California Civil Jury Instructions (CACI)

2301. Breach of Insurance Binder - Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] breached its duty to pay [him/her/it] for a loss or liability covered under a temporary insurance contract called an insurance binder. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of defendant] or its authorized agent agreed, orally or in writing, to provide [name of plaintiff] with an insurance binder;

2. That [name of plaintiff] [paid/was obligated to pay] for the insurance binder [or that payment was waived];

3. That [name of plaintiff] suffered a loss during the time the insurance binder was in effect;

4. That [all or part of] the loss was covered under the [insurance binder] [terms of the insurance policy [name of defendant] would have issued to [name of plaintiff]];

5. That [name of defendant] was notified of the loss [as required by the insurance binder]; and

6. The amount of the covered loss or liability that [name of defendant] failed to pay.

New September 2003

Directions for Use

The instructions in this series assume the plaintiff is the insured and the defendant is the insurer. The party designations may be changed if appropriate to the facts of the case.

This instruction is intended for an alleged breach of a contract of temporary insurance coverage. The court must interpret as a matter of law whether an ordinary person in the applicant’s circumstances would conclude, based on the language of the application, that coverage began immediately. Do not use this instruction unless the court has decided this issue.

Use bracketed language in element 5 if the jury is required to resolve a factual dispute over whether the manner in which the insurer received notice conformed to the policy requirements for notice. Element 4 should be modified if there is an issue regarding whether the insurance company’s agent made oral statements at variance with the policy language.

Note that the statutory requirements for a “binder” under Insurance Code section 382.5 do not apply to life or disability insurance, for insurance of any kind in the amount of $1 million or more, or to an oral binder (see Ins. Code, § 382.5(a)).

Sources and Authority

  • Insurance Code section 382.5 provides, in part: “A binder which is issued in accordance with this section shall be deemed an insurance policy for the purpose of proving that the insured has the insurance coverage specified in the binder… Except as superseded by the clear and express terms of the binder, a binder shall be deemed to include all of the usual terms of the policy as to which the binder was given, together with applicable endorsements as are designated in the binder.”
  • Insurance Code section 481.1 provides:

    (a) In the event any conditional receipt, binder, or other evidence of temporary or implied insurance [with specified exceptions] is canceled, rejected, or surrendered by the insurer, the coverage thereby extended shall terminate 10 days after written notice to the named insured is deposited, properly addressed with postage prepaid, with the United States Postal Service.

    (b) Any conditional receipt, binder, or other evidence of temporary or implied insurance described in subdivision (a) shall remain in force for a period of at least 30 days from the date of its issuance unless sooner canceled, rejected, or surrendered pursuant to the provisions of subdivision (a).

  • “Under California law, a contract of temporary insurance may arise from completion of an application for insurance and payment of the first premium if the language of the application would lead an ordinary lay person to conclude that coverage was immediate.” (Ahern v. Dillenback (1991) 1 Cal.App.4th 36, 47 [1 Cal.Rptr.2d 339].)
  • “[A] binder is an independent contract, separate and distinct from the permanent insurance policy. It is intended to give temporary protection pending the investigation of the risk by the insurer and until issuance of a formal policy or rejection of the insurance application by the insurer.” (Ahern, supra, 1 Cal.App.4th at p. 48.)
  • “[P]racticality dictates that a temporary insurance binder issued upon an application for insurance cannot contain all of the details and terms of the proposed insurance contract… [I]nsurance binders are adequate if they indicate the subject matter, the coverage period, the rate and the amount of insurance. (National Emblem Insurance Co. v. Rios (1969) 275 Cal.App.2d 70, 76 [79 Cal.Rptr. 583], internal citations omitted.)
  • “Whether or not a valid binder exists is a question of fact insofar as a finding comprehends issues relating to the credibility of witnesses or the weight of the evidence, but a question of law insofar as a finding embraces a conclusion that such factual elements do not constitute a valid oral binder.” (Spott Electrical Co. v. Industrial Indemnity Co. (1973) 30 Cal.App.3d 797, 805 [106 Cal.Rptr. 710], internal citations omitted.)
  • “ ‘For the sake of convenience, contracts of insurance sometimes exist in two forms: (1) A preliminary contract intended to protect the applicant pending investigation of the risk by the company or until the policy can be properly issued. (2) The final contract or policy itself… An agent possessing authority to bind the company by contracts of insurance has authority to bind it by a preliminary or temporary contract of insurance. . . .’ This preliminary contract is sometimes called ‘cover note’ or ‘binder.’ . . . ‘A valid temporary or preliminary contract of present insurance may be made orally, or it may be partly in parol and partly in writing.’ ” (Parlier Fruit Co. v. Fireman’s Fund Insurance Co. (1957) 151 Cal.App.2d 6, 19—20 [311 P.2d 62], internal quotation marks and citation omitted.)

Secondary Sources

2 Witkin, Summary of California Law (10th ed. 2005) Insurance, §§ 37, 38

Croskey et al., California Practice Guide: Insurance Litigation (The Rutter Group) ¶¶ 2:101—2:137

1 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar) Determining Whether Enforceable Obligation Exists, §§ 5.17—5.20

2 California Insurance Law & Practice, Ch. 9, Issuance of Insurance Policies, § 9.06[1]—[7] (Matthew Bender)

26 California Forms of Pleading and Practice, Ch. 308, Insurance (Matthew Bender)

12 California Points and Authorities, Ch. 120, Insurance, § 120.15 (Matthew Bender)

11 California Legal Forms: Transaction Guide, Ch. 26A, Title Insurance, §§ 26A.15, 26A.220 (Matthew Bender)