Insurance Company v. Webster
ERROR to the Circuit Court of the United States for the Eastern District of Michigan; the case having been thus:
One Webber, on the 25th of September, 1860, was, and for a long time had been, the agent of the AEtna Insurance Company, at East Saginaw, in Michigan, and was duly authorized to make insurances, by policies of the company countersigned by himself, against loss by the perils of inland navigation.
To facilitate the making of such insurances with promptitude, the agent was furnished with blank policies duly signed by the president and secretary of the company, and requiring nothing to make them obligatory contracts except to be filled up and countersigned by him.
These things being so, a certain Webster applied, on the 25th of September, 1860, to Webber for insurance on the schooner Ottoca for the residue of the current season of navigation. And thereupon Webber filled up, countersigned, and delivered to Webster a policy of insurance duly executed by the president and secretary of the company, by which seventeen hundred and thirty-three dollars were insured upon the Ottoca from that day (September 25th, 1860) to the 30th of November, 1860. Webster, on his part, paid the premium by an indorsed note in the usual mode.
The same schooner had previously, in 1858, been insured in like manner on the application of Webster in the same company through the same agent.
On the 25th of October, 1860, the schooner was wrecked, and became a total loss from perils covered by the policy, and notice of the wreck and loss was duly given to the insurance company.
Such was the substance of the proof on the part of the plaintiff below.
On the part of the defendant it was proved that immediately after the delivery of the policy by Webber to Webster, a paper, partly written and partly printed, and called an application, was signed by the latter at the request of the former. This paper contained a general statement of the substance of the transaction, and was also signed by Webber. Following the signatures appeared this printed memorandum:
'The insurance on this application is to take effect when approved by E. P. Dorr, general agent of the AEtna Insurance Company, at Buffalo, New York.'
This paper was immediately transmitted by Webber to Dorr, was received on the 29th of September, but the application did not receive his approval, and was sent back to Webber with a letter directing him to return to Webster the premium note received, and to cancel the policy. This letter was received by Webber on the 2d of October.
It also appeared from the evidence that Webber, apparently dissatisfied, wrote to Bennett, another general agent at Cincinnati, on the subject, and seems to have expressed in his letter some apprehension that the course directed by Dorr would 'earn for the company the reputation of backing out from contracts regularly made.' No attempt was made to cancel the policy, nor was the premium returned, nor was any notice given to Webster of the action of the general agent until after the loss, when Webster called to give notice of it to the company.
Then, for the first time, Webber informed him that his application for insurance had been rejected, and offered to return the premium note; which Webster declined to receive, and insisted on his contract. The company declining to pay, Webster brought suit against them; and under instructions given by the court and excepted to by the company, verdict and judgment were given for the plaintiff. The Insurance Company then sued out this writ of error.
Mr. Hibbard, for the plaintiff in error:
The approval was the condition on which the contract became operative. Without that approval there was no contract. Had the original risk been binding until disapproved by the company, and a contract once shown in existence, as was the case in Perkins v. The Washington Insurance Company,  it perhaps might have been the duty of the company to give notice of its disapproval. But the insurance company chose to make no contract but the one in this case, and as there could be no contract until the approval of the application by the company, then the event did not happen upon which alone the contract could exist. Suppose that no policy had been handed by the agent to Webster, and that the rights of the parties depended on the application alone, could there be a pretence that there was a contract actually made? It would be like any other application made to an underwriter for insurance, which the insurer did not assent to.
Mr. Wells, contra:
The case of Perkins v. The Washington Insurance Co., cited on the other side, concludes this. There an insurance company of New York empowered R., a surveyor in Savannah, to make an insurance to take effect from the time when the premium should be paid, and should be received at New York, provided the office should recognize the rate of premium, and be otherwise satisfied with the risk. R. advertised at Savannah the terms, and P. paid the usual premium on certain goods on the 5th of January, 1820, to R., who gave him a receipt for the money. Before, however, the premium was received at New York, the goods were consumed by fire, and P. afterwards tendered the premium to the company, and demanded that they should indemnify him, or execute the contract of insurance. It was held that the company was bound. Lightbody v. The North American Insurance Co.  is even a stronger case.
The CHIEF JUSTICE delivered the opinion of the court.
^1 4 Cowen, 645, 664.
^2 23 Wendell, 18.