VL Phillips & Co. v. PENNSYLVANIA THRESHERMEN, ETC.

• Citation: 199 F.2d 244
• Decision Date: 05 September 1952
• Docket Number: No. 6446.,6446.
• Parties: V. L. PHILLIPS & CO., Inc. et al. v. PENNSYLVANIA THRESHERMEN & FARMERS' MUT. CAS. INS. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

199 F.2d 244 (1952)

V. L. PHILLIPS & CO., Inc. et al. v. PENNSYLVANIA THRESHERMEN & FARMERS' MUT. CAS. INS. CO.

No. 6446.

United States Court of Appeals Fourth Circuit.

Argued June 30, 1952.

Decided September 5, 1952.

Ashby B. Allen and George E. Allen, Richmond, Va. (Allen, Allen, Allen & Allen, Richmond, Va., on brief), for appellants.

Robert Lewis Young, Richmond, Va. (Walter E. Hoffman, Norfolk, Va., and John G. May, Jr., Richmond, Va., on brief), for appellee.

Before PARKER, Chief Judge, DOBIE, Circuit Judge, and HAYES, District Judge.

HAYES, District Judge.

The Pennsylvania Threshermen and Farmers' Mutual Casualty Insurance Company, desiring to enter the State of Virginia to carry on its Casualty Insurance business, entered into a written contract, on August 11, 1944, with V. Lance Phillips of Richmond, Va., as its Agent for the State of Virginia, excluding the counties of Accomac and Northampton. The Agent was engaged in insurance business as State Agent with other companies and the contract did not require him to promote this Company's business to the exclusion of others. Later, Phillips incorporated his business in the name of V. L. Phillips and Company, Incorporated, and on September 1, 1947 a like contract was entered into between the Company and V. Lance Phillips and V. L. Phillips & Co., Inc., in which both were referred to throughout the contract as Agent. Therefore, the contract is treated as one contract constituting the basis for the business carried on between them until June 23, 1950, at which time it was terminated by the defendant pursuant to a previous notice of termination given 90 days earlier in accordance with paragraph 16.

During the period the contract was in force, the plaintiffs selected, appointed and instructed and obtained licenses for 173 sub-agents¹ throughout the State, to procure insurance in the defendant Company. The expense was borne by plaintiffs except the Company reimbursed the $2.00 license fee. Each sub-agent had a written contract signed by the Company and plaintiffs authorizing him to deliver policies and to collect premiums; fixing the compensation on a commission basis, and providing that he would forward all evidence of insurance effected by him to plaintiffs and to remit to plaintiffs within 45 days all premiums collected.

The volume of business grew rapidly and at the termination of the contract the annual premiums amounted to approximately $1,250,000.00.

The plaintiffs sued the defendant for damages alleging that the defendant interfered with, and deprived plaintiffs of, the expirations on the business created by the plaintiffs. The defendant denied such interference as to any business written by plaintiffs individually and asserted that plaintiffs had no right to expirations on policies written by plaintiffs' sub-agents. The trial judge adopted the view of the defendant and entered a summary judgment dismissing the action except it allowed judgment for commissions on certain policies written by Clifton Insurance Agency before the termination of the contract. From this judgment the plaintiffs appealed.

It is contended by the plaintiffs that the custom and usage in the insurance field recognizes the property right of the agent to expirations on fire and casualty policies written by him and that the contract between the parties here specifically so provides, and plaintiffs insist that the expirations apply to all the policies in the territory whether written by them or their sub-agents.

"Expirations" in the insurance field has a definite and well recognized meaning; it embodies the records of an insurance agency by which the agent has available a copy of the policy issued to the insured or records containing the date of the insurance policy, the name of the insured, the date of its expiration, the amount of insurance, premiums, property covered and terms of insurance. This information enables the agent to contact the insured before the existing contract expires and arms him with the information essential to secure another policy and to present to the insured a solution for his insurance requirements. It has been determined that this information is of vital assistance to the agency in carrying on the insurance business and it has become, in the insurance field, recognized as a valuable asset in the nature of good will.

There is ample authority for the rule which is generally recognized that a fire or casualty insurance agent has a property right to the expirations on business produced by him. Kelly v. American Mine Owners' Casualty Corporation, 161 Va. 206, 170 S.E. 580; Port Investment Co. v. Oregon Mutual Fire Insurance Company, 163 Or. 1, 94 P.2d 734, 124 A.L.R. 1342.

In our view it is unnecessary to dwell on the custom since we base our decision on the contract between the parties.

The executive Vice-president of the Company who negotiated the contract with plaintiff, in his affidavit in support of the motion for summary judgment, states that plaintiff requested the withdrawal of the defendant from the State of Virginia in the event of the termination of the proposed contract but defendant refused to do this and, in consequence of this, inserted the last sentence in paragraph 16.

"This Agreement may be terminated at any time at the pleasure of either party by giving a ninety (90) days notice to the other in writing, but any liability for monies received by the Agent shall not be discharged until all amounts are satisfactorily settled and paid by the Agent. In the event of the termination of this Agreement, the Agent not being in default and thereafter promptly accounting for and paying over balances not in default for which he may be liable, the Agent\'s record, use and control of the expirations shall be deemed the property of the Agent and left in his undisputed possession; otherwise the records, use and control of expirations shall be vested in the Company. Furthermore, upon termination of this Agreement, from any cause whatsoever, neither the Agent or his heirs, administrators, executors or assigns shall have any right to any commission upon, or remuneration from, the renewal of any policy or business previously written, which may be continued with the Company."

The expirations referred to in the preceding paragraph were intended to be, and beyond a doubt, were expirations on all business produced by the plaintiff or its sub-agents throughout the State of Virginia, excluding the two counties stated in the Contract. The Contract admits no other reasonable interpretation. The Contract recites: the area covered under the Contract was all of Virginia except two...