Where application for reinsurance was made on Saturday, upon
certain terms, which were declined, and other terms demanded, and
on Monday these last-mentioned terms were accepted by the
applicant, and assented to by the president, but the policy not
made out, because Monday was a holiday, the agreement to issue the
policy must be considered as legally binding.
The law of Massachusetts is that although insurance companies
can make valid policies only when attested by the signatures of the
president and secretary, yet they can make agreements to issue
policies in a less formal mode.
By the common law, a promise for a valuable consideration to
make a policy is not required to be in writing, and there is no
statute in Massachusetts which is inconsistent with this
doctrine.
Where the power of the president to make contracts for insurance
is not denied in the answer, or made a point in issue in the court
below, it is sufficient to bind the company if the other party
shows that such had been the practice, and thereby an idea held out
to the public that the president had such power.
It is not essential to the existence of a binding contract to
make insurance, that a premium note should have been actually
signed and delivered.
The facts are stated in the opinion of the court.
MR. JUSTICE CURTIS delivered the opinion of the Court.
This is an appeal from a decree of the Circuit Court of the
United States for the District of Massachusetts, in a suit in
equity, to compel the specific performance of a contract to make
reinsurance on the ship
Great Republic. The circuit court
made a decree in favor of the complainants, and the respondents
appealed.
It appears that the complainants, a corporation established in
New York, having made insurance of the ship
Great Republic
to a large amount, authorized Charles W. Storey, at Boston, to
apply for and obtain from either of the insurance companies there
reinsurance to the extent of ten thousand dollars. Pursuant to this
authority, on the 24th December, 1853, Mr. Storey made application
to the president of the defendant
Page 60 U. S. 319
corporation for reinsurance, at the same time presenting a
paper, partly written and partly printed, as embodying the terms of
the application. The paper was as follows:
"Reinsurance is wanted by the Union Mutual Insurance Company,
New York, for $10,000, on the ship
Great Republic, from
December 24, 1853, at noon, for six months ensuing."
"This policy is to be subject to such risks, valuations, and
condition, including risk of premium note, as are or may be taken
by the said Union Mutual Insurance Company, and payment of loss to
be made at the same time. 3 percent."
"Binding, _____ _____,
President"
"New York, December 24, 1853"
The president, after consultation with one of the directors of
the company, declined to take the risk for a premium of three
percent, but offered to take it for three and a half percent.
Mr. Storey replied that was more than he was authorized to give,
and left the office. He immediately apprised his principals, by a
telegraphic dispatch, that the risk could be taken for three and a
half percent for six months, or six percent a year. The reply, on
the same day, was, "Do it for six months, privilege of canceling if
sold." This reply did not come to the hands of Mr. Storey until
Monday, the 26th day of December, when he went to the office of the
respondents and found there the president of the company, but not
any other person, as the day was generally observed, by merchants,
bankers, and insurers, as a holiday, Christmas having fallen on
Sunday.
Mr. Storey informed the president he was willing to pay three
and a half percent for the reinsurance described in the proposal,
took a pen and altered the three percent to three and a half
percent, by adding 1/2 to 3 on the paper, and it is admitted by the
answer that the president thereupon assented to the terms contained
in the paper, but informed Mr. Storey that no business was done at
the office on that day, and that the next day he would attend to
it. The president then took the paper and retained it.
To a special interrogatory contained in the bill, the defendants
answer:
"That its president did assent to the terms and provisions in
said paper, as the terms and provisions of a reinsurance to be
completed and executed by this defendant, by the making and
execution of a policy in due form, according to the requisitions of
the laws of Massachusetts and the bylaws of this defendant, but
they were not assented to as a present insurance. "
Page 60 U. S. 320
Upon these facts, we are of opinion there was an agreement to
reinsure according to the terms contained in the proposal,
concluded by and between Mr. Storey and the president at this
interview on Monday the 26th of December. The paper contained every
particular essential to a contract to make reinsurance. It
ascertained the subject of insurance, the commencement and duration
of the risk, the parties, the interest of the assured, and the
premium; and for the special risks, the valuations, and conditions,
it referred to the original contract of insurance made by the
complainants, by reason of which they were seeking reinsurance.
On Saturday, the president had offered to contract in accordance
with the paper, saving a difference of one-half percent on the
premium.
It was argued that it could not be considered an acceptance, on
Monday, of a continuing offer made on Saturday, because, when the
complainants authorized Mr. Storey to give three and a half
percent, they at the same time imposed a new condition by the
words, "privilege of canceling if sold." But Mr. Storey testifies,
and this is not denied by the answer or by any witness, that when
he made the application on Saturday, and before the president had
named the premium which he was willing to take, the president said
he supposed that they would have to cancel the policy if the vessel
should be sold within the time, and that he (Storey) assented
thereto, and that at the interview on Monday, when this point was
referred to, the president said the usage in Boston would settle
it, and he would not put anything concerning it into the policy;
and after some conversation concerning the usage, Mr. Storey agreed
to take the policy without any mention of the privilege of
cancellation. Under these circumstances, we do not perceive that
the requirement of this privilege can be considered as at all
varying, in the apprehension and meaning of the parties, the terms
of the acceptance on Monday from the terms of the proposal on
Saturday. But whether, under all the circumstances, this should be
deemed to have been a continuing offer we do not think it necessary
to determine, because on Monday either the president's offer of
Saturday was accepted by Mr. Storey, and its acceptance made known
to the president, or the proposal was renewed by Mr. Storey and
accepted by the president. The fact that others chose to abstain
from business on that day did not prevent these parties from
contracting if they saw fit to do so, and when one of them either
accepted a continuing offer or renewed a proposal which was
accepted by the other, they made a binding contract. Nor do we
think the allegation of the answer that the president informed
Page 60 U. S. 321
Mr. Storey that no business was done in the office that day, but
the next day he would attend to it, can reasonably be interpreted
to mean that he had not made or intended to make a contract for a
policy. Their fair meaning is that though he had agreed to make the
insurance, as the secretary and clerks were not there and the books
not accessible, any action on the agreement must be deferred to the
next day. The words cannot be understood to mean that he would on
the next day attend to what he had already done; and he had already
made a contract for reinsurance, to be executed on the next day by
issuing a policy in due form to carry that agreement into
effect.
On leaving the office of the defendants, Mr. Storey immediately
informed the plaintiffs that he had effected this contract, and on
the night of the same day the ship
Great Republic was
destroyed by fire while lying at a wharf in the City of New York.
On the twenty-seventh of December, the complainants tendered their
note for the agreed premium and demanded the policy of reinsurance.
The defendants declined to make the policy. Several grounds have
been insisted on in support of this refusal:
The first is that by force of a statute of the State of
Massachusetts, Rev.Stats., ch. 37, secs. 12, 13, insurance
corporations can make valid policies of insurance only by having
them signed by the president and countersigned by the secretary.
But we are of opinion that this statute only directs the formal
mode of signing policies, and has no application to agreements to
make insurance.
Such we understand to be the view taken of this statute by the
Supreme Court of Massachusetts.
New England Ins. Co. v. De
Wolf, 8 Pick. 63 [Stat. 1817, ch. 120, sec. 1];
McCullock
v. Eagle Ins. Co., 1 Pick. 278;
Thayer v. Med. Mut. Ins.
Co., 10 Pick. 326.
See also Trustees v. Brooklyn Fire Ins.
Co., 18 Barbour 69, and
Carpenter v. Mut. Safety Ins.
Co., 4 Sand.Ch. 408.
It is further insisted, that by the law merchant, insurance can
be effected only by a contract in writing. We do not doubt that the
commercial law of all countries has treated of insurance as made in
writing by an instrument, denominated by us a policy, and there may
be provisions of positive law in some countries requiring an
agreement to make a policy to be in writing. But there is no such
statute of frauds in the State of Massachusetts.
The common law must therefore determine the question, and under
that law a promise for a valuable consideration to make a policy of
insurance is no more required to be in writing
Page 60 U. S. 322
than a promise to execute and deliver a bond, or a bill of
exchange, or a negotiable note. So it has been held by other
courts, and we think on sound principles. 18 Barbour 69;
Hamilton v. Lycoming Company, 5 Barr. 339.
See also
Sanford v. Trust Fire Ins. Co., 11 Paige 547.
The respondents' counsel had argued that their president had not
authority to enter into an oral contract binding the company to
make insurance. They admit it has been usual for the president to
make such contracts, but they say that when he has done so, the
policy was not issued until the next day, and no risk is understood
to have commenced under such an undertaking until the policy
issues. Whether a risk be commenced when the contract for insurance
in made or only when the policy issues must depend on the terms of
the contract. Where, as in the present case, there is an express
contract to take the risk from a past day, there is no room for any
understanding that it is not to commence until a future day. Such
an understanding would be directly repugnant to the express terms
of the contract. And if the defendants have held out their
president as authorized to make oral contracts for insurance, no
secret limitation of this authority would affect third persons,
dealing with him in good faith and without notice of such
limitation. Besides, the supposed limitation would be inconsistent
with the authority itself. It is in effect that though the
president is authorized to make oral promises to effect insurance,
the company is at liberty to execute those promises or to refuse to
do so, at its option.
The power of the president to enter into this contract to make
insurance is nowhere denied in the answer. All that can bear on
this subject occurs in certain statements concerning the usual
course of business of the company. It seems to have been assumed by
both parties that whatever the president actually did in this
transaction, he did for the company and so as to render them
responsible for his acts. And no question was raised on this point
in the court below. Still it is incumbent on the complainants to
offer competent and sufficient evidence of the authority of the
president to bind the company, though less evidence may be
reasonably sufficient when no issue concerning it is made on the
record.
We think such evidence is in the case. Mr. Storey deposes that
during the three years next preceding this transaction, he had
effected upwards of three hundred contracts for reinsurance, with
the presidents of ten different insurance companies of Boston, and
that one or possibly two of these presidents usually signed an
accepted application -- the others all contracted orally.
Considering that all the incorporated insurance
Page 60 U. S. 323
companies in Boston have similar charters and the same kind of
officers to conduct their business, we think this is competent
evidence that presidents of such insurance companies in that city
are generally held out to the public as having the authority to act
in this manner. And upon a point not put in issue in the record,
and on which no more than formal proof ought to be demanded, we
hold this evidence sufficient.
Fleckner v. Bank of the
United States, 8 Wheat. 330;
Minor v.
Mechanics' Bank of Alexandria, 1 Pet. 46.
The fair inference is that if the general authority of the
president to contract for the corporation had been put in issue, it
could have been shown by the most plenary proof that the presidents
of insurance companies in the City of Boston are generally held out
to the public by those companies as their agents, empowered to
receive and assent, either orally or in writing, to proposals for
insurance and to bind their principals by such assent.
Nor do we deem it essential to the existence of a binding
contract to make insurance that a premium note should have been
actually signed and delivered. The promise of the plaintiffs to
give a note for the premium was a sufficient consideration for the
promise to make a policy. It is admitted that the usage is to
deliver the note when the policy is handed to the assured. If the
defendants had tendered the policy, we have no doubt an action for
not delivering the premium note would have at once lain against the
plaintiffs, and we think there was a mutual right on their part,
after a tender of the note, to maintain an action for nondelivery
of the policy. In
Tayloe v. Mutual Fire Ins.
Co., 9 How. 390, it was held that a bill in equity
for the specific performance of a contract for a policy could be
maintained. And it being admitted that in this case the defendants
would be liable as for a total loss on the policy if issued in
conformity with the contract, no further question remained to be
tried, and it was proper to decree the payment of the money, which
would have been payable on the policy if it had been issued.
The decree of the circuit court is affirmed.