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Hoffman & Morton Co. v. American Ins. Co.

APRIL 16, 1962.




Appeal from the Municipal Court of Chicago; the Hon. JOSEPH B. HERMES, Judge, presiding. Reversed and judgment here.


This is an action on an insurance policy to recover the value of furs lost while being shipped from New York to Chicago. At the close of all the evidence, both parties moved for a directed verdict, and the court directed a jury verdict for plaintiff. Defendant appeals from a judgment entered on the verdict, against defendant, for $2695.

The material facts are not in dispute. The policy of insurance upon which this action is based is known as a "Furriers' Block Policy" and was issued by defendant American Insurance Company to plaintiff, Hoffman & Morton Company, a partnership. Plaintiff, a Chicago retail furrier, was advised that as of March 1, 1957, it was covered by American on an oral binder, because plaintiff was in the process of moving from one location to another, and the policy, which required the inclusion of pertinent information relative to the newly occupied premises, would be issued later.

On May 14, 1957, furs purchased in New York for plaintiff, by its representative, George Bloom, a New York fur buyer, were shipped to plaintiff in Chicago by Bloom, via air freight, and were lost in transit. When Bloom shipped the furs, valued at $2945, he placed a value declaration on them of $250. The furs were not received, and later "Wings & Wheels," the air freight forwarder, informed plaintiff that the fur package had been lost.

Subsequently, on June 1, 1957, American issued to plaintiff a standard form of the "Furriers' Block Policy," which came into general use in the insurance industry in August, 1956. The provisions of the policy include the following:

"2. Property Covered — On stock in trade consisting principally of furs, fur garments, garments trimmed with fur and accessories pertaining thereto, the property of the Assured or sold but not delivered, and the property of others who are dealers in such property or otherwise engaged in the trade for which the Assured may be liable, including the Assured's interest in such property for labor performed and materials expended thereon, hereinafter referred to as `property.'

". . .

"5. Property in custody of public or common carriers or postal authorities is not covered unless shipped subject to the following conditions:

"C. Air freight by (1) Civil Aeronautics Board certified scheduled air carriers, including while in the custody of agents of such air carriers, or (2) air freight forwarders; provided that on each shipping package sent by the Assured, his officers, agents, servants or employees, a value declaration is made to the carrier or freight forwarder of not less than 25% of the actual value of the contents of the shipping package, but not necessarily more than $1,000 per package."

On July 2, 1957, plaintiff asserted its claim for the lost furs against the air freight forwarder, "Wings & Wheels," and was paid $250 by check, which was sent to George Bloom. Plaintiff then made claim against American for the value of the furs less the $250 received from the air freight forwarder. Defendant denied liability, asserting that plaintiff had no policy coverage for the loss, because Bloom, the New York fur buyer, as plaintiff's agent when shipping the furs by an "air freight forwarder," failed to make a proper declaration of the value of the furs.

The principal question is Bloom's legal status in the transaction. Plaintiff denies that Bloom was its agent at the time of the fur shipment and contends that he was acting as an independent contractor. If Bloom was not plaintiff's agent, it is implicit that the furs were covered by the policy. If the fur package was sent by Bloom as the "agent" of plaintiff, a proper value declaration was a positive act required to be performed before defendant's insurance policy became effective and covered the fur shipment. American Ins. Co. v. Rosenberg, 28 Ill. App.2d 357, 171 N.E.2d 662 (1960).

The record shows that New York City is the center of the United States fur market. Retail furriers throughout the country, including plaintiff, purchase most of their furs in New York, either directly or through New York fur buyers.

Plaintiff, about 15 years ago, entered into a continuing agreement with George Bloom, a New York fur buyer, whereby plaintiff paid Bloom a monthly fee of $400, plus incidental expenses in servicing plaintiff's account, in return for Bloom's keeping plaintiff apprised of the fur market, making selections when requested, and having them shipped to plaintiff on approval. Plaintiff withheld no income taxes from Bloom's fee, paid no social security taxes for him, paid no part of Bloom's office rent, secretarial expenses or other office expenses, such as light, heat or telephone, and "had no right to tell Bloom how to run his business." Bloom "worked for approximately ten other furriers" throughout the country.

When furs were selected by Bloom, they were sent by the local New York fur dealer to Bloom's office but invoiced directly to plaintiff. Bloom examined the furs in his office and then shipped them to plaintiff in Chicago. On cross-examination, one of the partners of plaintiff testified, among other things: "It is customary that the buyer or the purchaser of the merchandise pays the freight charge. We paid the freight charge in the particular instance here. . . . We instructed Mr. Bloom to ship air freight whenever possible. When a shipment leaves the furrier in New York to go to Chicago it is on an invoice to Hoffman & Morton. . . . It was my understanding that we could merely terminate our relationship with Mr. Bloom at any time. . . . If he did not ship merchandise to us in the manner that we ...

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