binding contract. The conduct of both Spink and Smith thereafter tends to show that they regarded the change of possession as a delivery. Smith put the, policy in his safe-deposit box, with his other life insurance policy, while Spink made no effort to recover the policy. Spink admits, that he was not afraid to give Smith credit for the premium. He certainly knew, and it may fairly be inferred, that Smith knew also that credit was often extended on first premiums. The failure to. pay cash is not, therefore, of much significance to show that no binding delivery was intended.

On the whole case, the issues raised were for the jury, both as to the actual authority of Spink to make a binding delivery of a policy and as to his having done so, and. the court erred in not submitting them to that tribunal.

Other questions are raised upon the record. It is contended that the court below erred in excluding evidence to contradict Spink as to statements made by him to Mends of the plaintiff, after Smith’s death, inconsistent with his evidence given when called for the defendant. Spink had been called by the plaintiff to prove certain material facts, namely, that Smith had had a manual of the company’s instructions to agents furnished him, that he was a subagent of the company, and that the company knew it. It was not proper, after using him as a witness to this extent, to attempt to impeach him, even with respect to facts testified to by him when a witness for the defendant. Ellicott v. Pearl, 10 Pet. 412-440.

We think the court was right in excluding the reports which Spink made to the company. They did not show the dates when the policies were delivered by him, but only the dates of payment of the premiums. They contained nothing inconsistent with his having held the policies till the premiums were paid.

The plaintiff sought to establish a general custom by which general agents of life insurance companies exercised an authority to grant short credits on first premiums. We have held that evidence of general custom is permissible on questions of agency. Insurance Co. v. Waterman, 6 U. S. App. 549, 4 C. C. A. 600, 54 Fed. 839. But the offer here made did not cover the case. The policy here provided that it should not go into effect until the premium had actually been paid, and expressly- stated that the agent could not waive the stipulation. The offer was not to show that the custom prevailed in the issuance of such a policy. Such express limitation of authority brought to the knowledge of the policy holder could not be enlarged by a general custom prevailing in the absence of such a limitation. It can only be enlarged by showing a greater actual authority than that expressly given in the policy. The ruling of the court below was right.

It is objected by defendants in error that there is no proper bill of exceptions here, because the case was tried and verdict rendered at the February term, 1894, while the bill was not signed until the April term. It appears, however, from the record that a motion for a new trial was made at the February term, and by order of court the hearing of the motion was continued until the next term, and by leave of this court and consent of counsel, since the submission of the case in this court, the clerk of the circuit court has certified to this court an order entered at the February term, 1894, expressly giving plaintiff leave to file her hill of exceptions after the disposition of the motion.

Defendant objects that no tender has been made by Mrs. Smith of the premium, and therefore that no recovery can be bad. Tender to the company is not necessary, because, if there was a delivery, and the policy took effect, the company received Spink’s absolute obligation to pay; and under section 5 of the company’s instructions to agents it is Spink to whom Mrs. Smith owes the balance due on the premium. As between Mrs. Smith and the company, there was payment.

The judgment of the circuit court is reversed, at defendant’s costs, with instructions to order a new trial.