Contractor's Safety Ass'n v. Cal. Comp. Ins. Co.

• Court: United States State Supreme Court (California)
• Writing for the Court: SHENK; GIBSON
• Citation: 307 P.2d 626,48 Cal.2d 71
• Parties: CONTRACTOR'S SAFETY ASSOCIATION (a Corporation), Plaintiff and Appellant, v. CALIFORNIA COMPENSATION INSURANCE COMPANY (a Corporation), Defendant and Respondent. L. A. 24366.
• Decision Date: 01 March 1957

Page 626

307 P.2d 626 48 Cal.2d 71 CONTRACTOR'S SAFETY ASSOCIATION (a Corporation), Plaintiff and Appellant,
v.
CALIFORNIA COMPENSATION INSURANCE COMPANY (a Corporation), Defendant and Respondent. L. A. 24366. Supreme Court of California, In Bank. March 1, 1957.
Rehearing Denied March 27, 1957.

Page 627

[48 Cal.2d 72] Simon Miller, Harry E. Ehrlich, and Blau, Shaw & Miller, Beverly Hills, for appellant.

Betts, Ely & Loomis, Forrest A. Betts, Los Angeles, Frank J. Creede, san Francisco, and F. V. Lopardo, Los Angeles, for respondent.

Edmund G. Brown, Atty. Gen., and Harold B. Haas, Deputy Atty. Gen., as amicicuriae on behalf of respondent.

[48 Cal.2d 73] SHENK, Justice.

This is an appeal from the judgment of dismissal following an order sustaining the defendant's oral demurrer to the introduction of any evidence on behalf of the plaintiff.

The plaintiff seeks to recover dividends to which it claims to be entitled upon an agreement made in conjunction with the purchase of a policy of workmen's compensation insurance.

As finally amended the complaint alleges that the defendant in 1950 circulated a form letter representing that it would pay dividends according to a stated schedule to group insureds carrying workmen's compensation insurance issued by the defendant where the insured's loss-premium ratio was 65% or less and a surplus was available for payment of such dividends. In August, 1950, the defendant insurance company wrote the plaintiff to the effect that its board of directors had authorized an additional 5% dividend to those insureds whose loss-premium ratio was 60% or less provided a surplus was available to pay the dividend. In reply the plaintiff informed the defendant that it accepted the offer to insure the plaintiff according to the terms of the information thus received. On October 11, 1950, the defendant issued to the plaintiff its standard workman's compensation policy. The plaintiff alleges that it relied upon those representations and that its loss experience was within a range which would entitle it to dividends in the sum of $77,400.74; that the defendant has sufficient surplus to meet the payment of the dividend, that it arbitrarily reduced plaintiff's dividend to $13,959 and that it has paid that amount. The complaint prays that the balance be paid to the plaintiff upon the determination of the existence or reserves sufficient to make the additional payment. The plaintiff contends that before the representatiions were made the defendant's board of directors by resolution unknown to the plaintiff provided that no dividend would be paid except by resolution of the board and that the board has arbitrarily reduced the amount of plaintiff's dividend because the plaintiff ceased to do business with the defendant in August, 1951. This, the plaintiff contends, was malicious and oppressive conduct on the part of the defendant through its board of directors. Accordingly, the plaintiff seeks an additional $50,000 as punitive damages.

The above facts are alleged in three counts. The first is an action upon the collateral agreement which the plaintiff [48 Cal.2d 74] contends is a part of the contract of insurance entered into on .october 11, 1950. The second is on a common count for money had and received; the third is for punitive damages.

The Insurance Commissioner as amicus curiae contends that the enforcement of the dividend agreement would violate the minimum rating provisions of the Insurance Code and administrative rulings promulgated under the Code. The defendant joins in this contention and asserts that the enforcement of the agreement would violate the anti-rebate provisions of the Insurance Code.

Insurance Code section 751 provides: 'An insurer * * * shall not offer or pay, directly or indirectly, as an inducement to enter into an insurance contract, any valuable consideration which is not clearly specified, promised or provided for in the policy, or application for the insurance, and any such consideration not appearing in the policy is an unlawful rebate.'

Page 628

The receipt of a rebate is made a misdemeanor by Insurance Code section 752. The code does not, however proscribe all rebates. Insurance Code section 763 permits rebates under certain conditions. Subsection (a) of that section provides for 'The return by an insurer issuing...