The opinion of the court was delivered by: ROSENBERG
1. The plaintiff is Hannon Motor Lines, Inc., a corporation situated in Allegheny County and a citizen of Pennsylvania.
2. The defendant is Liberty Mutual Insurance Company, a Massachusetts corporation and citizen of Massachusetts.
3. The amount in controversy exceeds $ 10,000 exclusive of interest and costs.
5. Defendant counterclaimed for an unpaid premium balance from the plaintiff aggregating $ 24,051.04.
6. On and before September 26, 1958, Mr. Hutchins, a salesman of Liberty Mutual, the defendant, contacted Mr. Hannon, president of the plaintiff, for the purpose of selling a Workmen's Compensation policy. This policy was to replace its then present coverage with Pennsylvania Manufactures Association.
7. After several attempts, Mr. Hutchins finally succeeded on September 24, 1958 in convincing Mr. Hannon that the net cost of Liberty Mutual's Workmen's Compensation policy would be lower than that of P.M.A. and that Liberty Mutual could provide better policing of the policy.
8. Plaintiff's insurance coverage was originally represented by a binder which was replaced by a final policy (Exhibits A and A-1), prepared on December 18, 1958, and delivered to Mr. Hannon by Mr. Hutrchins, defendant's representative.
9. The policy, itself, was delivered approximately a month after the binder had been provided.
10. During the term of the policy two subsequent changes were made. On April 1, 1959 a miscellaneous change of endorsement was made setting forth the period of the policy as being from November 26, 1958 to November 26, 1959. And on April 17, 1959, an amendatory endorsement was made setting forth the same policy terms.
11. On November 24, 1958, Mr. Hutchins, defendant's agent, dictated to Miss Scheirer, secretary and bookkeeper of Hannon Motor Lines, without the knowledge of Mr. Hannon and without any previous authorization thereto, a letter (Exhibit 1) authorizing a three-year retrospective basis policy. This letter was taken by Mr. Hutchins to the home of Mr. Hannon who signed it amidst some confusion at Mr. Hutchins' request. The policy included a section providing for a 'retrospective premium endorsement -- three-year -- plan D', requiring an annual renewal for three years.
12. Plaintiff's letter of authority dated November 24, 1958, was signed by Mr. Hannon on plaintiff's stationery and specified: 'Workmen's Compensation is to be on a three (3) year retrospective maximum of 117.5% And a minimum of 50% And a loss limitation of $ 10,000 per accident.'
13. The insurance policy in question was issued for an initial one-year term, November 26, 1958 to November 26, 1959, but contained a four page endorsement entitled 'Retrospective Premium Endorsement -- Three Year -- Plan D'. Such policy and endorsement provided with respect to premiums:
(1) Estimated Standard Premium. An initial payment and thereafter monthly payments during the policy year based upon an estimated payroll of plaintiff.
(2) Audited Standard Premium. Arrived at after the close of a policy year by verifying the plaintiff's actual payroll for the period.
(3) Retrospective Premium. To be arrived at after six months from expiration of the policy year.
14. The plaintiff corporation had carried workmen's compensation for a substantial number of years prior to 1958 with other companies, and at no time did it ever have a policy which exceeded one year.
15. The plaintiff placed such insurance with defendant for policy service and for anticipated premium savings.
17. The insurance policy's Three-Year Rider, Sec. 5, at (3), also contained the following provision with respect to cancellation by the insured prior to the end of the three-year period which is substantially identical with the mandatory provisions of the 'Pennsylvania ...