Oral Insurance Contract?

Is there such a thing as an oral insurance contract?  Well, according to the 1949, Texas Supreme Court opinion styled, Pacific Fire Insurance Company v. Donald, …, Yes.

In the Donald case, Paul Donald sued Pacific Fire to recover for the loss of 5500 bales of hay which were destroyed by fire.  The lawsuit is based on an alleged oral contract between himself and agent Henry Moore, who represented Pacific Fire.

The controlling question presented here is whether there was any evidence to sustain the trial court’s finding that Pacific Fire and Donald entered into a valid parol contract to insure respondent’s hay.

Donald testified that during the summer of 1935 he bought some hay which he planned to store.  In July he telephoned Moore and requested the rate on about 5,000 bales of hay if stored therein.  Moore called back and informed Donald of the rate, and also told him, “you know there are a lot of companies won’t take this hay business and I have one that will, and you have some policies with it, and it is an easier matter for a company to take a policy where there is a previous coverage with a man,” and told Donald that the company was the Pacific.  Donald eventually asked Moore to write the insurance on 5500 bales of hay at 20^ per bale, to which Moore agreed.  No rate or premium was ever mentioned in regard to storage and as to the duration of the insurance, Donald testified that there was “no definite understanding but I told him it wouldn’t be any two or three year program.”  And Donald also testified: “I told him I would have it out of there before the winter was over.”

Nothing further was said or done in regard to the insurance. The place of storage and the hay stored therein were completely destroyed by fire on October 6, 1935.  The next time the insurance of the hay was discussed by Donald and Moore was several days after the fire, when Donald stopped by Moore’s office to report the loss; and Moore denied any liability, asserting that Donald had not requested insurance to be written on the hay.

The record discloses that Moore had written insurance before for the Donald brothers on other things than hay, and it appears that Moore would send them a bill for the premium some time later after the property was insured.

The statutes of this State do not prohibit parol agreements of fire insurance.

Here, the Pacific Fire agent agreed to insure Donald’s hay.  The evidence showed the agent’s usual practice was to send a bill the next month, or even the month after that.  The hay burned before any bill was sent to Donald.  The court found sufficient evidence of an oral contract based on the agent’s agreement to provide insurance.  If did not matter that rates were not agreed to, because the rates were set by law.

This case is pretty fact specific and may not apply to other situations with different facts.