Canal Insurance Company v. J. C. Thornton and James S. Given, D/B/A Kemp Coldwell & Company
279 F.2d 41
5th Cir.
1960
Check Treatment

*2 TUTTLE, Before CAMERON and JONES, Judges. Circuit Judge. TUTTLE, Circuit appeal judgment from This is an a broker, an found favor of insurance agent for court to be the the insur- company, for reimbursement from payments principal for made to an his which resulted in the insured’s insured obtaining the benefit legal protection at a rate lower than the of Texas. the State Appellees, under circumstances acted for both insured company, line and the ob- bus public tained for the bus liability Canal, 15, 1955, quota- dated November on the High, Agent, Ben tion its General rate of $4.80 $100 gross income. This rate was incorrect under the manual issued Commission, Texas Insurance it was actually by any ascertained parties to the transaction to be incorrect until after the had been cancelled In its of law conclusions after on June stated, relationship $2,483, deposit “This contractual had returned the agency practice and line, developed for, a common the bus amount here sued ac- premium. The usual *3 which Plaintiffs’ a return anof unearned controlling conformed, follow- premium tion and which ascertained is correct was ing by herein.” Commis- is not clear whether the Insurance an audit the by quoted practice many court premium referred to be- rates a common sion of High company ascertain- tween the and this after the same Ben and gen- many incor- been broker erally. them had or to a custom of trade ment that of the resulting high, (most rect of too them policyholders to its in refunds Canal With full deference to the trial Texas.) in court, findings whose of ac fact must be cepted clearly unless found to be errone receiving copy of After the brokers’ ous, necessary point we deem it out in- the sent the of cancellation notice that no there was basis on the record ap- company, company surance pellees, to the bus (1) trial court find either that on balance held a credit who dealing course of Insur between Canal insured, of this their books in favor Company Kemp, ance and Coldwell & credited the insured’s account with Company made such a cus action either October, Thereafter, $2,483. in sum of warranting practice, tom or common thus 1956, that it was ascertained the inference that it authorized had been gross of should have been $5.90 $100 company or ratified or the insurance receipts was and (2) practice in that was a common Com- ordered Board of Insurance recognized universally the trade this to file an endorsement to missioners particular policy part every to become contract showing the corrected agency such as find would warrant premium The was rate. endorsement Company’s that the Canal Insurance issued “as of” November payment contract authorized its such on policy. effective date of the testimony behalf the brokers. The appellee re- demanded of The brokers meager plain is but on this issue. The $2,483 imbursement for the appellee partner, Thornton, testified toas was had advanced to the insured. This particular contract as follows: present suit followed. declined and the regard “Q. to cancellations Appellees their reim- base claim for that, pro- and such as what is the on the fact the Notice that bursement cedure, practice? what A. is the sent of Cancellation Well, only that is the cancellation contained the to the insured Canal, have that we ever had with statement, premium, “The return if companies all the other —the demand"; you, on will refunded due you normal what want they alleged com- what was and on know about?” practice to make refunds brokers mon objection by appellant, Upon the court premiums to the insured unearned ruled, “I am not sure it would be then trial court based cancellation. The binding upon this defendant what finding that were entitled its companies. practice was of other The theory. precisely on this recover Thus, objection be sustained.” it will fact, findings in its practice common or usual that no clear refunding in the amount of “Plaintiffs agent procedure existed as between the deposit under company. acting upon the Notice as cancelled and Agent’s Copy, hand, theory If, marked the other was on of Cancellation following practice the usual custom and common there was a common handling binding practice on insur- refunds after that would all trade contracts, companies agency all cancellation.” equally it is clear Moreover, that there no evi- even if some universal testimony dence to this on effect. proved, custom had been point this is as follows: said to be the custom was the custom voluntarily the broker “Q. advance the Now, you any pay- did make amount due to the insured for unearned by way ment of return premiums when a place. cancellation took payments on to El Paso- this There was prove not even an effort to Ysleta Bus Lines? A. allowed comprehended that such prin custom $2,483.00 their credit of ciple payment that when such general was made ledger account. *4 by the broker complete awas ac gave “Q. you them full And cord and satisfaction as all the between is cor- credit A. That for that? parties, reopened which could not be even rect. showing legally a that a insuffi cient had been Thus collected. “Q. cus- that and Is usual sought proved the custom to be not did tomary you handle manner in which even touch the real issue here before That is correct. such refunds? A. Court. The issue here is not whether companies and it with all our do Kemp, right Company Coldwell& had the they clients, mean, if our I both. to a make refund to on the bus cancelled, bring to be a us to apparent showing an that refund was figure and we we out the cancellation having due. whether, was rather give right there will check our made such developed refund and it later immediately. We, in from our office legally that the was refund not be due turn, put Ac- it on then will coverage cause the rate for the not was Payable Accounts Cur- and counts legally in published accord with the companies, rent which is a to rates, there was a custom in the trade transaction, far as matter of as that be would concerned, bookkeeping we is but bound to reimburse the broker rather cash, have disbursed our our check than recoup pay for the broker to already. to the client ment from insured who not was “Q. you companies, And to the legally entitled to retain it. There referring companies to such as are proof no custom, any of the existence Company? Canal Insurance A. even as between and Yes, represent thirty- thirty we to thirty thirty-five companies. their or companies.” five different insurance beyond this, however, Even think we (Emphasis added.) principle regula- a basic inherent premiums by tion of insurance practice Kemp, state Whatever Cold- regulatory agencies prevent would Company may & have followed with well result which follows thirty-five decision respect different principle trial court. That is they companies represented cannot be clearly stated in a decision this Court proof universal as of a custom taken in Bowen Motor Coaches v. New York binding on the trade which would be Casualty Company, Cir., 5 139 F.2d Company. course, Of Insurance Canal 334: theory specific under which a con expanded parties paid tract between is two “The rates be in- for this by public custom is certain or modified that surance had been fixed au- universally thority; practice or is so and no others can be engaged parties charged, followed and is discrimination industry particular provi- or that all business forbidden statute. The presumed to contract with reference are law cannot be overridden sions proof agreement parties, The falls that act or of the custom. necessary currency would be far short what either before- or after the policy. prove custom. The situation is much universal any agreement not a refund if have make rates railroad where that like binding. legally legally authority and due would not be by public fixed been This, too, was, law, under the known to forbidden.” rates of other the use appellees. page 335: further stated The Court principle case Bowen right premiums “If the repeated v. in Battles this Court agreed paid inten- to be paid or Cir., Airways, Inc., 146 F.2d Braniff invali- not to statute tion of the page said: where on 338 we permit im- or date the proper premium settlements agree appellant “We with policy shall be stand, that the agreement for a less than law, con- illegal conformed that fixed statute was and it, written into against sidered that it is suit ineffective paid which premiums shall those premiums for the ought paid. court would to be it.” under duty to as- refused if it its fail in *5 Finally, we are to constrained pre- lawful and enforce the certain disagree with to conclusion deference the miums due.” applying the trial that in of the being insur Appellees, licensed pari delicto it would further doctrine statutes, under the Texas brokers ance were, public policy Texas for of charged course, with as much of permitted amount to be paid to recover the premium be to the correct as notice to deny insured than to charged An be. insured would as an only point fact, relief. of this layman insured, in the field iswho public policy here involved is the Texas is, insurance, held us in as was sanctions, policy, enforced criminal obligated pay case, legally to Bowen charging prohibiting the of less than the coverage. though premium even correct premium for being expired. Tex the law in This has judgment effect trial court it be that clearer must as much party permit which, is to innocently, accomplished however obligation broker, to sustain the whose giving of in other structure as well protection company regulations touch statutes and surance legal less than rate to obtain reimburse by him contracted on the business ment charged imposed statute, must be they paid sum achieve this il information rate to with full as to the legal insurance, and to leave the insur obligation charged in and the position having impro pay it and thus of the sured to contributed amount which in permitting priety of an unlawful re enjoyed legal charge than surer less in fund be left in hands of an coverage. for sured. judgment, conclude based Nothing, course, ap- is added to the facts, admitted state of cannot pellees’ no- contention reason of the judgment is reversed and is stand. any refund returned tice appellant. rendered any demand if was due. The con- you,” dition, key “if is the Judge. CÁMERON, Circuit obligation this statement. There is no Moreover, pay any refund if I not due. dissent