Oral Insurance Contract

Whether you are an insurance lawyer in Grand Prairie, or Dallas, or Fort Worth, or anywhere else in Texas, Texas insurance law is the same.  And one good part of that law is that there are situations where an oral insurance contract is enforceable.

This is seen in the 1949, Texas Supreme Court opinion, Pacific Fire Ins. Co. v. Donald.

Paul Donald sued four insurance companies to recover for the loss of 5500 bales of hay which were destroyed by fire while stored in a building situated in Bowie, Texas.  Donald’s claim was that there was an oral contract between himself and Henry Moore, the insurance agent of the companies.  A jury trial resulted in a verdict in favor of Donald and this appeal followed.

Moore had agreed to insure Donald’s hay.  Moore’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 Moore’s agreement to provide insurance.  If did not matter that rates were not agreed to, because the rates were set by law.  The change in the insured location also did not matter, because that would only affect the rate, not whether there was coverage.

The controlling question presented to the court was whether there was any evidence to sustain the trial court’s finding that a valid parol contract to insure Donald’s hay had been entered into.

In issuing this opinion upholding the judgment in favor of Donald, the court stated the oral agreement “is presumed to be made in contemplation of a policy containing the terms and conditions in customary use, and impliedly to adopt the same, and it is on this ground that such agreements are sustained as complete and binding contracts.

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