
    George B. More et al, Resp’ts, v. The New York Bowery Fire Ins. Co., App’lt.
    
    
      (Court of Appeals, Second Division,
    
    
      Filed January 26, 1892.)
    
    1. Insurance (Fire)—Contract for policy—When binding on insurer.
    Plaintiffs applied for insurance to one 1ST., who had blanks furnished him by Sage, an agent of defendant, who had full power to make contracts. hi. filled out the blank and sent it to Sage, who wrote to bL, saying he had written the company in regard to the risk and would advise him as soon as he heard from them, as it was a special risk and he did not wish to write it without first submitting it to the company. Plaintiffs knew that the application must receive the approval of the company. The application was rejected May 19, but Sage did not notify hT. or plaintiff. On May 30 plaintiff sent hi. a check for the premium and on June 6 the property was burned, field, that the company was not liable, as there was no agreement on the part of Sagé as agent of the defendant to issue a policy to plaintiffs.
    3. Same.
    The mere failure of an insurance company to respond to an application raises no inference that the company accept and insure the risk. The proper inferences from failure to respond to a proposition of any kind is that it is rejected or declined.
    3. Same.
    The acceptance of the premium by If., an insurance solicitor, and his statement that it was all right, did not bind the defendant. As plaintiffs understood that he did not have power to contract, such statement was merely the expression of an opinion.
    Appeal from a judgment of the general term of the fourth judicial department, affirming a judgment entered upon the report of a referee.
    This action was brought to recover upon an alleged paroi contract to insure the plaintiffs’ creamery building in Delaware county for the term of six months, from May 12 to November 12, 1887. The defendant denied the making of the contract
    It appeared that Omar Y. Sage was the secretary of the Cooperative Insurance Company, a company engaged in the insurance business in the counties of Greene, Schoharie and Delaware, and issuing policies limited in amount to $2,500.
    For the purpose of dividing risks where the value of the property on which the insurance was sought exceeded that amount, he requested to be and was appointed agent for the defendant company. As such agent he had full power to fix the rate of premium, collect the same and issue policies. The co-operative company had numerous agents soliciting insurance in the counties named who were informed by Sage of his appointment and the purpose of it, and to whom he sent blank applications, with instructions that in ease they secured business for the defendant, they should fill out such applications as completely as possible and send to him at Catskill, leaving blank the space to be signed by the agent for his (Sage’s) signature.
    On May 12, 1887, Charles E. Nichols, one of the agents for the co-operative company, as a result of negotiations had with the plaintiffs, filled out one of the blank applications which had been sent to him as aforesaid and forwarded it by mail to Sage at Catskill.
    On its receipt Sage wrote to Nichols saying that he had written to the defendant in reference to the risk and would advise him as soon as he heard from them. That the risk was special and he did not wish to write it without first submitting it to the company.
    On the same day he wrote to the defendant at New York, stating the application and what the risk was, and the defendant immediately replied rejecting the application and declining to write the policy. This letter from the defendant was received by Sage about May 19th, but he neglected to notify the plaintiffs or Nichols of the defendant’s action. The application made out by Nichols was as follows:
    “ New York Bowery Fire Insurance Company of New York in consideration of thirteen 50-100 dollars do insure C. B. More & Co., to the amount of Eighteen hundred dollars on their 11-2 story frame building, shingle roofed, situated in the village of No. Harpersfield, Del. Co., N. Y., on the south side of Main street, used as a creamery for the manufacture of butter. Said Eighteen hundred dollars is divided as follows : $800 on building; $800 on fixtures therein; $200 on butter packages, milk cans and butter therein contained. Term six months. Amount $1800, rate § per cent, premium $13.50.
    “ Commences May 12, 1887. Terminates November 6, 1887,
    •--, Agent.”
    On May 30th the plaintiff sent a check for the premium agreed upon to Nichols, which he received but never remitted to Sage or the defendant, and on June 6th the buildings were burned.
    With reference to the application for the insurance the referee found that it was made after two or three conversations between Nichols and the plaintiffs and “ was written on the day of its date as the final agreement which the plaintiffs had concluded to make and as the terms had been agreed on.” “ That the plaintiffs did not see the application blank.” “ That the plaintiffs understood distinctly, from their conversation with Nichols, that he could not make or issue a policy of insurance upon their property in behalf of the defendant, and that before such policy could be issued their application must receive the approval of some other person or persons.” With reference to the payment of the premium, he found, “ That a day or two thereafter Nichols met one of the Elaintiffs, who asked him if he had received the check and said that e had received no policy, and Nichols told him that it was all right, that he had heard nothing from the company and consequently it was all right, and that he would get the policy in a day or two.” 41 That plaintiffs believed that they were insured according to the terms of the writing * * * after the assurance given them by Nichols upon the receipt of the check for the premium, that it was all right or he would have heard from the company.” He found, as a conclusion of law, “ That the writing of Nichols on the 12th day of May, 1887, together with the acts of the defendant, and the agent Sage, and by reason of the writing not being repudiated within a reasonable time after it was submitted to the defendant, became and was a valid and subsisting contract of insurance at the time of the fire according to the terms of the writing, and in the form of the standard stock policy of the state, and was as such binding on the defendant.”
    
      A. H. Sawyer, for app’lt; John P. Grant, for resp’ts.
    
      
      
         Reversing 29 St. Rep., 768.
    
   Brown, J.

The question presented in this case is whether there was a contract for insurance between the parties, and it maybe said that if such a contract existed at any time subsequent to May 12th it had not been rescinded or annulled at the time of the fire.

If there was a contract, it grows out of the acts of the agent, Sage, and his subordinate, Nichols, which are binding upon the defendant, notwithstanding the fact that it promptly refused to accept the risk or issue a policy when the application was presented to it.

An agent of a fire insurance company having unrestricted authority to accept risks, fix premiums and make and issue policies, has power to bind his principal by a preliminary paroi contract to-issue a policy. Ellis v. Albany City Fire Ins Co., 50 N. Y., 402; Angell v. Hartford Fire Ins Co., 59 id., 171. Such was the power-possessed by Sage as the agent of the defendant, and had he-agreed to issue a policy to the plaintiffs, the judgment could be sustained.

The general term based its decision upon the application of the-principle of the cases cited to the facts which that court assumed, to exist, that Sage knew on May 16th that the insurance, according to the agreement between Nichols and the plaintiffs, was to taker effect from May 12th, and that the plaintiffs relied upon the defendant as an insurer of their property, and that Sage’s silence under these circumstances was in legal effect an approval of the application, and a consent on the part of the defendant to enter into the contract contemplated by the plaintiffs. That Sage had the powel- and authority to make just such a contract as plaintiffs claim was. made may be conceded, but the facts assumed by the general term, were not found by the referee. He refused to find that Nichols-agreed that, in case the property was burned after May 12th,. plaintiffs would get their insurance, or that the agreement was to-commence on that date.

The finding that he did make was that the evidence tended to-the belief that it was to be considered as commencing on that day. But this was qualified by another finding, that plaintiffs understood from Nichols that he could not issue a policy, and that before that was done their application must receive the approval of some other person. In effect this was a finding that there was not. to be a contract until the application was approved elsewhere.

The evidence does not disclose that Sage had any knowledge concerning the negotiations between plaintiffs and Nichols, except-such as he derived from the. application, and in view of the findings of the referee that I have quoted, it cannot be said that on May 16th he knew, or had any reason to suppose, that the plaintiffs, relied upon the defendant as an insurer of their property. On the contrary, the finding of the referee in reference to the plaintiffs’ belief on that subject is, that they “ believed that they were insured after being informed by Nichols that he had received the-premium, and that it was all right, or he would have heard from the company.”

But this was on June 1st, and on May 18th Sage had informed-Nichols by letter that he could not approve the application; that the risk was a special one and could not be accepted without the defendant’s consent It appears, thorefore, that the referee has not found that plaintiffs relied upon the defendant as insurer of their property until about June 1st, six days before the fire, and that this resulted not from Sage’s neglect to inform them that the application was refused, but from what Nichols told them on that date.

It is contended, however, that a contract can be inferred from Sage’s silence and failure to notify the plaintiffs that the application was rejected. This, I think, would be a novel doctrine to introduce into the law of contracts. In discussing it, I assume Sage’s powers to have been those of a general agent, and coextensive with those of the defendant The courts have applied the principles of waiver and equitable estoppel in a most liberal manner to insurance contracts, but always to enforce good faith and to prevent injustice and fraud where the insured has been misled by the acts of the company or its agents. But no case has yet decided that the mere failure to respond to an application raised an inference that the company accepted and insured the risk.

The proper inference from failure to respond to a proposition of any kind is that it is rejected or declined. A party cannot be held to contract where there is no assent Silence operates as an assent and creates an estoppel only when it has the effect to mislead.

There must be such conduct on the part of the insurer as would, if it were not estopped, operate as a fraud on the party who has taken or neglected to take some action to his own prejudice in reliance upon it 2 May on Ins., § 508. When a party is under a duty to speak, or when his failure to speak is inconsistent with honest dealings and misleads another, then his silence may be deemed to be acquiescence.

If the company knew a person was acting as its agent without or in excess of authority and did not disclaim his acts, it might be held liable, as in such a case there is a duty to speak. But this case presents no element of that character. The plaintiffs knew that Nichols had no authority to contract with them on behalf of the defendant. Their application was promptly rejected by the defendant when it reached it They were not misled by the neglect of Sage to notify them of that fact. They knew they had no contract until the application was approved, and they could at any time have withdrawn their application and secured other insurance. If they had done so and the defendant had issued a policy, it could not be claimed that they were liable for the premium. It is very plain that they relied upon Nichols and his statement that “ it would be all right,” but as they knew he had no power to speak for the company, their trust was in him alone, and they had at no time any legal claim upon the defendant.

While I do not find that this question has been presented before in the courts of this state, it has been raised in other jurisdictions and decided adversely to the plaintiffs’ claim.

In Insurance Co. v. Johnson, 23 Penn. St, 72, afire occurred six monthp after the application was made, during which time the company had neglected to notify the plaintiffs that their application was rejected, and that delay was claimed to justify the inference of a contract It was held that a proposal could not become a contract from delay in rejecting or answering it

In Royal Ins. Co. v. Beatty, 119 Penn., 6, the validity of a policy by renewal was involved, and it was decided that when in an action upon a contract plaintiff’s case consists of proof of a proposal with the presumption of assent thereto arising from silence of the defendant, no legal inference of a contract can arise out of such silence without evidence of a duty to speak on the part of the defendant, which was neglected to the plaintiff’s harm. To the same effect are Haskin v. Agricultural Ins. Co., 78 Va., 700; Misselhorn v. Mut. R. F. Life Ass'n, 30 Fed. Rep., 543; Winnesheik Ins. Co. v. Holzgrafe, 53 Ill., 516.

And it was said in Titus v. Glens Falls Ins. Co., 81 N. Y., 410, in reference to a waiver by an insurance company of a breach of a condition which forfeited the policy, that “A waiver cannot be inferred from mere silence. It (the company) is not obliged to do or say anything to make a forfeiture effectual.” And it may be added, that a person is under no obligation to do or say anything concerning a proposition which he does not choose to accept

Our opinion is, that when an application for insurance is made and its rejection is not signified, no presumption of its acceptance can be indulged in. There must be • actual acceptance or there is no contract.

The respondent contends further that the company was bound from the time of the payment of the premium to Nichols. Their payment was never remitted to Sage or to the company and it is not found that they had any knowledge of it. Its effect, therefore, depends on the relation which Nichols bore to the defendant and the knowledge which plaintiffs had of his powers.

There is no finding in the case that Nichols was the defendant’s agent. The referee refused to find either that he was or was not the defendant’s agent. He found that Sage had authority to appoint sub-agents and that the acts done by Nichols in connection with the risk in question were within the scope of Sage’s authority. But this does not aid the plaintiffs in view of the express finding that plaintiffs knew that the application had to be submitted to some other person or persons and approved by them before a policy could be issued. '

The negotiations with Nichols did not reach the point where a contract was made. Nichols did not assume to have power to contract. The plaintiffs understood that perfectly! There was an application to defendant through Nichols. He was the solicitor merely. His apparent power to represent the defendant did not go beyond that. The application was to be approved by and the contract to come from some person other than him.

. That person was either Sage or the company. The application reached and passed Sage without approval, and of this fact Nichols was informed, and he then knew that the contract if made must come from the company. About June 1st the plaintiffs learned from Nichols that he had received no word from the company that the application had been approved or the risk accepted. In substance Nichols informed them that approval must come from the company, and yet he told them because it had not come it was all right, and they would get the policy in a day or two.

Now it is very plain that Nichols had no authority to make that statement Had plaintiffs any right to rely upon it? Did the acceptance of the premium by Nichols coupled with the statement that it was all right, and the policy would come in a day or two, bind the defendant? Obviously not, under the finding that plaintiffs had been informed that he had no power to make or issue a policy, and that before their application could grow into a contract it must be approved elsewhere This fact, of which plaintiffs were informed at the beginning of their negotiations, limited and qualified all their subsequent dealings with Nichols. The payment of the premium could not, therefore, bind the defendant, as Nichols had no authority to contract on its behalf, and for the same reason his statement that “ it was all right and they would get the policy in a day or two ” was the expression of an opinion merely. Having no power to contract, he could not bind the defendant by a representation as to the effect of its failure to report its action upon the application. A different question would have been presented had the plaintiffs dealt with Nichols as the agent of the defendant with no knowledge as to any limitations upon his power. Bodine v. The Exchange Fire Ins. Co., 51 N. Y., 117; Arff v. S. F. Ins. Co., 125 id., 57-64; 34 St Rep., 366. But such a case is not presented on the facts as found by the referee.

The judgment must be reversed and a new trial granted.

All concur.  