For reversal -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Weintraub, C.J.
[51 NJ Page 246] Plaintiff Lewis suffered a loss by fire early on September 5, 1963. Defendants Curran and Sykes (herein agents) as agents for defendant Travelers Insurance
Company (herein Travelers) admittedly gave Lewis an oral binder on August 27, effective at once. Travelers, however, denied the agents' authority to bind it and contended it rejected the application by letter to the agents dated September 4, which letter the agents say reached them on the 6th and hence after the loss. Lewis sued both Travelers and the agents, who in turn cross-claimed against each other. On motion, the trial court found the agents had "apparent" authority to act for Travelers and gave judgment for Lewis against it. Travelers does not challenge that judgment. On the trial of the cross-claim of Travelers against the agents, the trial court, sitting without a jury, found the agents acted without actual authority and therefore had to indemnify Travelers for the amount of the loss. The Appellate Division affirmed in an unreported opinion, and we granted the agents' petition for certification. 50 N.J. 287 (1967).
The risk here involved is known as "inland marine." The agency contract dated July 14, 1954 authorized the agents to accept proposals for "Fire and Marine" lines of insurance and to issue and renew policies with respect thereto, but as to a "marine" line, which the parties agree is here involved, the writing expressly provided:
"Authority to bind the Company and/or to issue and renew policies of insurance pertaining to Marine Lines is not covered by this contract but may be extended specifically by an authorized representative of the Company in writing."
Travelers explains there are moral and other hazards peculiar to inland marine risks by reason of which applications should receive more critical attention. Nonetheless the contract expressly stated that authority to bind could be granted. When an earlier contract was made with Curran alone in 1953 (it was superseded in 1954 by the contract already mentioned when Curran and Sykes formed a partnership), Travelers expected Curran to solicit risks of this kind, saying in its letter to him, dated July 23, 1953, that it was "looking forward to receiving a good volume of Casualty,
Fidelity and Surety and Inland Marine business from your agency," and by letter of July 29, 1953, in which Travelers extended authority to Curran to bind automobile risks, it concluded:
"In case you feel as though you need binding privilege in other lines, please advise and I will furnish you with the necessary authority * * *."
Curran insists he did ask for and receive authority to bind with respect to inland marine coverage, but he was unable to produce a writing to support his claim. We accept the premise that Travelers never in so many words authorized the agents to bind a risk in that category.
The case turns upon the conceded fact that in accepting some 300 inland marine risks submitted by the agents over a period of years, Travelers in every case dated the policy as of the date requested, backdating the policy to the date of the application whenever coverage was sought as of that time. Backdating, Travelers says, is the uniform practice in the industry. Nonetheless, it says this practice does not bespeak authority in the agent to issue a binder, but rather means only that if Travelers should decide to accept the application, coverage will attach retroactively to the date requested in the application. Under that view, the applicant would hold the interim risk if Travelers should reject the application after a loss, while Travelers, if it issued the policy, would obtain a full premium for the period during which it held the option to accept or reject the application even though at the time of acceptance Travelers knew there had been no loss and of course no risk. Travelers says the picture is not really one-sided because the insured would be covered if the policy was issued after a loss, and Travelers, if it knew a loss had already occurred, would nonetheless consider the application with sheer objectivity. No mention is made of any standard whereby its judgment could be tested, nor of a time period within which the insured's interest would be in limbo. Travelers adds that when it rejected an inland marine application which sought retroactive coverage, it
received no premium, whereas if it rejected an application with respect to a risk as to which a binder was issued with authority, it was entitled to a premium for the period of the binder. Curran, however, testified that in practice no such distinction was drawn, saying that as to an admittedly valid binder in any line Travelers never charged a premium if it ...