291 Mass. 62 | Mass. | 1935
This bill in equity was brought by a receiver, appointed by the Superior Court, in the name and behalf of the Union Mutual Casualty Insurance Corporation (herein referred to as the plaintiff or the plaintiff corporation), a corporation organized under the laws of the State of New York which had been engaged in this Commonwealth in the business of issuing policies of liability insurance on the mutual plan ■— particularly to owners of motor vehicles — to obtain an accounting by the defendant Insurance Budget Plan, Inc. (herein referred to as the defendant), a corporation organized under the laws of this Commonwealth, for premiums on insurance policies written by the defendant for the plaintiff corporation. The defendant filed an answer containing a counterclaim. The case was referred to a master who made a report. An interlocutory decree
The case involves the interpretation of a so called agency agreement between the plaintiff and the defendant, made October 22, 1930, and the rights of the parties thereto in the events which have happened. By this agreement the defendant was to procure applications for insurance in the plaintiff corporation and collect premiums thereon and was to receive commissions of fixed percentages "on the net premiums (i.e., the gross premiums paid to Company [the plaintiff] less premiums returned to the insured) paid to the Company on all policies of insurance procured by or through the Agent under this Agreement.” The agreement in paragraphs 5, 6 and 8, provided: “5. The Agent [the defendant] shall keep in books or records, the form of which shall be approved by the Company, an accurate account of all policies written or renewed for the Company and shall render to the Company at such times as may be required by the Company a statement of the business written and the amounts due the Company thereon, and the amounts due the Company thereon are to be remitted by the Agent whether received by him or not, as follows: On the 20th of the month following the date of issuance for all annual policies written; on extended payment policies secured by notes effective January 1st, 1931, thirty (30%) per cent of the annual premium is to be paid on January 10th; 20% on March 10th; 20% on May 10th; 20% on July 10th and 10% on September 10th, with similar arrangements on extended payment policies issued after January 1st, 1931, in accordance with the further instructions of the Company. 6. The Company reserves the right during the term of this contract, or in the event of its cancellation, without releasing the Agent in any way, to make collections
The defendant did some business on “open accounts.” In doing this business it charged to the insured or to the defendant’s agents procuring the business the full amount of the annual premiums. But the principal part of the defendant’s business consisted of “financing automobile insurance accounts.” In doing this business the defendant took from the insured under each policy “a note for the full amount of the premium from the date of the policy to be effective to the end of the calendar year plus a finance charge of 10%.” Provisions ordinarily were made for an initial payment and for eight equal monthly instalment payments of the balance of the premium and the charge for financing. And the note contained a power of attorney to the payee or any holder thereof on default by the maker to cancel the policy and to collect any return premium or dividend, an assignment to the payee or any holder of the note, unless and until the obligation of the maker thereof was discharged by full payment, of the right of the maker to cancel the insurance and his right to any return premium or dividend, and an authorization to the payee to
The premiums on policies of insurance written by the defendant for the plaintiff before March 11, 1931, for the periods from the dates the insurance attached to the end of the year 1931 amounted to $88,000 (including $13,000 on “open accounts” and $75,000 on “financed accounts”), and the commissions on this amount would have been $15,900. The premiums prorated to March 16, 1931, would have amounted to $14,000 and the commissions on this amount would have been $3,000. The defendant, so far as it was able, as of March 16, 1931, replaced in other companies insurance formerly with the plaintiff, but in many instances of “financed accounts” the persons insured refused to permit the defendant so to replace insurance. The full premiums on policies not replaced amounted to $35,000. After such replacement of insurance the defendant retained the notes above referred to and applied
The amount adjudged by the final decree to be due from the defendant to the plaintiff was the amount of premiums prorated to March 16, 1931, treated as “earned premiums,” less deductions for amounts paid by the defendant to the plaintiff, or collected directly by the plaintiff, and for- the defendant’s commissions computed on the basis of such earned premiums. The defendant contends that it does not owe to the plaintiff more than the amount of the earned premiums, less proper deductions, but that it is entitled to commissions on the full amount of the premiums and, therefore, is entitled to recover on its counterclaim. The plaintiff contends that the defendant owes it the full amount of the premiums, less proper deductions, and concedes that if this contention is sustained, the defendant is entitled to commissions on the full amount of the premiums. The plaintiff contends also that the amounts collected by the defendant are held by it in trust for the plaintiff.
First. The amount owed by the defendant to the plaintiff, disregarding proper deductions, was the amount of the premiums prorated to March 16, 1931 — the earned premiums — that is, $14,000.
By the terms of the agency agreement the defendant was bound to remit to the plaintiff the “amounts due” to the plaintiff on business written by the defendant “whether received by him or not.” The “amounts due” are those
The question for determination, however, is the liability of the defendant for premiums in excess of earned premiums. We consider this liability, in the first instance, on the assumption that the rules applicable to cancellation of policies in the ordinary course of business are applicable here.
The plaintiff does not contend that, in the case of cancellation of policies in the ordinary course of business, policy holders who have paid the full amount of their premiums would not be entitled to return premiums to the extent that premiums were not earned. See G. L. (Ter. Ed.) c. 175, § 113A (2), (3). Indeed, though the terms of-the policies do not appear from the master’s report, the agency agreement indicates that policy holders would be so entitled. And the right of the plaintiff to recover in actions brought after cancellation against policy holders for unpaid premiums would be limited to earned premiums. Hill v. Baker, 205 Mass. 303, 309-310.
The effect of the provision in the agency agreement applicable in cases of cancellation of policies that the defendant should collect earned premiums is to reduce the “amounts due,” payment of which is guaranteed by the defendant, to the amounts of the earned premiums. This reduction takes effect by reason of a change in the contractual obligation of the defendant resulting from changed circum.stances and not by reason of set-off,. Such reduction js
It remains to consider, however, the liability of the defendant to the plaintiff for unearned premiums collected by the defendant from policy holders. In this connection it is to be observed that the defendant occupied a dual position. See Westfield Cigar Co. v. Insurance Co. of North America, 169 Mass. 382, 384; Michelson v. Franklin Fire Ins. Co. of Philadelphia, 252 Mass. 336, 339. Under the agency contract the defendant was the agent of the plaintiff to receive premiums on policies written by the defendant for the plaintiff. G. B. (Ter. Ed.) c. 175, § 169. And by the terms of the notes given on “financed accounts” the defendant was the agent of policy holders on such accounts to replace their insurance in other companies. Moreover, from the facts found by the master it appears that the defendant was the agent of the policy holders on “open accounts” to replace their insurance. Amounts collected from policy holders after the cancellation of policies in the plaintiff corporation and the replacement of insurance in other corporations, so far as not required for the payment of earned premiums on policies of the plaintiff corporation, are to be regarded as received by the defendant as agent of such policy holders. The defendant, therefore, is not required to account for such premiums to the plaintiff.
Amounts collected from policy holders by the defendant before cancellation of the policies, however, stand on a somewhat different basis. Whether these amounts were paid on account of earned or of unearned premiums, as between the plaintiff and the policy holders they were re
The plaintiff contends, however, that the principles applicable to cancellation of policies in the ordinary course of business are not applicable here, particularly in view of the fact that the plaintiff is a mutual company. We think that those principles are applicable.
The provision in the agency agreement with respect to cancellation of the policies is not to be interpreted as inapplicable to cancellation by reason of withdrawal of the plaintiff from the Commonwealth. There is a statutory requirement for inclusion in policies of compulsory motor vehicle insurance of provisions for paying return premiums in case of such withdrawal (G. L. [Ter. Ed.] c. 175, § 113A [3]) and it is to be inferred that cancellation by reason of withdrawal of the plaintiff from the Commonwealth was within the contemplation of the parties to the agency agreement.
It is true that in a mutual company the policy holders are both insurers and insured persons and as insurers are liable to assessment. Consol. Laws of N. Y. (1930) c. 30, § 346. See also G. L. (Ter. Ed.) c. 175, §§ 81, 83, 90, 150, 151 (Second). Commonwealth v. Massachusetts Mutual Fire Ins. Co. 112 Mass. 116, 121-122. But this is not a suit to recover assessments. And the defendant did not by the agency agreement agree to collect assessments or guarantee the payment thereof. Nor does it seek here to set off or recoup against assessments on policy holders any claim of its own or any claims of the policy holders. Compare Stone
The amount of commissions to which the defendant is entitled depends upon the terms of the agency agreement applied to the facts of the case. Federal Ins. Co. v. Gilmour, 206 Mass. 203, 206. By the terms of the agreement commissions "accrue only on such net premiums as are actually paid to the Company” and are “payable on the date of the payment of such net premiums,” and "net premiums” are defined as "gross premiums paid to Company less premiums returned to the insured.” And the agreement provided further that in case of cancellation the defendant should "make a short rate or pro rata charge and collect for the earned portions of policies.” Clearly, therefore, according to the provisions of the agency agreement, in the ordinary course of business, the defendant was not to receive commissions on premiums not paid by it to the plaintiff — except as it might be entitled to partial commissions on premiums collected by the plaintiff in accordance with a special provision in the agreement. Indeed the defendant was not even to receive commissions on premiums actually paid by it to the plaintiff but returned by the plaintiff to the policy holders. It is to be observed that the service rendered by the defendant to the plaintiff for which it was to be paid was not limited to procuring applications for insurance but included also guaranteeing the payment of premiums. In this respect the case differs from T. T. Hay & Brother v. Union Fire Ins. Co. 167 N. C. 82, 83-84, and Johnson v. Button, 120 Va. 339, 344, relied on by the defendant. And, as already stated, the guaranty of the defendant was limited by the provisions of the agency agreement to earned premiums. Such earned premiums, therefore, furnish the measure of the defendant’s service so far as the guaranty of premiums is concerned. And cancellation of policies by reason of the withdrawal of the plaintiff from the Commonwealth, which was contemplated by the parties to the agency agreement, like cancellation in the ordinary course of business, is cancellation with respect to the reduction of commissions as
Third. The final decree was right in adjudging that the defendant owes the plaintiff the sum of $6,166.77.
It is undisputed that the defendant has paid to the plaintiff the sum of $4,636.23 and is entitled to credit for the amount so paid. And the plaintiff makes no contention that the defendant is not entitled also to credit in the amount of $197 for premiums collected by counsel for the plaintiff. The defendant, however, contends that it is entitled to credit for $2,727, the full amount of premiums on accounts turned over by it to such counsel for the plaintiff, upon which accounts this sum of' $197 was collected, instead of to credit only for the amount actually collected on such accounts. This contention is unsound. The decision here made relieves the defendant from liability for such part of these accounts as represents unearned premiums. But nothing in the agency agreement relieves the defendant from its liability for such part of these accounts as represents earned premiums. Finally, the defendant does not argue in this court that it is entitled to damages for breach of the agency agreement. The aggregate amount, including $3,000 for commissions, of credits to which the defendant is entitled is, therefore, $7,833.23 and the excess of the amount of earned premiums for which the defendant is liable over the aggregate amount of credits is $6,166.77.
Interlocutory decree affirmed.
Final decree affirmed.