310 Mass. 762 | Mass. | 1942
The Attorney General, through this information filed at the relation of the commissioner of insurance under
Section 164A reads as follows: “If a policy of industrial life insurance upon which premiums have been paid for three years or more is surrendered to the company for a cash surrender value or paid up insurance or extended term insurance or lapses for non-payment of premiums, the agent shall not be charged with a decrease for said premium and no deduction shall be made from his commission or salary.”
This section was approved April 21, 1938, and went into effect July 21, 1938. The alleged violation is found in the terms of a new form of agreement between the company and its “industrial” agents which was put into operation on July 4, 1938, after the enactment of § 164A, but before that section took effect. The portion of the new form of agreement which it is contended violates the statute is in these words, “Sec. 9. (c). That, in the calculation of my ‘Net First-Year Premiums’, I [the agent] shall not receive credit for any ‘first-year premiums’ on any policy written by me on the life of any person, or any relative sharing the home with the person, who has terminated a policy of any kind or description, either by non-payment of premiums payable under the terms thereof or by surrender, not more than three months before or within three months after such policy is written. A policy lapsed for non-payment of premiums, and having continuing benefits under paid-up or extended insurance, shall be deemed to have terminated for the purposes of this Section.”
In Cronin v. Metropolitan Life Ins. Co. 304 Mass. 53, we were called upon to construe § 164A. We there held this section to mean “that in computing the agent’s commission or salary no deduction shall be made on account of the surrenders or lapses to which the statute refers from the commission or salary which under his contract the agent would receive if there had been no such surrenders or lapses” (page 54), and that “The purpose was to exclude these surrenders and lapses as elements operating adversely to the agent in computing his commission or salary” (pages
We cannot agree with this argument. In general, the company pays first year commissions on policies written by its agents. It does not refuse to accept the “re-written” or “replacement” policies, as they are called. It permits its agents to write such policies. In general, it does not even deny to its agents first year premium commissions on policies which replace former surrendered or lapsed policies. It simply reduces the amount which it would otherwise pay its agents for first year premiums upon new policies written by them by a sum which is dependent upon surrenders and lapses of “industrial” policies within three months. And in instances where the former policy is not surrendered or lapsed until after the new policy is written it cannot even be determined that any reduction will be made in the agent’s compensation until some time after the event (writing of the new policy) out of which the right to a commission commonly arises. Whether the statute has been violated is to be determined with reference to the substance of the relation between the company and its agents and not with reference to the form of bookkeeping entries adopted. In view of the object to attain which the statute must have been enacted we cannot avoid the conclusion that the respondent’s form of contract does make a “deduction” within the meaning of that word in the statute “on account of the surrenders or lapses to which the statute refers from the commission or salary which under his con
But the respondent further contends that the statute is unconstitutional in that it unwarrantably interferes with the respondent’s freedom to contract, deprives the respondent of property without due process of law and of equal protection of the laws, and is not a valid exercise of the police power of the Commonwealth. The question of constitutionality was not argued and was not decided in Cronin v. Metropolitan Life Ins. Co. 304 Mass. 53. We are of the opinion, however, that the statute is not unconstitutional upon any of the grounds urged. All of the contracts here involved between the respondent and its agents were entered into after the statute was enacted, although many of them must have been entered into before it took effect. We are therefore not here concerned with the impact of a statute upon a contract made before the statute was enacted.
It is well settled that the business of insurance is subject to a large degree of legislative regulation. New York Life Ins. Co. v. Hardison, 199 Mass. 190, 198. Delaney v. Ancient Order of United Workmen of Massachusetts, 244 Mass. 556, 567. Opinion of the Justices, 251 Mass. 569, 607. Goldman v. Commercial Travellers Eastern Accident Association, 302 Mass. 74, 77. German Alliance Ins. Co. v. Superintendent of Insurance of Kansas, 233 U. S. 389. National Union Fire Ins. Co. v. Wanberg, 260 U. S. 71. This power extends to the reasonable regulation in the public interest of insurance brokers, La Tourette v. McMaster, 248 U. S. 465, and agents, Stipcich v. Metropolitan Life Ins. Co. 277 U. S. 311, 320, and of the compensation paid to agents. O’Gorman & Young, Inc. v. Hartford Fire Ins. Co. 282 U. S. 251. Osborn v. Ozlin, 310 U. S. 53, 65, 66. See Wilson v.
The statute here assailed does not appear to be capricious, arbitrary, or unreasonably discriminatory. The Legislature may have believed that insurance agents dealing with “industrial” insurance policies were commonly persons of comparatively small income; and that it was an unfair practice for the companies to insist upon methods of calculating the agents’ compensation which might result in an agent finding at the end of a period of work that the earnings upon which he depended for a livelihood were in considerable part swept away by reason of surrenders and lapses which he could not control and for which he was in no wise to blame. Whether, as contended by the respondent, the public welfare would be better served by a contract which would encourage the agents to exert themselves to the utmost to prevent surrenders and lapses was a matter for the Legislature to decide.
Classification as a group of insurance agents dealing with “industrial” policies for the purpose of alleviating the conditions of their employment in the particular to which the statute is directed cannot be pronounced palpably unreason
After the effective date of the statute the respondent could not lawfully employ agents to procure “industrial” policies without obligating itself to pay them in accordance with the terms of the statute. See Patterson v. Bark Eudora, 190 U. S. 169; Midland Realty Co. v. Kansas City Power & Light Co. 300 U. S. 109, 114.
A final decree is to be entered in the Superior Court permanently enjoining the respondent from enforcing section 9 (c) of. its “Agent’s Agreement,” attached to its answer and marked “B,” by denying credit to its agents in computing their commissions or salaries by reason of the surrender to the company for cash surrender value or paid up insurance or extended term insurance or by reason of the lapse for nonpayment of premiums of any policy of “industrial” life insurance upon which premiums have been paid for three years or more, and from making deductions from its agents’ commissions or salaries because of such surrenders or lapses, and ordering the respondent to pay to its agents such sums as it has failed to credit to them or has deducted from their commissions or salaries because of such surrenders or lapses occurring on or after July 21, 1938.
Ordered accordingly.