KAMIKAWA v. KESKINEN

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Docket Number

No. 142.

Attorney(S)

For the appellant there were briefs by Wickham, Borgelt, Skogstad Powell, attorneys, and Robert C. Watson of counsel, all of Milwaukee, and oral argument by Mr. Watson. For the respondent there was a brief by Giffin, Simarski, Goodrich Brennan, attorneys, and Alvin A. Stack of counsel, all of Milwaukee, and oral argument by Mr. Stack.

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Smart Summary

Factual and Procedural Background

This action arose from a January 31, 1965 automobile collision involving plaintiff Paul K. Kamikawa and defendant Charles Keskinen. Kamikawa sought recovery for personal injuries and property damage. American Standard Insurance Company was joined as a defendant based on an allegation that its agent, Clifford Johnson, had orally agreed to extend insurance coverage to Keskinen effective prior to the accident. American Standard denied any coverage was in force at the time. The issue of insurance coverage was separated from negligence and damage issues and tried first before the court and jury.

Keskinen’s prior insurance was canceled in October 1964. He applied to American Standard and received a binder for coverage from October 25 to November 9, 1964, upon payment of a $30 premium. He later paid the balance due and received a policy expiring January 25, 1965. Prior to expiration, he was notified that renewal premium of $77 was due by January 25, 1965, and that coverage would cease if not paid by that date. Keskinen did not pay the renewal premium by January 25 but mailed a check dated January 29. The company received and accepted it February 1 and issued a new policy effective that date.

The accident occurred January 31, before the new policy’s effective date. The jury found that the agent Johnson told Keskinen on January 29 that he was covered as of that date. However, the trial court granted American Standard’s motion for judgment notwithstanding the verdict, dismissing the complaint as to the insurer. Kamikawa appealed.

Legal Issues Presented

Whether an oral statement by an insurance agent that coverage existed as of January 29, 1965, created an effective insurance contract covering the January 31 accident despite the policy lapse.
Whether the insurer was estopped from denying coverage based on the agent’s alleged oral assurance.

Arguments of the Parties

Appellant's Arguments

Oral contracts of insurance are recognized in Wisconsin and should be upheld where an agent orally assures coverage.
The agent’s statement that Keskinen was covered if he sent in the premium constituted an effective renewal of insurance coverage prior to the accident.

Respondent's Arguments

No valid oral contract was formed because the essential elements of contract—offer, acceptance, and consideration—were not met prior to the accident.
The policy expired January 25, and coverage did not resume until the premium was received at the home office on February 1.
The agent lacked authority to extend coverage or waive premiums beyond the written terms.
The doctrine of estoppel cannot be used to create an insurance contract and does not apply here.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Kiviniemi v. American Mut. Liability Ins. Co., 201 Wis. 619, 231 N.W. 252 (1930)	Recognition of oral contracts of insurance and validity of oral renewals under certain circumstances.	Referenced to acknowledge that oral contracts can be valid but distinguished because no such contract was formed here.
Stehlick v. Milwaukee Mechanics' Ins. Co., 87 Wis. 322, 58 N.W. 379 (1894)	Support for recognition of oral insurance contracts.	Referenced as part of established Wisconsin law on oral insurance contracts.
Campbell v. Wilson, 18 Wis.2d 22, 117 N.W.2d 620 (1962)	Further support for oral contracts of insurance.	Used to reinforce the principle but distinguished on facts.
Briggs v. Miller, 176 Wis. 321, 186 N.W. 163 (1922)	Basic elements of contract law: offer, acceptance, and consideration.	Applied to determine that no acceptance occurred prior to the accident.
Ingalls v. Commercial Ins. Co., 18 Wis.2d 233, 118 N.W.2d 178 (1962)	Agent's apparent authority and insurer's ability to revoke coverage; limits on agent authority in cancellation and renewal.	Held controlling; agent lacked authority to extend coverage beyond policy terms; no coverage on accident date.
Schuster v. Germantown Mut. Ins. Co., 40 Wis.2d 447, 162 N.W.2d 129 (1968)	Estoppel cannot create an insurance contract.	Applied to reject estoppel argument in this case.
Shearer v. Dunn County Farmers Mut. Ins. Co., 39 Wis.2d 240, 159 N.W.2d 89 (1968)	Limits on estoppel in insurance contracts.	Supported the court’s refusal to apply estoppel.
Harris v. Knutson, 35 Wis.2d 567, 151 N.W.2d 654 (1967)	Estoppel doctrine in insurance context.	Used to reinforce the principle that estoppel cannot create coverage.
Maryland Casualty Co. v. Industrial Comm., 230 Wis. 363, 284 N.W. 36 (1939)	Estoppel and insurance contracts.	Referenced as authority limiting estoppel's reach.

Court's Reasoning and Analysis

The court acknowledged Wisconsin’s recognition of oral contracts of insurance but found no valid oral contract was formed here because the essential elements—offer, acceptance, and consideration—were not satisfied before the accident. The original policy expired January 25, 1965, and the renewal premium was due by that date. Keskinen’s mailing of the premium check on January 29 constituted a new offer, which was accepted by the insurer only when received at the home office on February 1, after the accident.

The court emphasized that the insurer’s written policy and premium notices clearly stated that coverage would lapse if the premium was not received by the due date and that coverage would not be effective until receipt of payment at the home office. The agent, Johnson, lacked authority to waive premiums or extend coverage beyond these terms.

The court relied on the precedent in Ingalls v. Commercial Ins. Co., which held that when an insurer properly cancels a policy and notifies the insured, the insured must ensure the agent has actual authority to reinstate or extend coverage. Apparent authority was insufficient to bind the insurer.

Regarding estoppel, the court noted that while the agent allegedly stated Keskinen was covered if he sent in the premium, the doctrine of estoppel cannot be used to create a contract of insurance. The court cited multiple Wisconsin cases and legal commentary to confirm that estoppel cannot impose primary liability on an insurer absent a binding contract.

Holding and Implications

Judgment affirmed.

The court held that no insurance coverage was in effect on January 31, 1965, the date of the accident, because the renewal premium was not received until after the accident and the agent lacked authority to extend coverage orally. The insurer was entitled to judgment notwithstanding the verdict. The decision directly affected the parties by denying recovery against American Standard Insurance Company but did not establish new precedent beyond reaffirming existing principles regarding oral contracts, agent authority, and estoppel in insurance law.

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KAMIKAWA, Appellant, v. KESKINEN and others, Defendants: AMERICAN STANDARD INSURANCE COMPANY, Respondent.

This action was commenced to recover for personal injuries and property damage sustained in an automobile collision of January 31, 1965, between vehicles driven by the plaintiff, Paul K. Kamikawa, and the defendant, Charles Keskinen.

The defendant American Standard Insurance Company of Wisconsin was made a party defendant upon an allegation that Clifford Johnson, an agent of American Standard, had orally agreed to extend insurance to the defendant, Charles Keskinen, effective prior to the accident.

American Standard denied that any policy of insurance was in force at the time of the accident.

The issue of liability insurance coverage was separated from the negligence and damage issues and tried first before the court and jury.

Most of the facts are undisputed.

American Standard is a subsidiary company of American Family Insurance of Madison, Wisconsin. It was organized for the purpose of dealing in high-risk automobile liability insurance. As shown by its rules and rates manual, policies are issued for basic short terms of three months. The sales agents may issue binders for a period of fifteen days provided the applicant fulfills the standard of eligible risks in his application. Only the company, after the receipt of the full premium for the three-month period, issues the policy if the applicant is an eligible risk.

Sometime in October, 1964, the defendant Keskinen's automobile liability insurance carrier notified him it was canceling his policy. Keskinen, then, on October 23, 1964, contacted Clifford Johnson relative to obtaining automobile liability insurance. Johnson took an application and $30 in cash from Keskinen. Pursuant to Johnson's authority, liability coverage was extended by American Standard to Keskinen from October 25, 1964, to November 9, 1964, a period of fifteen days.

On October 28, 1964, the company at its home office, in writing, in a form designated "AUTOMOBILE POLICY BINDER AND BALANCE DUE NOTICE," acknowledged receipt of the application and the $30 payment on the premium. The effective dates of the binder were stated to be "10-25-64 — 11-9-64." This form then set forth in boldfaced red ink type, "IMPORTANT! BEFORE THE EXPIRATION DATE OF THIS BINDER THE BALANCE DUE must be received by the Company in its home office at Madison, Wisconsin if coverage is to continue." The form then indicated the balance due for the policy for the three-month period was $47. Keskinen sent the $47 to the company at its home office in Madison and a policy that was to expire on January 25, 1965, was issued to him.

Several days before the January 25th policy expiration date the home office of the company sent Keskinen an "AUTO PREMIUM NOTICE." This notice advised him his policy would expire January 25th and that the premium for the next three months was $77. It also set forth the following:

"Premium to continue the insurance under your policy as described herein is due and payable to the company on or before the due date. Payment shall be considered as having been made upon receipt of the premium at the company's home office and not at the time of mailing. Coverage under such policy ceases on the due date at the hour specified in the policy unless the premium is paid when due."

Keskinen did not make a payment of the renewal premium in any manner on or before January 25th. On January 28th Johnson received a policy lapse notice from the company. On January 29th he called Keskinen by telephone, as was his practice when he received lapse notices, to inquire as to whether Keskinen wanted coverage. The substance of the telephone conversation between Johnson and Keskinen is in dispute. Keskinen testified that he told Johnson he had sent in the premium or that he was sending it in that day and that Johnson responded "if he mailed it in he was covered." Johnson denied making any such statement.

Keskinen did make out a check to American Standard dated January 29, 1965, in the amount of $77 for the premium for three months' coverage and sent it (from Milwaukee) to the home office at Madison. January 29th was a Friday. The home office is not open Saturday or Sunday. The check was received Monday, February 1st, accepted, and a policy for three months, commencing February 1st, was issued.

Keskinen and Kamikawa were involved in the accident in question on January 31st. American Standard denies coverage.

The only question submitted to the jury was:

"Did the insurance agent, Clifford Johnson, on Friday, January 29, 1965, tell the defendant, Charles Keskinen, that he was covered with insurance as of that date?"

This question was answered, "Yes."

American Standard moved for judgment notwithstanding the verdict. The motion was granted and judgment was entered dismissing the complaint as to American Standard.

The plaintiff, Paul K. Kamikawa, appeals.

BEILFUSS, J.

Was the automobile liability insurance in effect on the day of the accident by virtue of the agent's statement to the insured that if he sent the premium in he was covered?

The plaintiff-appellant points out that in Wisconsin the court has long recognized the validity of an oral contract of insurance.

In Kiviniemi v. American Mut. Liability Ins. Co. (1930), 201 Wis. 619, 629, 231 N.W. 252, it is stated:

"Should one before starting on an automobile trip orally request an agent to renew a policy about to expire issued by the agent on his automobile and be assured that it would be attended to, precisely the same reason exists for holding insurance effected as for holding fire insurance renewals effected under like circumstances. Had the collision here involved occurred after the request for and promise of coverage were made and before the writing of and mailing of a rider would customarily be consummated, there would be no hesitancy in holding the coverage of the truck effected."

Also see Stehlick v. Milwaukee Mechanics' Ins. Co. (1894), 87 Wis. 322, 58 N.W. 379; Kiviniemi v. American Mut. Liability Ins. Co., supra; Campbell v. Wilson (1962), 18 Wis.2d 22, 117 N.W.2d 620.

The respondent argues, and we believe correctly so, that even though oral contracts of insurance are recognized a valid oral contract was not entered into under the facts of this case.

The basic elements of a contract, of course, are an offer, an acceptance, and consideration.

Briggs v. Miller (1922), 176 Wis. 321, 186 N.W. 163.

The first policy clearly expired January 25th. The sending of the premium constituted a new offer by Keskinen. It was acted upon and accepted by the insurance company pursuant to the terms of the notice the day after the accident. Did the statement by Johnson that if he sent the premium in he was covered change the acceptance date? We think not.

The insurance was substandard or high-risk insurance; the policy issued in November clearly stated (on the declaration sheet and not buried within the policy) that the insurance expired January 25th; the premium notice received by Keskinen prior to the expiration date again set forth the expiration and advised that insurance would not be in force until the premium was received at the home office, and specifically provided it was the date the premium was received, not when it was mailed.

The agent Johnson clearly had no authority to waive premiums, nor to extend coverage dates or even issue binders without the payment of a premium.

The trial court was of the opinion that the rule of Ingalls v. Commercial Ins. Co. (1962), 18 Wis.2d 233, 237, 238, 118 N.W.2d 178, controls this case. Although Ingalls deals with cancellation and this case renewal, we agree it does apply and dictates the conclusion that Johnson did not have apparent authority to commit the company and that Keskinen did not have coverage on January 31st.

We stated in Ingalls, supra, at pages 237, 238:

"The company made use of this policy provision and unequivocally canceled the plaintiff's insurance. Although there are situations where the equities will lie in favor of an insured who has relied on the apparent authority of an insurance agent, this is not such a case. A line must be drawn somewhere and when an insurance company revokes a policy and the insured has received written notice of such cancellation in accordance with the policy terms, the insured, seeking revocation of that notice, must make sure that the agent with whom he is dealing has actual authority to countermand this order."

Though not discussed in the briefs, the issue of estoppel was raised and considered at oral argument. Estoppel, if applicable to the instant case, would be predicated upon the statement of Johnson that Keskinen was "covered" to bar American Standard from denying the issuance of a parol contract of insurance.

The doctrine of estoppel does not apply to this case because its usage would be directed to the creation of a contract of insurance. This court has specifically declined to extend the doctrine to such situations. See Schuster v. Germantown Mut. Ins. Co. (1968), 40 Wis.2d 447, 162 N.W.2d 129; Shearer v. Dunn County Farmers Mut. Ins. Co. (1968), 39 Wis.2d 240, 159 N.W.2d 89; Harris v. Knutson (1967), 35 Wis.2d 567, 151 N.W.2d 654; Maryland Casualty Co. v. Industrial Comm. (1939), 230 Wis. 363, 284 N.W. 36.

In agreement with the principle that estoppel cannot be used to create a contract of insurance is a recently revised edition of 16A Appleman, Insurance Law and Practice, pp. 339, 340, sec. 9090, where it is stated:

"Insurance contracts cannot be created by estoppel. That doctrine cannot be invoked by an insured to create a primary liability of the insurer for which all elements of a binding contract are necessary."

By the Court. — Judgment affirmed.