Hurt & Quinn v. National Sur. Corp.

• Decision Date: 02 May 1950
• Docket Number: No. 2,No. 32970,32970,2
• Citation: 81 Ga.App. 683,59 S.E.2d 722
• Parties: HURT & QUINN, Inc. v. NATIONAL SURETY CORP
• Court: Georgia Court of Appeals

Page 722

59 S.E.2d 722

81 Ga.App. 683

HURT & QUINN, Inc. v. NATIONAL SURETY CORP.

No. 32970.

Court of Appeals of Georgia, Division No. 2.

May 2, 1950.

Rehearing Denied June 7, 1950.

Syllabus by the Court.

1. In a suit on a fidelity bond, to recover money allegedly lost through the acts of an employee covered thereunder, where the amended petition fails to allege that the loss occurred by reason of larceny, embezzlement, misappropriation, forgery, or other fraudulent or dishonest act as set out in the bond, it fails to set forth a cause of action thereunder.

2. Where the allegations of the petition, as here, affirmatively show that the loss upon which suit is brought under the terms of a fidelity bond is the result of an indebtedness by the employee to the plaintiff, rather than a loss occasioned by reason of larceny, embezzlement, or other fraudulent or dishonest act as set forth in the bond, there can be no recovery under such bond.

Hurt and Quinn, Inc., herein referred to as the plaintiff, filed suit in the Superior Court of Fulton County against the National Surety Corp., herein referred to as the defendant, to recover the sum of $10,000, representing the full coverage under a fidelity bond issued by the defendant to the plaintiff on Whitner and Company, an employee and local insurance agent of the plaintiff, and herein referred to as the local agent. The bond in question covered all the employees and local agents of the plaintiff, in designated amounts, and under its terms the defendant agreed to indemnify the plaintiff 'against any direct loss of money or other personal property belonging to the Insured or for which the Insured is legally liable, caused by larceny, embezzlement, forgery, misappropriation, wrongful abstraction, or any other fraudulent or dishonest act or acts committed by any of the Insured's employees while covered under this bond.'

The petition alleges in substance that the plaintiff is the general agent of various designated insurance companies; that it has authority to write master fire insurance policies to various employees or local agents; that Whitner and Co. was such an employee and local agent; that it wrote to this local agent a master fire insurance policy, under the terms of which the local agent had the right to write and sell insurance policies to the individuals insured; that whenever the local agent sold such a policy it became liable to the plaintiff for the full premium on such policy within four weeks after the month in which the policy was written; that Whitner and Co. sold a tremendous and ever increasing volume of such policies; that under the plan set up it paid the plaintiff the full premium owing to the plaintiff on each policy it issued under the master policy by advancing its own money to do so, and thereafter it collected from the individuals insured small amounts weekly or monthly over the entire life of the policy (the aggregate amount collected being four times the cash premium price charged by the insurance companies); that the policies were issued in one, three and five year terms; that in order to do this the local agent needed to be financed so that it would be in position to pay the cash premiums to the plaintiff and later collect from the individuals insured; that an agreement was entered into to finance this plan; that under the terms of the financing agreement, the local agent each month borrowed from the First National Bank sufficient funds to pay the plaintiff the total premiums owing on every policy it had issued during that month for the full life of such policy, plus an additional amount which represented the greater portion of the commissions owing by the plaintiff to the local agent for writing these policies; that upon borrowing such sum from the First National Bank each month it gave the Bank its note for the total amount borrowed and secured this note by assigning to the Bank as collateral title to all the premiums due by the individuals insured on such policies; that the local agent turned in both to the bank and the plaintiff a record showing just what individual policies were covered thereunder and what premiums were due.

It was the further agreement between the parties that the insurance companies and the plaintiff, their general agent and acting on their behalf, should assign to the bank for its further protection title to all return premiums on cancelled policies. This assignment was made. It is then alleged that 'the method adopted by petitioner, as general agent of the Sentinel Fire Insurance Company and the Agricultural Insurance Company, to carry out the obligations of these companies to account for and pay over to The First National Bank unearned premium on the cancelled individual policies or entry numbers, was to have such payments made by Whitner & Company from the current cash premium receipts due these companies through the conduct of the business, such payments to be deducted from the monthly remittances made to petitioner on behalf of the Sentinel Fire Insurance Company or Agricultural Insurance Company, as the case might be.' Thus the bank was protected, as it had the right to receive all premiums paid in by individuals insured during the life of the policy, up to the limit of its indebtedness; and if the policy was cancelled during that time it had the right to receive the refund made by the plaintiff and its insurance companies, the plaintiff having previously been paid in full by the local agent. The arrangement made by the plaintiff for paying these return premiums due by it to the bank was as follows: when the local agent made its borrowing each month for the purpose of getting money to pay the plaintiff the amount owing as the full paid-up premium on the individual policies it had issued under its master policy for that month, it was supposed, after receiving this amount, to deduct therefrom the amount owing by the plaintiff to the bank and pay back to the bank this sum, together with a list of the cancelled policies represented by these refunds. Thereupon the bank released the plaintiff and its insurance companies from their assignments on such cancelled policies. This amounted to a direction by the plaintiff for the local agent to pay a part of the amount due directly to it, and to pay the balance of the amount due directly to the bank, taking credit for the latter against the sums it owed the plaintiff as cash payments of the policies it...