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June 5, 1964


The opinion of the court was delivered by: FREEDMAN

This suit was brought on two fire insurance policies covering plaintiff's retail furniture store and its contents, which were completely destroyed by fire on January 27, 1960. The jury returned a verdict for the defendant and plaintiff has moved for a new trial.

The case presented a number of unusual elements. Plaintiff claimed that Perrin and Tyson were his brokers and were looking after his insurance needs. They had previously written ten policies for the plaintiff with companies, other than defendant, for which they were agents, and had apparently collected from the plaintiff the premiums on these policies but had failed to report them or turn the proceeds over to the companies. On the day following the fire, after a meeting relating to the loss, Perrin and Tyson handed over to the plaintiff the two policies in suit and two others not here involved in exchange for the ten earlier policies which plaintiff delivered to them. *fn1"

 The four policies were dated January 23, 1960, four days prior to the fire. They were printed in the familiar form prescribed by statute. They bear the facsimile signatures of the president and secretary of the company and contain a provision that they shall be valid only when countersigned by an authorized agent. Each policy was signed: 'Jack J. Perrin, Broker for James N. Lutz, Agent'. Curiously, although Perrin and Tyson were agents for a number of companies other than defendant, neither was a licensed broker (Transcript, pp. 169, 171), despite Perrin's signature as 'broker' for Lutz.

 Lutz, who admittedly was a general agent of the defendant, had delivered its blank policy forms to Tyson on January 23, 1960. Lutz claimed that he had given the blank forms to Tyson so that Tyson could fill in certain residences, unspecified at trial, as the insured properties and then return the policies to Lutz for approval by the company and counter-signature by Lutz. The plaintiff disputed Lutz's version of his purpose in turning over the blank forms to Tyson, claiming that Lutz knew that plaintiff's property was to be filled in and that the delivery of the blank policy forms constituted an authorization to Perrin or Tyson to countersign the policies as Lutz's sub-agent.

 The trial itself took a curious direction. Neither party called either Perrin or Tyson, the two admitted wrongdoers. Defendant did not call Lutz but it called the plaintiff as its own witness for a limited area of inquiry. The plaintiff, however, was not called as a witness in his own case, but plaintiff did call in rebuttal, again for a limited area of inquiry, Lutz.

 Plaintiff presses two arguments. One is that I erred in refusing to submit to the jury the claim that the policies were ratified by Lutz. The other is that prejudicial conduct by defendant's counsel requires a new trial.


 The facts on which the plaintiff's contention of ratification is based are these: Lutz received in the mail copies, called 'dailies', of the first pages of the four new policies, including the two here in suit, on January 29, 1960, two days after the fire. Concerned at his inability to reach Perrin or Tyson, he sought them that day at their office. Finding them out he searched about on their desks for the policies, which he intended to destroy. (Transcript, p. 232). The telephone rang while he was there and he answered it. The caller, by coincidence, was the plaintiff. Each man identified himself to the other and Lutz asked Posternack if he had the policies. Lutz told Posternack that the policies were not valid because they did not bear his signature and he requested Posternack to bring them to him so that he could sign them. *fn3" Later that day the plaintiff, accompanied by his wife and son, brought the policies to Lutz's office. When Lutz requested to see the policies Posternack asked him what his intentions were. Having in mind that he intended to destroy them, Lutz said that he wanted to review the policies and 'guessed' he would sign them. Thereupon, at Posternack's direction his son gave the policies to Lutz. Lutz put them together and tore them into a number of pieces. Posternack's son regained the torn policies. (Transcript, pp. 234-35).

 It is clear that there was no act of ratification by Lutz of the signing of the policies by Perrin. Lutz made it clear that the policies were invalid without his signature and expressly limited what he would do to affixing his counter-signature, as if Perrin had not signed them. At the most, therefore, what he said amounted only to a promise to perform an act in the future if the policies were delivered to him. There is nothing in the evidence from which it may be found that Lutz told the plaintiff that he affirmed Perrin's signature as his own; on the contrary, the evidence is undisputed that in order to obtain possession of the policies so as to destroy them Lutz told Posternack to bring them in because as they were, with Perrin's signature, they were invalid and if they were delivered to him he would affix his countersignature. It was a false representation, to be sure, but the only consequence to the plaintiff of its falsity was that when he recaptured the policies he handed over to Lutz they were in a mutilated form, still uncountersigned by Lutz. Thus ratification is without any support in the record.

 It is not clear that a promise to ratify the policies in the future could be found from the evidence. However, even if Lutz's language were enough to constitute such a promise a number of difficulties remain. There was no change of position by Posternack in reliance on a promise of future ratification which could create an estoppel against the defendant to deny ratification. Moreover, there is a serious question whether an agent may orally ratify the signature of his alleged sub-agent when the policy expressly states that it is not valid until countersigned by the 'duly authorized Agent of the Company'. See 1 Couch, Insurance (2d ed.1960), § 8:16.

 Putting these problems aside, however, there remains the question whether Lutz had authority from the defendant to ratify a fire insurance policy after the subject matter of the policy had been destroyed by fire. The burden of showing such authority, of course, was on the plaintiff.

 One need not accept as an inflexible principle the dogma that once a loss has occurred an insurance company may not bind itself to liability on a policy. There may well be business or moral considerations which would justify a company, acting on the highest level of authority, in assuming liability in some such cases. If the board of directors of an insurance company authorized the assumption of liability in such a case it would be impossible to say that the act was unauthorized. An attack on such an acknowledgment of responsibility would amount ultimately to a claim of ultra vires, a defense of shrinking dimensions. But is a simple insurance agent, who is authorized to countersign policies in the regular course of business, apparently or impliedly authorized -- for there is no evidence of express authority -- to undertake to bind the company to such an unusual liability, a liability rather than a risk? It is the risk which is the inherent characteristic of the business of insurance and not the accrued liability.

 The only evidence as to the nature of Lutz's authority is that he was an agent of the company in a small one-man office with no stenographer and no employees. In fact it was the very meagerness of Lutz's business that plaintiff urged should make the defendant responsible because it entrusted to such a poorly circumstanced agent its blank forms of policy when it should have realized that in his marginal enterprise there was likely to be unbusinesslike conduct, such as the delivery of blank policies to Tyson, which could then result in injury to innocent third parties like the plaintiff. I agreed with this view sufficiently to leave it to the jury whether in all the circumstances shown by the evidence there was implied authority from the company to Lutz to deliver the policies to Perrin and for Perrin to sign them as Lutz's sub-agent, even though Perrin in his signature did not so label himself. But this is a very different matter from authority to assume liability on behalf of the company after the loss had occurred. Assumption ...

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