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MISSISSIPPI FARM BUREAU MUTUAL INSURANCE COMPANY v. JOHN W. TODD

MARCH 05, 1986

MISSISSIPPI FARM BUREAU MUTUAL INSURANCE COMPANY
v.
JOHN W. TODD, ET AL



BEFORE PATTERSON, DAN LEE AND SULLIVAN

SULLIVAN, JUSTICE, FOR THE COURT:

On January 27, 1981, Charles Ballard and Dr. James Mangum owned as tenants in common an empty three-bedroom house in Jefferson County, Mississippi. The house was covered by a fire insurance policy from Southeastern Fire Insurance Company, and was subject to a mortgage of $10,000 held by Farmers Home Administration (FmHA).

On January 27, 1981, Dr. Mangum granted to John and Gloria Todd an option to purchase the house. The option was for three months, and the Todds paid Mangum $1.00 for it.

 Paragraph 9 of the option, a standard FmHA form,

 reads in pertinent part:

 9. Loss or damage to the property by fire . . . shall be at the risk of the seller until the deed to the buyer has been recorded, and in the event that such loss or damage occurs, the buyer may, without liability, refuse to accept conveyance of title . . . .

 The Todds accepted the offer contained in the option on April 8, 1981, and prepared to secure a FmHA loan of $24,200 for the purchase of the house. This loan was scheduled to close in late April, 1981.

 In early April, the Todds asked permission to begin moving personal items into the house, although the sale had not been completed. Charles Ballard agreed to allow the Todds to move personal items into the house provided they got insurance coverage on the house. They obtained insurance coverage on the house. On April 14, 1981, Mrs. Todd went to Farm Bureau Agent Ralph Frizzell in Fayette, Mississippi, to secure insurance on the house. Frizzell issued a 30-day binder showing the owner of the house as Mrs. Gloria Todd, and insuring the house for $25,000, with no contents coverage. Mrs. Todd paid a $270.46 premium to Frizzell and then began to move her personal items into the house.

 The next day, on April 15, 1981, Southeastern Fire Insurance Company canceled the policy of Ballard and Mangum on the house. At the trial, Ballard claimed this cancellation was at his request in view of the upcoming sale; Farm Bureau claimed that Southeastern canceled the policy because the house was unoccupied and isolated.

 On Sunday, April 26, 1981, after the Ballard and Mangum policy had been canceled by Southeastern but before the loan was to have been closed and title conveyed, the house was totally destroyed by fire. The loan closing, scheduled for April 28, 1981, was then canceled. At the time of the fire loss, Ballard and Mangum were the record owners of the house; the Todds had not obligated themselves under a note or deed of trust; and Farm Bureau had not yet received the binder, premium or application showing Mrs. Todd as the owner of the property.

 On April 28, 1981, Farm Bureau adjuster, Ken Bossier, prepared a loss notice and claim report on behalf of the Todds for the total fire loss under the written binder issued to Mrs. Todd. This report showed that Ballard and

 Mangum still owned the house. On April 30, 1981, Bossier filed a second report, pointing out the risk of loss provision in the option and stating that Bossier had advised Ballard that Farm Bureau "would not owe for the loss since the Todds had no insurable interest in the property." (emphasis in the original) Ballard told Bossier that he canceled his previous policy when Frizzell wrote the Todd binder in reliance upon the Farm Bureau binder.

 On May 4, 1981, Farm Bureau claims supervisor, Joseph Bacon, got the two Bossier reports and began an immediate investigation. Bacon instructed Bossier to question the people he interviewed concerning any conversation about any agreement between agent Frizzell and the seller. Bacon also directed an adjuster named Stevens to get information about Ballard's prior policy on the property.

 On May 5, 1981, at Bossier's request, the Todds signed a non-waiver agreement to permit Farm Bureau to conduct further investigation without waiving any defenses to the claim that Farm Bureau may assert. Bossier took a statement at that time from Mrs. Todd, who said that Ballard told her she needed the binder, and that Frizzell did not tell her how the binder worked or when the policy would go into effect.

 Bossier also interviewed Frizzell, who said Mrs. Todd asked for whatever FmHA needed in order to proceed with the loan. Frizzell said that Ballard reported the loss to him, and Ballard had called him before Mrs. Todd came in about the binder. Frizzell claimed that Ballard did not mention the Southeastern policy to him, and Frizzell did not tell Mrs. Todd or Ballard when the Farm Bureau coverage would be effective. However, Frizzell did tell Bossier that issuing binders prior to loan closing was neither unusual nor disapproved company practice.

 On May 11, 1981, Bacon got the Stevens report on the Southeastern policy which consisted merely of a statement that it had been canceled on April 15, 1981.

 On May 15, 1981, Bacon got a report from Bossier detailing his interviews with FmHA agent Taylor, who refused to cooperate because the Todd claim was unpaid and who would not discuss if or when FmHA had received notice of the cancellation of Ballard's prior policy. Because of the complexity of the claim, Bacon submitted it to his superior, State Claims Manager Magill. Magill's report to state manager Preston Geoff on May 18, 1981, reads as follows:

 Technically there is, of course, no coverage. What concerns me is that the agent, although he acted improperly and in excess of his authority, did exactly what he intended he bound coverage on a dwelling that the insured did not own nor had incurred any obligation to any mortgagee. But the agent doing exactly what he intended to do, we would be hard pressed to explain no coverage to a jury in Claiborne County.

 This matter may or may not be pressed by insured or some other interested party. Just in case, I think it should be reported as a E and O claim.

 Magill reiterated his recommendation that the claim be reported to Agent Frizzell's error and omissions carrier in a letter dated May 21, 1981, to the vice president of Farm Bureau's parent company, Southern Farm Bureau Casualty Insurance Co.

 On May 26, 1981, Bacon learned that Ballard's prior policy was canceled at the request of the company. Bossier also reported to Bacon that Ballard and Mangum still owned the property. FmHA told Bacon that they had no Ballard policy on file from Southeastern Insurance Company, only a copy of Farm Bureau's binder to the Todds.

 On July 1, 1981, over two months from the date of the loss, Farm Bureau received its first letter from attorney Harry Corban, representing Gloria Todd, insured, and other unnamed parties in interest, requesting immediate payment under the binder. Magill replied by letter dated July 6, 1981, that the matter had been referred to INAX underwriting agency in Chicago, and someone representing that agency would be in touch within ten days.

 On August 13, 1981, attorney Corban notified Farm Bureau advising them that INAX had not contacted him and that, unless the company replied within seven days, suit would be filed.

 On August 20, 1981, Magill wrote Corban that INARPRO, Inc., in New York City, was handling the claim. Magill also wrote INARPRO the same day requesting that they make prompt contact with Corban.

 On August 24, 1981, Corban wrote both Farm Bureau

 and INARPRO demanding immediate action on the claim. Corban told Farm Bureau that his clients were looking to Farm Bureau for payment under the binder.

 On September 16, 1981, Magill memoed his file that he had tried to contact INARPRO and learned that they had referred the claim to their Jackson attorneys, who had taken little, if any, action. FmHA also contacted Magill and threatened to file suit. The next day, the local INARPRO office got a legal opinion that an insurable interest in the property did exist.

 On September 28, 1981, Bacon submitted the entire claim file to general counsel and requested a legal opinion on whether an insurable interest existed in this case. Bacon noted that the company's position from the beginning was that the Todds had no insurable interest.

 On October 30, 1981, attorney Corban again wrote demanding payment from Farm Bureau. In the meantime, on October 16, 1981, general counsel had written Bacon that Todd may have had an insurable interest in the property, but its value was equivalent to the amount paid for the option to purchase the property. Counsel noted that the option itself stated that the risk of loss does not pass until the deed to the Todds was recorded. There was a caveat to Farm Bureau, however, that frequently consideration far exceeded the stated dollar amount. The opinion recommended that Farm Bureau determine what the Todds paid and tender that amount, plus the premium refund, to attorney Corban, along with an explanation of why this amount was being paid. A rough draft of a suggested letter was enclosed by general counsel for Farm Bureau's consideration.

 On November 2, 1981, Bacon wrote to attorney Corban indicating his company's willingness to indemnify the Todds to the extent of their actual pecuniary loss, namely the amount paid for the option. Bacon requested documentary evidence of the amount paid for the option and a full assignment of his clients' rights and release of any obligation to the Todds, any mortgagee, and any other persons with an interest in the property. Bacon concluded in his letter that it would have been impossible for the Todds to have suffered any loss above the amount of the option, since any loss caused by fire was the responsibility of the seller until the deed to the Todds was recorded. Corban did not respond.

 Instead, on December 30, 1981, the Todds, Ballard and Mangum filed suit against Farm Bureau under the written

 binder, alleging that Farm Bureau knew and had consented to Ballard and Mangum cancelling their insurance to allow the Todds to get an insurance binder on the property without double coverage.

 On June 3, 1982, the plaintiffs amended their complaint to add agent Frizzell as a party defendant. The amendment charged that Farm Bureau was liable to the Todds under the written binder and to the co-owners Ballard and Mangum under an oral binder allegedly given by Frizzell in a conversation with Ballard. The plaintiffs also agreed to permit the jury to return one verdict representing the damages sustained by all of them. Alternatively, recovery was sought against Frizzell under his errors and omissions policy.

 The trial involved the testimony of six witnesses called in the plaintiffs' case in chief:

 1. Harry Corban, attorney, testified that the risk of loss provision in the option was a standard FmHA provision. He admitted that his first letter to Farm Bureau was on behalf of Gloria Todd and other parties not identified by him in his letter. He could not recall writing anything to Farm Bureau about any claim that Mangum or Ballard were insured under the binder. His letters did show that copies of his letters were being sent to Ballard and Mangum. Corban considered Bacon's letter of November 2, 1981, a denial of the claim and, therefore, did not answer it.

 2. Ralph Frizzell, called as an adverse witness, testified that he had issued more than 100 insurance binders to be given to FmHA for a person who was purchasing property but was not yet the owner. Mrs. Todd told him that she did not own the house but was buying it from Ballard. He listed Mrs. Todd as the owner anyway because the application and binder had no place to enter the seller's name and he had never done so. Until this case, Farm Bureau had never "kicked back" on a binder like this to his knowledge. Farm Bureau knew the procedure Frizzell followed and that the owner's name was not on the application or binder. Frizzell admitted a conversation with Ballard but could not remember telling him the house was covered. Frizzell did not deny that he said that to Ballard. He simply did not remember. A non-suit as to Frizzell was granted after his testimony.

 3. Gloria Todd testified that she asked Mr. Ballard for permission to move into the house before the sale, and Ballard told her she could do so only if she had

 insurance coverage on the house. She told Mr. Frizzell that she was buying the house from Ballard and Mangum and wanted her husband and "all of us" covered by insurance, meaning both Todds, Ballard and Mangum. Frizzell told her that she had coverage and she relied upon him to do the papers. She took the binder to FmHA and then went to Ballard's office and found him on the phone with Mr. Frizzell.

 Mrs. Todd was then asked if she and the other plaintiffs had agreed that the jury could bring in one verdict for all of them. Mrs. Todd said that she had so agreed. Farm Bureau objected and the objection was sustained. The trial court then overruled the objection because the question merely asked if such an agreement was contained in the complaint. Mrs. Todd was then asked what the agreement was. When Farm Bureau did not object to this question, Mrs. Todd replied that she would take $600 for her loss and anything above that amount the plaintiffs would split.

 Farm Bureau then moved for a mistrial, which was denied, based upon their failure to object to the question.

 Mrs. Todd admitted that her total cash outlay for the option was $1.00, and that her $270.46 premium had been refunded by Farm Bureau. She also said that, while she had many personal items lost in the fire, she had not purchased insurance on contents.

 4. Charles Ballard testified that he was a retired loan supervisor for FmHA. At the time of the trial, he was in a real estate partnership with Dr. Mangum. In his experience it was not unusual to make out a binder in the name of the buyer where there was an option to purchase. Ballard testified that he told Mrs. Todd she could move into the house after she got insurance because he canceled his prior insurance on April 15, 1981, and did not want the house uninsured. The Farm Bureau binder was issued one day before Ballard's insurance was canceled.

 Ballard testified that on April 14, 1981, he called Frizzell to be certain that he and Mangum, as well as the Todds, were covered under the new policy binder. Frizzell told him that he had insurance. Ballard stated that had Frizzell told him that only Mrs. Todd was covered Ballard would have immediately told him to issue the binder to him and Mangum, rather than to Mrs. Todd; he did not do so because he trusted Frizzell's word that he and Mangum were also covered. He said that Frizzell left his name

 off the binder in spite of his instructions from Mrs. Todd and the call from Ballard.

 5. Dr. James Mangum testified that his role in the Ballard partnership was to raise money while Ballard handled the loan and sale arrangements. Had Frizzell told Ballard that they were not covered, Mangum could have obtained coverage through his regular insuror, who had handled his business for 30 years.

 6. Joseph Bacon. This claims supervisor from Farm Bureau admitted that Ralph Frizzell was a general agent of Farm Bureau and had authority to put someone other than the owner on the binder, thus affording coverage. He admitted that Farm Bureau knew what Frizzell was doing but did not know that Frizzell was claiming that the binder did not go into effect until after the loan was closed.

 Bacon was aware that Ballard owned the property. It did not occur to Bacon why Ballard's name was not on the binder. Bacon took the position that one who has exercised an option and was moving into the house had no insurable interest in the property. He did admit that early on in the investigation he wanted to know if there was any agreement between Frizzell and Ballard. Even though Bacon acknowledged that his general counsel told him that the Todds could have an insurable interest in the house, he concluded that they did not. He further admitted that he did not use the proposed letter sent to him by his general counsel when he wrote the unanswered letter to attorney Corban.

 Bacon admitted that Frizzell knew that Ballard and Mangum and not Mrs. Todd owned the property when he made the application and binder in Mrs. Todd's name. He also admitted that the original company position was that Todd had no insurable interest but that this position was changed by general counsel's letter to that of a possible insurable interest.

 7. Joe Harper, Farm Bureau underwriter, said that the application for insurance by the Todds was rejected because when he viewed the pictures of the house it appeared to him to be unoccupied. He did not reject the policy and refund the premium until he learned that the house had been burned, however.

 At the close of this testimony, the annual statement of profits of Farm Bureau was admitted into evidence over objection.

 Farm Bureau's motion for a directed verdict stated seven grounds including Mangum and Ballard failed to make out a prima facie case of any liability; failed to prove the elements of an oral contract of insurance; failed to prove that they were covered under the written binder of insurance; and failed to make out a case for punitive damages.

 Farm Bureau further argued that any claim of the Todds over their actual investment in the property was not payable as a matter of law and was, therefore, not a jury issue. This motion was overruled. When the plaintiffs rested, the defense also rested.

 Instruction P-2, granted over objection by defendant, reads:

 In this case, Mississippi Farm Bureau Mutual Insurance Company, was under a duty to pay for the fire loss with reasonable dispatch, and it was under a duty not to arbitrarily reject the payment of the loss, and if you believe from a preponderance of the evidence in this case that Mississippi Farm Bureau Mutual Insurance Company failed to exercise good faith in unreasonably prolonging the payment of the fire loss, if such was done, but instead acted arbitrarily in an attempt to escape a just debt, then, in such event, you have a right to award damages by way of punishment, to deter actions of a similar nature in the future. These damages are called punitive damages. You may award punitive damages in addition to actual damages, and the amount of the punitive damages is solely within your discretion.

 Farm Bureau objected that the instruction did not accurately state the Mississippi law on punitive damages; that the language relating to an attempt to escape a just debt was prejudicial; and that a granting of any instruction for punitive damages was not warranted under the evidence in this case.

 Instruction P-5, granted over Farm Bureau's objection, reads:

 The Court directs you, the jury, to bring in a verdict for all of the Plaintiffs Page 539 for the sum of $25,000.00, which represents the actual damages sustained by the Plaintiffs.

 You are further directed that if you find from a preponderance of the evidence in this case that the Plaintiffs are entitled to punitive damages, then you may bring in a sum of money in excess of the $25,000.00 for an amount that is solely within your discretion.

 If you find from a preponderance of the evidence in this case that the Plaintiffs have sustained only actual damages, then the form of your verdict, written upon a separate sheet of paper, may be in the following form:

 "We find for the Plaintiffs in the amount of $25,000."

 In the event that you find that the Plaintiffs are entitled to punitive damages, then the form of your verdict, written upon a separate sheet of paper, may be in the following form:

 "We find for the Plaintiffs for

 $25,000.00, actual damages, and $____ as punitive damages." Defense counsel objected to the direction of a verdict for the plaintiffs on the grounds that, as a matter of law, the interest of the Todds was limited to their pecunicary interest in the property; that Ballard and Mangum had not established coverage under either an oral contract or the written binder; that if Ballard and Mangum had been named in the binder, Farm Bureau would have been required to include a mortgage clause to assume liability for the FmHA mortgage, and, thus Farm Bureau was still exposed if Mangum and Ballard were allowed to recover; that the instruction allowed all plaintiffs a windfall in that the Todds had invested only $1 and Ballard an Mangum had only invested $10,500 in the property; and that the instruction allowed the question of punitive damages to go to the jury, despite the presence of an arguable reason for Farm Bureau's handling of the claim.

 The court granted Instruction D-12, which reads:

 The Court instructs the jury that punitive damages should be assessed as an example

 and warning to others, and that they should be allowed only with caution and within narrow limits. The Court further instructs the jury that if an insurance company has a legitimate or an arguable reason for failing to pay a claim, punitive damages will not lie. The Court therefore instructs the jury that if you find from the evidence in this case that Mississippi Farm Bureau Mutual Insurance Company had a legitimate reason or an arguable reason for failing to pay the claims of Plaintiffs, then you may not return a verdict against Mississippi Farm

 Bureau Mutual Insurance Company for any punitive damages.

 The court refused instruction D-3, which would have directed a verdict for Farm Bureau on all punitive damages claims. Instruction D-5, also refused, would have directed the jury that in order for the Todds to recover they must prove by a preponderance of the evidence that they had an insurable interest in the property, saying such an interest exists when a person will derive pecuniary benefit or advantage by the preservation or continued existence of the property, or will sustain pecuniary loss from its destruction.

 Instruction D-6, also refused, would have told the jury not to return a verdict against Farm Bureau for an amount beyond the insurable interest, if any, of the Todds, regardless of the face amount of any insurance policy written for the Todds.

 Instruction D-7, also refused, would have directed a verdict for Farm Bureau on any claims made by Ballard and Mangum.

 Instruction D-13 was refused. It would have told the jury that in order to find that there was a valid oral contract between Ballard and Farm Bureau, it must first find by a preponderance of the credible elements (sic) that there was an identity of property intended to be insured; that there was an identity of the risk to be insured against; that there was a specific period that the insurance was to be in force; that there was a promise to pay a fixed or ascertainable amount for the coverage; and that there was an identity of the premium to be paid for the coverage. Instruction D-13 would have told the jury that if the plaintiffs have failed to prove by a preponderance of the

 credible evidence each of the above elements, then it should return a verdict for Farm Bureau on Mangum's and Ballard's claim.

 Instruction D-15, also refused, would have told the jury that in the event they find for the Todds, they could not award them a sum greater than $1.00.

 Special interrogatories to the jury, which were refused, would have required the jury to state the specific amount which the Todds were entitled to recover; state the specific amount that Ballard and Mangum were entitled to recover; and state whether Frizzell bound fire insurance coverage on the house in favor of Ballard and Mangum.

 After deliberating a short period, the jury returned a verdict for $25,000 actual and $250,000 punitive damages. Motions for JNOV, for a new trial, and for a remittitur, were all overruled by the court.

 I.

 DID THE TRIAL COURT ERR IN GRANTING A DIRECTED VERDICT (a) FOR BALLARD AND MANGUM UNDER THE ORAL OR WRITTEN BINDER: AND (b) FOR THE TODDS, IN AN AMOUNT EXCEEDING THEIR ACTUAL PECUNIARY INVESTMENT IN THE PROPERTY?

 The issue raised by Farm Bureau here is the propriety of the trial court in granting instruction P-5 which directed the jury to bring in a verdict for all of the plaintiffs for the sum of $25,000, representing the actual damages sustained by them. Paymaster Oil Mill Co. v. Mitchell, 19 So.2d 652, 656 (Miss. 1975), recognizes that a motion for directed verdict and a request for peremptory instruction necessarily contemplate a consideration of different evidence and inferences arising during the course of trial.

 A motion for a directed verdict encompasses testimony of the plaintiff and its favorable inferences, whereas, the evidence considered on a request for a peremptory instruction or a judgment NOV embraces the testimony in behalf of the plaintiff as well as that of the defendant, there being no difference between that considered for a peremptory instruction and a judgment NOV since the latter is entertained only to correct the court's error in refusing a requested peremptory instruction. [citations omitted]

 Id. at 656. The peremptory instruction rule in Paymaster Oil permits the court to examine the evidence of both parties that is not in conflict in order to reach a legal conclusion.

 Weems v. American Security Insurance Co., 450 So.2d 431 (Miss. 1984), discusses the analysis the trial court must undertake when faced with a request for peremptory instruction.

 Where such a request has been made, the trial court must consider all of the evidence - not just the evidence which supports the non-movant's case - in the light most favorable to the party opposed to the motion. The non-movant must also be given the benefit of all favorable inferences that may reasonably be drawn from the evidence. If the facts and inferences so considered point so overwhelmingly in favor of the movant that reasonable men could not have arrived at a contrary verdict, granting the motion is required. On the other hand, if there is substantial evidence opposed to the motion, that is, evidence of such quality and weight that reasonable and fair-minded men in the exercise of impartial judgment might reach different conclusions, the motion should

 be denied . . . . [citations omitted]. Id. at 435.

 The proof in this case consists of the testimony of the witnesses called in the plaintiffs' case in chief, as well as Exhibits introduced into evidence, including the claim file. The defendants presented no evidence. Farm Bureau's evidence consisted of its cross-examination of the plaintiffs' witnesses, including three Farm Bureau field representatives called by the plaintiffs as adverse witnesses, and the exhibits introduced as part of cross examination. Application of the Paymaster Oil rule in this case requires the Court to compare the evidence elicited on direct examination with that produced on cross examination; determine what, if any, facts are uncontradicted in the proof; and consider all of the evidence together with all favorable inferences reasonably to be drawn from the evidence in the light most favorable to Farm Bureau.

 A. ORAL BINDER

 Farm Bureau asserts that the proof was insufficient

 to establish the existence of an oral binder of insurance between Ballard, Mangum, and Farm Bureau. Alternatively, Farm Bureau asserts that at most there was a disputed factual issue as to the existence of the oral binder. Farm Bureau argues that the trial court erroneously ruled that the proof was undisputed that Farm Bureau agent Frizzell issued an oral binder covering Ballard's and Mangum's interest in the property.

 Farm Bureau presents us with a two-pronged attack under this assignment. They do not challenge the general authority of Agent Frizzell, and we are not faced with that issue.

 Farm Bureau first argues that Ballard and Mangum have the burden to prove by clear and convincing evidence the existence of an oral contract of insurance. For this proposition, Farm Bureau relies on three cases: American Bankers' Insurance Co. v. Lee, 161 Miss. 85, 134 So. 836 (1931); Canal Insurance v. Bush and King Trucking, 247 Miss. 87, 154 So.2d 111 (1963); and Smith Trucking Co. v. Cottonbelt Insurance Co., 556 F.2d 1297 (5th Cir. 1977).

 The first case relied upon, American Bankers' Insurance Co., supra, dealt primarily with a soliciting agent's authority to issue oral binders of insurance, and the Court held that the proof was insufficient to show the soliciting agent possessed such authority. This issue is not before us in this case. The language relied upon by Farm Bureau is quoted as follows:

 No presumption exists, however, that the company's agents have authority to make a parole contract to insure; such authority must be proved affirmatively. Of course, a parole contract to issue or renew a policy must be clearly established. [citations omitted]

 161 Miss. at 106, 134 So. at 840.

 It is undisputed that Ballard and Mangum met their burden of proof as to the authority of Frizzell to make the parole contract to insure. Farm Bureau argues that they have failed to clearly establish the oral contract, however.

  In Canal Insurance v. Bush and King Trucking, supra, the majority opinion written by Justice Lee upheld a verdict for the insured based on an agent's oral extension of the

  radius of coverage under an existing policy. In upholding the oral contract, Presiding Justice Lee, writing for the majority, said: Stated simply, that ". . . the Court is of the opinion that the oral contract in this case, if made, is enforceable." 154 So.2d at 119. For the authority that the burden of proof is clear and convincing evidence, Farm Bureau must go to the dissent in this case, which stated that the unanimous rule appears to be that "oral contracts of insurance must be established by clear and convincing evidence or, as sometimes stated, by full and clear proof. 15 ALR 1004; 69 ALR 565; 92 ALR 236. Our own Court is in accord. American Bankers' Insurance Co. v. Lee, 161 Miss. 85, 134 So. 836." Among other things, the dissent took the position that the oral modification had not been proven by clear and convincing evidence. 247 Miss. at 109-10, 154 So.2d at 121. The majority was, therefore, of the opinion that an oral contract could be enforced without mention of the burden of proof and the dissent took the position that the one sentence in American Bankers' Insurance Co. v. Lee, supra, should be interpreted so that clearly established means "clear and convincing evidence" .

  In the Smith Trucking Co. case, supra, the Fifth Circuit upheld a Mississippi District Court's verdict of liability under an oral extension of the radius of coverage in a commercial trucking policy. Quoting 44 Am. Jur.2d Insurance, 2040, the Fifth Circuit held that oral contracts of insurance "must be established by clear and convincing evidence, full and clear proof, etc., and [thatl it must be shown that each party understood its terms in the same light." 556 F.2d at 1304. The Federal Court decision, while bearing out the argument of Farm Bureau, cites no Mississippi authority in spite of the fact that there existed both American Bankers' Insurance and Canal Insurance, supra, at the time the opinion was written. Rather than rely upon the interpretations of Mississippi law by the Mississippi Supreme Court, the Fifth Circuit chose instead to ground its decision on 44 Am. Jur.2d Insurance 2040.

  In the second prong of this assignment, Farm Bureau contends that it was entitled to a directed verdict because the specific elements of an oral insurance agreement were not clearly and convincingly proven by the testimony. Employer's Fire Insurance Co., et al. v. Speed, et al., 242 Miss. 341, 133 So.2d 627 (1961), was a case in which this Court reversed and entered judgment for the insurance company on the ground that no contract was established where the agent failed to designate which of the companies he represented were to be the insurors. That issue is

  not present here. However, the Speed Court noted that sufficient proof must be made as to the required elements of an oral insurance contract.

  We also assume that the proof was sufficient to establish specifically the amount of insurance, the rate of the premium, the commencement of the risk, and the duration of the risk. The proof shows, however, that there was no agreement as to what company or companies were to be the insurors.

  242 Miss. at 347, 133 So.2d at 630.

  In McPherson v. McLendon, 221 So.2d 75 (Miss. 1969), this Court reversed a directed verdict for the insuror and held that the terms of the alleged oral contract had been sufficiently established to make it a jury question as to whether a contract of insurance had been entered into by the parties. Id. at 79. The agent filled out an application for the insured which contained the subject matter, period, rate, and amount of insurance to be issued and, upon receipt of the premium, informed the insured that he was "covered" . Id. at 77.

  In addition to these arguments, Farm Bureau points out that a binder is a contract for temporary insurance, until either a permanent policy can be written or its issuance approved or disapproved by the insuror. 43 Am. Jur.2d Insurance Sec. 219, p. 304 (1982). See also, 14 A.L.R. 568, Temporary Insurance, Sec. 2 (1967). Farm Bureau points out that at no time following the conversation between Frizzell and Ballard on April 14, in which the oral binder of insurance was allegedly made, did Ballard or Mangum take any further steps to obtain a written binder or application for insurance.

  We conclude that the arguments of Farm Bureau are without merit. Even if the burden of proof for establishing an oral contract of insurance is clear and convincing, this record establishes that there was an oral contract of insurance and it is based upon the uncontradicted word of one man. When one compares the testimony of Ballard and Frizzell, there is demonstrated without question that Frizzell admitted having had a conversation with Ballard and did not deny telling him that Ballard and Mangum were "covered" , saying only that he, Frizzell, could not recall the substance of the conversation. In Paymaster Oil, supra, the farmer's testimony as to the terms of a soybean sales contract was held to be undisputed by the testimony of

  the buyers' representative who said, "I cannot testify as to the specifics of the conversation, I cannot," and repeated that he simply did not know and could not recall any part of the conversation with the farmer. 319 So.2d at 657.

  A valid oral contract of insurance must be specific, either expressly or by implication, as to the subject matter, period, rate and amount of insurance. 44 C.J.S. Insurance, sec. 230, p. 963. Employers Fire Insurance Co. v. Speed likewise requires proof of amount, rate, commencement and duration of the risk, as well as the identity of the insuror.

  We imply from the context of the conversation between Ballard and Frizzell that Ballard and Mangum intended and Frizzell agreed to obtain coverage identical to that given to Mrs. Todd under the written binder and the application for insurance. A reasonable implication follows that Ballard and Mangum desired $25,000 fire insurance coverage on the property at the same rate, commencing on the same day until title was transferred to the Todds.

  Reliance can be placed upon Cummings v. New England Insurance Co., 266 F.2d 888 (5th Cir. 1959), where interpreting Mississippi law, the Fifth Circuit held that an agreement to bind fire insurance which failed to fix the amount of the premium or the rate would not prevent the binder from becoming effective. Cummings, supra, stands for the proposition that these two elements of the contract may be implied from what the ordinary and reasonable rate and premium would be under the circumstances.

  The only element not readily susceptible of inference from the facts as they existed on April 14th is the period or duration of the risk. The Todds' FmHA loan was not approved until April 20, six days after the oral binder, and no specific date was set for the loan closure and title transfer which attorney Corban testified would take place on the Tuesday following the arrival of the loan check. It is reasonable to infer that the one-year policy covered Ballard and Mangum for that portion of the year in which they were owners of the property, with the Todds being covered for the remainder of the year, under one premium. This is similar in effect to the assignment of a policy from the vendor to the purchaser.

  The general rule permits the essential terms of an insurance binder to be supplied by implication, but these terms must be readily inferrable from the prior course of dealing between the parties, Smith Trucking Co., Inc.

  v. Cottonbelt Insurance Co., 556 F.2d 1297 (5th Cir. 1297), or from established insurance business standards, Cummings v. New England Insurance Co., supra. In this case, the subject matter, amount, commencement of risks, premium and rate for the oral binder are readily inferrable from the terms of the written binder issued to the Todds. Furthermore, the duration of the risk inferrable from the facts known both to ...


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