Fidelity & Deposit Co. of Maryland v. Sun Life Ins. Co. of America, s. 69484

• Decision Date: 07 March 1985
• Docket Number: Nos. 69484,69485,s. 69484
• Citation: 174 Ga.App. 258,329 S.E.2d 517
• Court: Georgia Court of Appeals
• Parties: FIDELITY & DEPOSIT COMPANY OF MARYLAND v. SUN LIFE INSURANCE COMPANY OF AMERICA; SUN LIFE INSURANCE COMPANY OF AMERICA v. FIDELITY & DEPOSIT COMPANY OF MARYLAND.

Page 517

329 S.E.2d 517

174 Ga.App. 258

FIDELITY & DEPOSIT COMPANY OF MARYLAND v. SUN LIFE INSURANCE COMPANY OF AMERICA;

SUN LIFE INSURANCE COMPANY OF AMERICA v. FIDELITY & DEPOSIT COMPANY OF MARYLAND.

Nos. 69484, 69485.

Court of Appeals of Georgia.

March 7, 1985.

Rehearing Denied March 28, 1985.

Certiorari Denied May 10, 1985.

George C. Reid, Laurie B. Gilbert, Atlanta, for appellant.

Michael A. Dailey, Atlanta, for appellee.

BIRDSONG, Presiding Judge.

Fidelity & Deposit Company of Maryland, defendant below, brings this appeal from a grant of summary judgment to the plaintiff, Sun Life Insurance Company of America. Sun Life obtained a "Life Insurance Companies Blanket Bond" from Fidelity which included coverage for "[a]ny loss through any dishonest or fraudulent act of any of the Employees or General Agents of the Insured...." Sun Life, a life insurance company, signed a contract of employment with Eduardo Gilbert, as a general agent, to solicit applications for life insurance on behalf of Sun Life. On the same date, Sun Life signed an "Agreement for Advance of Commissions" in which Gilbert was to receive in "advance ... 85% of the first-year commissions upon anticipated first-year premiums."

During the period of his employment by Sun Life, from about June 1, 1979 to January, 1980, Gilbert was an active insurance agent, submitting 315 applications for life insurance policies to Sun Life, together with the first premium. In accordance with their agreement, Sun Life advanced to Gilbert 85% of the first year commissions, based upon the anticipated first year premiums. A vice-president of Sun Life began to monitor Gilbert's commission "to determine whether there appeared to be any reason, apart from the increasing commission balance, to take a closer look." Subsequent investigation revealed that Gilbert could not be located and an internal audit by Sun Life showed that only eight of the 315 applications for insurance were valid and the remaining 307 were either fictitious persons or individuals who had not made application for insurance. Sun Life's total loss was $80,885.64. Application for reimbursement to Fidelity was denied. This action resulted, and the trial court granted Sun Life's motion for summary judgment. Held:

1. Fidelity denied liability upon three grounds: (1) Section 3 of its bond excluded from coverage losses resulting from any advance of commissions, (2) Sun Life did not commence suit within the contractual period of limitations, and (3) Sun Life did not comply with the notice requirement of the bond. We need address only the issues of whether the loss came within the exclusion, and whether this action was filed within the contractual limitation of time.

Section 3 of the exclusion portion of the bond provides: "Collections--Advances--Commissions.... The Underwriter shall not be liable for loss sustained by the Insured through failure of any ... General Agent of the Insured ... to repay monies advanced by the Insured, except monies advanced for traveling expenses, claim settlements, claim expenses and other expenses of the Insured and dishonestly converted by such Representative...." It is clear that the greater portion of the money advanced to Gilbert was under the agreement for advance of commissions. It is equally clear that a loss incurred "through failure of any Representative [including a General Agent] to repay monies advanced by the Insured" except expenses incident to traveling, claim settlements, and general operational expenses, was excluded by the contract.

Sun Life argues that advance payments of commissions to a general agent are "other expenses of the insured" and are not within the exclusion. They also contend that the latter part of Section 3 of the exclusionary portion of the bond recognizes coverage for " 'actual advance' of a commission to the agent ..." where the agent converts advanced commissions. These arguments are not persuasive.

The latter portion of Section 3 provides: "The Underwriter shall not be liable ... as to premiums for more than the amount actually collected and retained by such Representative after deducting the entire amount of all commissions to which such Representative ... would have been entitled had there been no default ... provided that such deduction of commissions shall not be applicable to a case where such Representative, in consideration of an actual advance made by the Insured, is obligated and has agreed to account for and pay over such commissions to the Insured." "Ambiguity is not to be created by lifting a clause or portion of the contract out of context." Dickert v. Allstate Ins. Co., 121 Ga.App. 760, 761, 175 S.E.2d 98. This subsection relates only to "such deduction of commission" where the agent is collecting premiums from the insured and retains such premiums. Thus, the insured's claim would be limited to that portion retained by the agent after the insurance company deducted the amount of his commission, except that if the agent had received advance commissions, he would be obligated to repay that amount plus the amount computed under the first clause. Because this subsection is restricted to claims involving collection and retention of premiums by an agent, it is inapplicable to the factual predicate of the instant claim.

Competent parties are free to choose and insert whatever provisions they desire in a contract, unless prohibited by statute or public policy. Hall v. Skate Escape, 171 Ga.App. 178, 319 S.E.2d 67. While a policy of insurance is to be construed liberally in favor of the object to be accomplished and its provisions construed against the insurer, where a part is susceptible of two constructions, that interpretation will be adopted that is most favorable to the insured. Yet a contract of insurance should follow the cardinal rule of construction so as to carry out the true intention of the parties, and their rights are to be determined by the terms of the contract. Its language should receive a reasonable construction and not be extended beyond what is fairly within its plain terms. Where the language fixing the extent of coverage is unambiguous, as here, and but one reasonable construction is possible, this court must enforce the contract as written. Pilot Life Ins. Co. v. Morgan, 94 Ga.App. 394, 398, 94 S.E.2d 765; accord Midland Nat. Ins. Co. v. Wright, 117 Ga.App. 208, 209, 160 S.E.2d 262. This court has no more right, by a strained construction, to make an insurance policy more beneficial by extending coverage not contracted for, than they would have to increase the amount of coverage. Standard Guaranty Ins. Co. v. Davis, 145 Ga.App. 147, 151, 243 S.E.2d 531. " ' "In an action to collect on an insurance policy, the insured must show that the occurrence was within the type of risk insured against to make a prima facie case." ' " Pennsylvania Millers Mut. Ins. Co. v. Heule, 140 Ga.App. 851, 852, 232 S.E.2d 267. It is the function of an appellate court to construe the contract as written, and we will not, by construction, create a liability not assumed by the insurer, nor delete a coverage contracted for, and we are not authorized to make a new contract for the parties, or one different from that plainly intended. Pilot Life Ins. Co., supra, 94 Ga.App. p. 399, 94...