The appellants, Silas Campbell and the Pittsburgh Consolidation Coal Company, brought this action against the appellees, Aetna Insurance Company and nineteen other insurance companies, to recover $118,000 (less premiums) on an alleged parol contract of insurance on a building destroyed by fire. By agreement the suit was transferred to equity, and following a trial, the Chancellor decided that the parties had not entered into an insurance contract because the evidence failed to establish that there was a meeting of the minds of the parties upon the following essential elements of an oral contract of insurance: (1) The amount of the insurance; (2) the rate of premium; and (3) the identity of the parties.
The events leading to this litigation began on April 7, 1950, when the appellant, Silas Campbell entered into a written contract with his co-appellant, Pittsburgh Consolidation Coal Company, for the construction of a building at the mine of the coal company at Deane, Kentucky. Campbell agreed to construct the building according to certain plans and specifications, and was to receive $116,000 when the building was completed and accepted by the coal company.
Under the contract Campbell was to obtain Workmen's Compensation Insurance, public liability and property damage insurance, but there was no requirement of fire insurance. However, it appears that after the contract was entered into Campbell and C. E. Hennen, agent for the Pittsburgh Consolidation Coal Company, mutually agreed that fire and extended coverage insurance should be carried on the construction of the building to cover the interests of each of the parties, at the expense of Campbell. Hennen explained that he overlooked placing the fire insurance requirement in the original contract.
Campbell testified that before he began the construction work he talked with A. H. Noel, manager of the insurance agency of Lewis, Noel, and Jones, Harlan, Kentucky, who represented twenty insurance companies (appellees herein) which had authority to issue policies of insurance against loss or damage by fire, and advised Noel of his building contract with the coal company and requested Noel to provide him with fire insurance on the building. Campbell stated that he told Noel that Hennen wanted $120,000 fire insurance coverage on the building and suggested to Noel that Noel should go to Jenkins, Kentucky, and make the necessary arrangements for such insurance as required by the coal company. Noel does not deny these statements.
Some time between April 7, 1950, and April 15, 1950, Noel and Aubrey Campbell, son and agent of Silas Campbell, had a discussion with Hennen about their insurance coverage requirements. As a result of this conference, all the insurance required by the written contract between the coal company and Campbell was ordered and the proper policies were issued therefor, and certificates showing the same were forwarded to the coal company by Noel. However, no fire and extended coverage insurance policies were ever issued.
On about March 1, 1951, the building in question, when approximately 98 per cent complete, was destroyed by fire, causing an alleged loss to the appellants in the sum of $118,000. It appears that after the construction contract was entered into between Campbell and the coal company, various changes were made in the original plans and specifications of the building which caused the cost of the building to exceed the original contract price. The appellants claim as a result of the conference between Aubrey Campbell, Noel, and Hennen, and the conversation between Silas Campbell and Noel, that Noel, as agent for the twenty fire insurance companies named in this action, bound all these insurance companies by oral insurance contracts to cover the fire loss sustained by Campbell and the coal company. The insurance companies denied liability and this suit followed.
In their petition the appellants assert that the Insurance Companies (appellees herein) through their agent, W. H. Noel, bound themselves on oral insurance contracts with appellants for a total fire coverage of $120,000 "Builder's Risk, Completed Value,' and that these oral contracts of insurance provided for an equal division of the risk between the twenty insurance companies, each in the sum of $6,000. The petition in effect sought judgment against each of the twenty insurance companies which Noel represented for one-twentieth of the $118,000 loss, less the premium charge for a $6,000 "Builder's Risk, Completed Value' policy. In short, "Builder's Risk, Completed Value' form of policy means that the whole amount of insurance on the value of the building in its completed state would be issued as soon as the construction of the building was begun. The petition alleged that such was the kind of insurance applied for and approved by Noel.
The essential elements of a contract of insurance, whether verbal or written, concerning which there must be an understanding are: (1) The subject matter; (2) the risk insured against; (3) the rate of premium; (4) duration of the risk; (5) the amount of insurance; and (6) identity of the parties. State Automobile Mut. Ins. Co. v. Bowie, 280 Ky. 696, 134 S.W.2d 601; Preferred Risk Fire Ins. Co. v. Neet, 262 Ky. 257, 90 S.W.2d 39; Svea Fire & Life Ins. Co. v. Foxwell, 234 Ky. 95, 27 S.W.2d 675. And it is a rule in this jurisdiction that if the application for insurance be made to an agent representing several insurance companies, the particular company or companies to carry the risk must be designated, with the amount each is to carry, and each must, by its agent or otherwise, agree to assume liability upon the terms and conditions proposed and acceded to by the applicant. Until this is done, there can be no binding contract. Hartford Fire Ins. Co. v. Trimble, 117 Ky. 583, 78 S.W. 462; also see, Kerr on Insurance, pp. 46, 57, 60; Pomeroy's Equity Jurisprudence, section 1405; Ray v. Talbott, 64 S.W. 834, 23 Ky. Law Rep. 572; Gray v. Davis, 26 Ky. 381; Fowler v. Lewis, 10 Ky. 443; Banta's Heirs v. Clay, 2 A.K.Marsh 409, 9 Ky. 409. With these fundamental rules before us, we proceed with our review of the case.
The Chancellor, in an excellent written opinion which is before us, fully considered all pertinent issues in the case, and denied the appellants a recovery for the reason that the evidence failed to establish the essential elements required for oral contracts of insurance of the type upon which the appellants base their suit. Therefore, in view of the Chancellor's findings, we shall re-examine only those findings adverse to the appellants to determine whether or not they are supported by the record. In the event that appellants have failed to prove all the essential elements of the contract relied upon, their action must fail.
The written documents introduced concerning the subject matter of the conversations upon which this action is based consist of: A written memorandum made at the conference held at Jenkins, Kentucky, between Aubrey Campbell, W. H. Noel and C. E. Hennen, which set out the public liability and property damage insurance requirements, and contractual liability insurance requirements "in connection with construction of the Administration Building, at the Hendrix Mine, Deane, Kentucky, per contract dated April 7, 1950'; another memorandum made by Noel which he gave to his secretary for attention, which reads: "2 parties -- fire ins. -- E. C. Consolidation Coal Co. (Ky.) Hendrix Mine, Deane, Letcher County, Ky.'; and a letter written to Hennen by Noel on the 15th day of April, 1950, as follows:
"Mr. C. E. Hennen, Purchasing Agent
"Consolidation Coal Company (Ky.)