APPEAL from a judgment of the Superior Court of the County of Cochise. Albert M. Sames, Judge. Judgment reversed.
Messrs. Sutter & Roche, for Appellant.
Mr. Frank E. Thomas, for Appellee.
William H. Hughes brought an action against the Southern Casualty Company, a corporation, to recover $5,000 on a contract of insurance alleged to have been entered into on or about August 23d, 1923, and from a judgment in his favor [37 Ariz. 335] for the full amount asked for the defendant has appealed.
The case is before the court a second time, the decision in the former appeal being reported in 33 Ariz. 206, 263 P. 584. The pleadings and the evidence are practically the same as in that proceeding. The complaint has not been changed and the answer raises all the defenses it did then, except those attacking the sufficiency of the complaint, and also some new ones which it is not necessary to state.
The action then, as now, was based upon an oral contract of insurance and it was held that an insurance company, though it fails to comply with the provisions of the statute requiring it to file copies of the forms of its policies which must include certain provisions and exclude others, "may not set up in defense that it was not authorized by law to make such contract" when sued for damages upon one made by it which has been fully performed by the other party. Thereupon, the sufficiency of the evidence to show that the contract sued on had been either entered into or later ratified by the defendant was considered, the question having been raised by an assignment based upon the court's refusal to direct a verdict for defendant, and the record in that appeal disclosed that if such contract did become binding upon the company this result followed from the subsequent ratification by it of the acts of its representative in Bisbee, one I. W. Wallace, in making it.
It further appeared, however, that Wallace was merely an agent with power to solicit business, take applications and collect premiums, but without any authority whatever to issue policies, and that the court,
notwithstanding this fact, instructed the jury that an insurance agent having these powers could bind the company by his oral agreement to insure where the insured pays the premium to the agent [37 Ariz. 336] at or about that time and causes the successive monthly installments of premium called for by the contract to be paid. This instruction was held erroneous since a mere soliciting agent has no power to bind an insurance company even though it accepts the premium, unless it has knowledge, either express or implied, of the agreement, and it is not chargeable with knowledge acquired by its agent in matters not within the scope of his authority.
Under this state of the record it was clear that there was nothing to advise the court whether the jury reached its verdict as a result of this instruction or because it believed the insurance company had ratified the oral agreement. Hence, the case was remanded for a new trial, and the record of that proceeding, which is now before us for review, discloses that this erroneous instruction was not given, but that the question whether the company ratified the alleged oral agreement prior to the accident was again submitted, and a proper disposition of the case, as we view it, requires only a consideration of the question of ratification. To determine whether the court's action in placing it before the jury finds support in the record it is well to state briefly the facts relied on to constitute the alleged oral contract of insurance and necessary to set forth those claimed to show ratification of it.
It appears that plaintiff and one William Shields were partners in a mining lease in the Warren district, and that in August, 1923, they took in two partners, F. N. Merrill and John Charon, who were operating a lease near theirs. After agreeing to consolidate their leases the four partners, according to the plaintiff, dropped into the office of Wallace one afternoon to sign a working agreement, and while there the question of insurance came up. They had decided that they themselves should be insured against accident, and one of them said to Wallace [37 Ariz. 337] that they wanted protection. He told them he could insure them, and after explaining the policy he could offer them stated, in answer to the inquiry of one of the partners whether all of them would be covered, that all would be except the foreman, Hughes, who thereupon remarked that he also wanted protection for himself and family, and that he would "go out and get some," or, as one witness put it, "go up the street and get accident insurance." Wallace, according to plaintiff, then said: "If you go strong enough I can insure you. You pay me one hundred dollars and six per cent a month on the payroll, five dollars a day, for five thousand dollars." When asked by one of the partners if he could do that, Wallace replied that he could. The proposition was accepted, and he then told Hughes that he would be covered when he went to work the following morning.
Instead of issuing two new policies Wallace suggested, inasmuch as it would be a saving to them, that a policy that had been theretofore issued by the defendant in the name of Hughes and Shields on property they had worked out be transferred to Hughes, and that one known as the "Banks-Jones lease," which had been posted with Wallace for sale and transfer and was on property that had been worked out and shut down, be transferred to Shields. This was agreed to, the transfer to Hughes being made on August 2, 1923, and the one to Shields on October 2, 1923. Upon receiving the policies from Phoenix, properly assigned, Wallace delivered them to the partners, and on the date of their expiration they were renewed, the Shields policy on November 8, 1923, in his name, and the Hughes policy on September 7, 1923, in his name. One of the policies insured Hughes and the other Shields "against loss from the liability imposed by law upon the assured for damages on account of bodily injuries or death at any time resulting therefrom suffered, [37 Ariz. 338] or alleged to have been suffered, as the result of an accident occurring while this policy is in force by any employee or employees of the assured."
To protect the partners it was necessary, so Wallace informed them, that they be carried on the timebook as employees, and he directed them to keep two time-books, one for each policy or piece of ground, and on the Hughes time-book to carry as employees Shields, Merrill, Charon and any others they wished to, and on the Shields time-book, Hughes and such others as they desired. These directions were complied with, but in his letter to the Barr Agency of Phoenix, the general agents of the defendant company in Arizona, asking it to transfer the policies, Wallace failed to notify it of any of these facts. He merely requested attaching an indorsement on one policy changing it to read "Wm. Hughes" instead of "Shields and Hughes" as written, and one on the other so that it would read "Wm. Shields" in the place of "Bank-Jones," the policies to remain the same in all other respects. And in the monthly reports of the pay-rolls of Shields and of Hughes furnished the defendant after that for the ...