Opinion
6 Div. 274.
January 12, 1933. Rehearing Denied March 2, 1933.
Appeal from Circuit Court, Jefferson County, Bessemer Division; Gardner Goodwyn, Judge.
J. C. B. Gwin, of Bessemer, for appellant.
Every trade, business, or calling has its usages, and persons who make offers relating thereto assume that all the customary incidents of such callings shall be part of the agreement, and hence do not expressly refer to them. Although unexpressed, they are implied terms of the contract, and this is true in case of written as of oral contracts. 9 Cyc. 252. An insurance company, on an agreement to insure, made by an agent, although the charter provided that all policies of insurance made by the corporation should be subscribed by the president and countersigned and sealed by the secretary, is liable. 12 Cyc. 1064; Sanborn v. Fireman's Ins. Co., 16 Gray (Mass.) 448, 77 Am. Dec. 419; Davenport v. Peoria M. F. I. Co., 17 Iowa, 276. A mere custom of fire insurance companies or their agents in certain localities to renew, without request, insurance placed with them, is sufficient to establish a renewal contract when said custom is well known to insurer and insured and the original contract was made with reference to said custom. 26 C. J. 110; Nippolt v. Firemen's Ins. Co., 57 Minn. 275, 59 N.W. 191; Todd v. German-American Ins., 2 Ga. App. 789, 59 S.E. 94; Area v. Milliken, 35 La. Ann. 1150. An agent whose duty it is to effect insurance must exercise due care and skill in so doing, and will be held liable for losses resulting from his negligence in failing to effect the insurance, to procure the proper amount, to procure a valid and enforceable policy, or to keep it renewed and in force. 31 Cyc. 1466; Shoenfeld v. Fleisher, 73 Ill. 404; Strong v. High, 2 Rob. (La.) 103, 38 Am. Dec. 195. A contract to issue or renew a policy of insurance is not within the statute of frauds. Commercial F. I. Co. v. Morris Co., 105 Ala. 498, 18 So. 34; Springfield F. M. Co. v. De Jarnett, 111 Ala. 248, 19 So. 995; Cherokee L. I. Co. v. Brannum, 203 Ala. 149, 82 So. 175. The payment of a premium is not essential to the validity of a contract to renew. American C. I. Co. v. Robinson (Tex.Civ.App.) 219 S.W. 280; Orient Ins. Co. v. Wingfield, 49 Tex. Civ. App. 202, 108 S.W. 788. The insured or mortgagee may bring an action at law for breach of an agreement to renew. 26 C. J. 110; Liverpool Ins. Co. v. Hinton, 116 Miss. 754, 77 So. 652; Gold v. Sun Ins. Co., 73 Cal. 216, 14 P. 786; Georgia Home Ins. Co. v. Kelley (Ky.) 113 S.W. 882; Mallette v. British-American A. Co., 91 Md. 471, 46 A. 1005; King v. Hekla F. I. Co., 58 Wis. 508, 17 N.W. 297; Schwahn v. Mich. F. M. I. Co., 89 Wis. 84, 61 N.W. 78. The complaint states a good cause of action. American Cent. Ins. Co. v. Hardin, 148 Ky. 246, 146 S.W. 418, 419.
Huey, Welch Stone, of Bessemer, for appellee.
Any agreement made at the time the policy was issued, which was not expressed in the policy itself, whether such agreement was expressed or implied, was in violation of the statutes, void and unenforceable. Code 1923, §§ 8371, 4589; Meridian L. I. Co. v. Dean, 182 Ala. 127, 62 So. 90; Royal Ind. Co. v. Watson (C.C.A.) 61 F.(2d) 614. A contract can never be made by custom and usage. Goddard Sons v. Garner, 109 Ala. 98, 19 So. 513; Mallory S. S. Co. v. Druhan, 17 Ala. App. 365, 84 So. 874. Nor can custom or usage be resorted to for the purpose of adding to or taking from a written contract plain and unambiguous. 27 R. C. L. 172; 17 C. J. 499. A contract, whether oral or written, whereby it is agreed that at the expiration of the term of a policy then issued the insurer will renew the insurance or issue a new policy, is nothing more than an option, and is not binding. Barker v. Pullman Co. (C.C.A.) 134 F. 70. In any event, for a custom or usage to be sufficient to effect a renewal at the end of the term of an existing policy, the custom or usage must be of such nature as will bind both the insurer and insured. 26 C. J. 110; Nippolt v. Firemen's Ins. Co., 57 Minn. 275, 59 N.W. 191; Farnsworth v. Riverton, etc., Co., 35 Wyo. 334, 249 P. 555, 47 A.L.R. 1114; Thomas v. G. T. T. Co., 81 Ohio St. 432, 91 N.E. 183, 26 L.R.A. (N.S.) 1210; 17 C. J. 501. The proviso in the policy that, in event the mortgagee neglects to pay the premium due under the policy, the mortgagee shall pay same on demand, is a condition and not an obligation. It does not bind the mortgagee to pay, and hence there can be no obligation to issue the policy that is binding. 26 C. J. 113; Refuge C. O. Co. v. T. C. F. I. Co., 152 Miss. 522, 120 So. 214; Whitehead v. W. K. Mills, 194 N.C. 281, 139 S.E. 456, 56 A.L.R. 674; Farnsworth v. Riverton, etc., Co., supra; Security Ins. Co. v. Eakin, 41 Ga. App. 257, 152 S.E. 606. When there is a valid agreement to insure or renew and a failure on the part of the insurance company to carry out the agreement, the remedy is not one based on negligence, but must be a suit based on the breach of agreement to insure or renew. National L. A. I. Co. v. Lokey, 166 Ala. 174, 52 So. 45; Commercial F. I. Co. v. Morris, 105 Ala. 498, 18 So. 34. If the agent issues a policy for his company and in connection therewith enters into an agreement to the effect that at the expiration of the policy then issued he will issue a renewal policy on the same terms and conditions such agreement is one between the agent and the insured, and the insured can only proceed against the agent. 26 C. J. 112; Royal Ex. Assur. of London v. Almon, 202 Ala. 374, 80 So. 456; Cherokee L. I. Co. v. Brannum, 203 Ala. 145, 82 So. 175.
The defendant, appellee here, issued a fire insurance policy to Young McCray upon a certain building for a period of three years beginning the 2d day of May, 1927, and expiring May 2, 1930. The building is alleged to have been destroyed by fire June 7, 1931, more than a year after the expiration of the policy. The policy contained a clause in standard form making the loss payable to this appellee, as mortgagee, as its interest might appear.
The counts to which the demurrers were sustained proceed upon several theories: First, upon a breach of contract for a failure to renew the insurance for a period of three years under an agreement anterior to or contemporaneous with the issuance of the policy; second, for the breach of a contract and for the negligent failure to renew the policy under an agreement between the appellant mortgagee and an agent of the defendant to renew the policy made after the issuance of the policy but before the same expired; and, third, for the breach of a contract, express or implied, arising out of a local custom as to renewals of existing fire insurance policies.
The agreement relied on under the first theory, being anterior to or contemporaneous with the issuance of the policy, was ineffectual, unless incorporated in and made a part of the policy. Section 8371 of the Code of 1923.
The agreement set out under the second theory of the case, being subsequent to the issuance of the policy, was not controlled by said section 8371 of the Code 1923. As to whether or not such a contract could be by parol, or the agent averred had the authority to bind the company, or it was a mere option, are questions we may pretermit as the action of the trial court in sustaining the demurrer to these counts must be affirmed for another reason. These counts set up an express agreement between the plaintiff and an agent of the defendant for a renewal of the existing policy upon the expiration of same for a like period with the understanding that the defendant was to look to the owner, Young McCray, for the payment of the premium, but plaintiff would pay it on demand if said Young McCray refused to do so. There is no averment that McCray, the insured, and owner of the property, was a party to this agreement or was bound thereby, or that the plaintiff had the authority to bind said McCray by such an agreement. A renewal is, in effect, a new contract of insurance, especially when not provided for in the original policy, at least in the sense that it requires the mutual assent of the parties and a new consideration. The agreement to renew must have all the essentials for a valid contract. 26 C. J. 109, § 108. These counts not only fail to aver that McCray was a party to the agreement, but count 5 fails to charge that McCray refused to pay the premium which is averred as a condition precedent for the plaintiff's liability for same.
Whatever may be the rule in some other states, it is settled in Alabama that custom or usage cannot be looked to to prove or establish a contract. The customs, usages, and course of dealings in a business may sometimes be looked to in a similar business to explain or aid in the interpretation or construction of a contract; but never to prove that a contract has been entered into. E. Goddard Sons v. Garner Bros., 109 Ala. 98, 19 So. 513; Mallory S. S. Co. v. Druhan, 17 Ala. App. 365, 84 So. 874. The trial court did not err in sustaining the demurrers to amended counts 4, 5, and 6 of the complaint.
The quotation in count 5, from the policy, as to the plaintiff's right to pay premiums in case of the failure of the insured to do so upon demand of the defendant, relates to premiums on the existing policy, and did not operate to renew the policy in the absence of a contract to do so, and as to which the insured was a party to said renewal agreement.
The judgment of the circuit court is affirmed.
Affirmed.
THOMAS, BROWN, and KNIGHT, JJ., concur.