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May 5, 1966

Richard F. SERVENTI et al.

The opinion of the court was delivered by: WILLSON

 The verdict of the Jury favored plaintiffs. Judgments have been entered accordingly. Defendants filed timely post trial motions both for a new trial and for judgments n.o.v. Plaintiffs Richard F. Serventi, Mary E. Serventi, and Gale (Gail) M. Serventi are the owners of a commercial building and a dwelling located in Lower Burrell, Westmoreland County, Pennsylvania. Plaintiff Millvale Savings and Loan Association is the mortgagee of the premises owned by the Serventis. Defendants New York Fire Insurance Company, Travelers Indemnity Company, Springfield Insurance Company and Aetna Insurance Company are the insurers, under policies issued by each, of the premises owned by the Serventis. Each of the policies contained a mortgagee clause in favor of Millvale Savings and Loan. Following a fire loss to the premises, the individual plaintiffs and the corporate plaintiff each sued each of the insurance companies on account of the loss. Since all eight actions involved the same facts, they were consolidated for trial purposes.

 Paul J. Trimbur, Inc., was the general agent for Western Pennsylvania of all four companies. Paul A. Bazzano was the agent of two of the companies and the sub-agent under Trimbur, Inc., of the other two. In these cases, all four policies were issued by Trimbur, Inc., with Bazzano countersigning the two from the companies of which he was agent, and Paul J. Trimbur countersigning the other two. Trimbur, Inc., was charged by the companies for the net premiums on a 60 day credit basis; Bazzano in turn was charged by Trimbur, Inc., for the net premium less his commission on a 60 day credit basis. One Louis W. Opall was the agency supervisor of Trimbur, Inc. He and Bazzano inspected the Serventi property prior to the issuance of the policies. Trimbur, Inc., being underwriters, fixed the premium rate. However, on August 11, 1962, the date of the mortgage closing, the premium rate was undetermined, and the Servientis paid $225 on account of the premium and a binder was issued. Trimbur issued the policies on September 22, 1962. The face amount of each policy was $22,250 with an 80% co-insurance clause.

 The evidence showed that the crux of these cases lies in the relationship between Bazzano and Trimbur, Inc., the general agent. Bazzano was the soliciting agent and turned his business - which he had secured - over to Trimbur, Inc., for issuance of the policies. As mentioned, there was a credit arrangement between them for payment of premiums collected by Bazzano. Monthly statements were sent by Trimbur, Inc., to Bazzano covering policies written during the current month; these statements included whatever credits Bazzano might be due because of cancellations or otherwise and also included the unpaid balance from the previous month's statement. During the interval from the writing of the instant policies, September 22, 1962, and December 19, 1962, there were demands made by Trimbur, Inc., upon Bazzano for payment of premiums on these policies and for other balances due. The evidence shows that Bazzano and Trimbur, Inc., were in disagreement as to the indebtedness of Bazzano to Trimbur, Inc., on the running account. The evidence showed, and the Jury found in Interrogatory No. 1 that Louis W. Opall, as agency supervisor of Trimbur, Inc., had learned that Bazzano had received the initial premium payment of $225 at the time of the mortgage settlement. It was apparent from the evidence that Trimbur, Inc., became dissatisfied with its inability to get funds from Bazzano, and so the instant policies were cancelled by a notice sent by mail on December 19, 1962, to plaintiffs. Richard F. Serventi, on receipt of the cancellation notice, immediately contacted Mr. Bazzano with regard to the cancellation. Bazzano, having himself contacted Opall upon receipt of a copy of the cancellation notices, advised Mr. Serventi that he was covered but that the balance of the premium - $494.72 - would have to be paid. Bazzano, however, gave Mr. Serventi until after the holidays to pay this balance. The evidence showed that when Bazzano contacted Opall with regard to the reinstatement of the policies or the rescinding of the cancellation notice, Mr. Opall - on behalf of Trimbur, Inc., - agreed that upon payment of the balance of the premium by the Serventis to Bazzano, the policies would be reinstated. In Interrogatory No. 3, the Jury found under the evidence that Mr. Opall, for Trimbur, Inc., had received knowledge from Mr. Bazzano that the premium balance had been paid to Mr. Bazzano by the Serventis on January 11, 1963.

 It is to be emphasized at this point that the cancellation notices came from Trimbur, Inc., only. None of the defendant insurance companies had notice of the issuance of the policies for some period of time thereafter, nor did any of them participate in or request their cancellation. This phase of the business was left entirely to Trimbur, Inc., which sent the cancellation notices in the name of the defendants on December 19, 1962. The testimony of the Trimbur, Inc., fire underwriter was that the cancellation notices were mailed because Trimbur, Inc., had not received payment of the premium from Mr. Bazzano.

 We have thus a situation presented in which the general agent Trimbur, Inc., having fixed the premium and written the policies in the first instance, and having mailed the policies to its sub-agent Bazzano, knew that Bazzano had collected the initial premium payment of $225. It was also carrying Mr. Bazzano on an open account with 60 days credit and with more or less a disagreement between them as to what Mr. Bazzano owed Trimbur, Inc. According to Mr. Bazzano, he discussed the reinstatement with Mr. Opall and reached an agreement with him after the notices of cancellation had been sent. Bazzano's testimony to this effect was accepted by the Jury in its answers to Interrogatories Nos. 2 and 3. This conclusion is further supported by the letter written on March 20, 1963, by Mr. Opall to Mr. Bazzano, indicating that the policies would have been reissued at any time Trimbur, Inc., got its money. Since this is so, and since Trimbur, Inc., knew that Bazzano had received the balance of the premium, the Jury was instructed that it might find for plaintiffs if it found that the understanding between Trimbur, Inc., and Bazzano was that the policies would be reinstated upon payment of the balance of the premium to Bazzano by the Serventis. Mr. Bazzano testified that Mr. Opall had agreed to this.

 Thus it seems to the Court now and did so during the trial of the case that Trimbur, Inc., - because Mr. Opall was its agency supervisor - was required to do more after January 11, 1963, than simply remain silent with regard to the owners Serventis and the mortgagee. The reason is obvious. It knew that Bazzano had the premium money and that the Serventis were relying on that fact. It knew also that Bazzano was disputing the amount owed it. Opall on behalf of Trimbur, Inc., wrote two letters on March 20, 1963. The one to Bazzano - plaintiffs' Exhibit 27 - has been discussed. Because of that letter and no doubt because of the relationship between Trimbur, Inc., and Bazzano and what had transpired, Opall came to realize that he must notify the owners that they still did not have insurance. He sent a letter to the owners which referred to the cancellation notice and which read -

"This is to advise that the captioned policies were cancelled by direct notice to you for underwriting reasons, effective December 30, 1962.
"We have notified Mr. Bazzano to either replace these policies or to return the unearned premium to you upon demand."

 It is to be especially noticed, however, that he does not tell the owners that the policies were cancelled because of the dispute as to non-payment of premium. The cause given for the cancellation is - underwriting reasons" - which no doubt to the insured was meaningless. Mr. Opall's letter to the insureds was in the mail but undelivered when the fire occurred on March 20th-21st 1963, and received by the owners the morning after the fire.

 Under this set of facts, the defendant insurance companies, by their counsel, have attempted to persuade this Court that the cancellation notices were effective and that there was no way to avoid their effect except by the issuance of new policies. It is said also that no one had authority to rescind the cancellation notices or to reinstate the policies. This may be so as a general statement of law, but certainly cannot control in these unusual circumstances. The private instructions and secret rules that are known only by the company and its agent cannot be invoked to defeat the very contract it ostensibly holds the agent out with apparent authority to make. Such rules may be effective in their personal transactions, but should not be extended to third parties who would not be informed of them. Essington Enamel Co. v. Granite State Fire Ins. Co., 45 Pa.Super. 550, (1911). Cases cited by defendants in support of their thesis that a policy, once cancelled, cannot be reinstated, or that a notice of cancellation cannot be rescinded, are distinguishable on their facts. Here the notices of cancellation were prepared and sent not at the instance of nor with the knowledge of the insurance companies but by Trimbur, Inc., on its own initiative and because of its inability to collect the premium from its sub-agent.

 It is true, as defendants argue, that the procedure for cancellation of insurance policies is set forth in the policies, and that the policies conform to the mandatory provisions set forth by statute [40 P.S. (Pa.) § 636]. However, the policies contain no provision relating to reinstatement of policies or recission of cancellation. This Court knows of no statute or any rule of law - nor has counsel pointed out any - which would prohibit the reinstatement of a fire insurance policy by an oral rescinding of the cancellation notice. Oral binders are perfectly valid by statute.

 The Jury found that Opall agreed that upon the happening of a condition, that is upon payment of the premium balance by the Serventis - not to Trimbur, Inc., but to Bazzano - the policies would be reinstated. The exact means by which Opall intended to reinstate the policies are not important; it seems to the Court that a general agent such as Trimbur, Inc., empowered as it was to cancel policies on its own initiative, could agree with its sub-agent that the policies would be reinstated and could take whatever steps were necessary to reinstate the policies. Opall knew that the Serventis had paid Bazzano and that the condition for reinstatement had thereby been fulfilled, but did nothing for more than two months. If Trimbur, Inc., despite its agreement with Bazzano, knowing that the Serventis had paid the full premium on January 11, 1963, pursuant to their understanding with Bazzano, nevertheless did not intend to reinstate the policies, it was bound to quickly and directly notify them that although the premium was paid their policies were still ineffective. But in this situation which called for action on the part of Trimbur, Inc., it did nothing but attempt to collect the debt from its sub-agent. In the meantime the defendant insurance companies had already received their premium from the general agent. Trimbur, Inc., being bound to act and not having acted, defendants cannot at this point rely upon the inability of the general agent to collect the premium from its sub-agent in order to escape liability on the policies.

 It is said that silence is golden. Another aphorism is that silence means consent. It is the latter which has significance on the facts presented in the instant case. Mr. Opall failed to take action soon enough. He recognized that on March 20th, but some 60 days late. Although the factual situation is not that of classic equitable estoppel, the principle has application. The Supreme Court of the United States ...

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