INLAND EMPIRE INSURANCE COMPANY v. Bair

• Decision Date: 12 July 1957
• Docket Number: No. 5529.,5529.
• Citation: 246 F.2d 505
• Parties: INLAND EMPIRE INSURANCE COMPANY, a corporation; and Continental Bank and Trust Company, Receiver of Assets of Inland Empire Insurance Company; and R. F. Apodaca, Conservator of Assets of Inland Empire Insurance Company in the State of New Mexico, Appellants, v. K. H. BAIR and K. H. Bair, Jr., d/b/a K. H. Bair & Company, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

246 F.2d 505 (1957)

INLAND EMPIRE INSURANCE COMPANY, a corporation; and Continental Bank and Trust Company, Receiver of Assets of Inland Empire Insurance Company; and R. F. Apodaca, Conservator of Assets of Inland Empire Insurance Company in the State of New Mexico, Appellants, v. K. H. BAIR and K. H. Bair, Jr., d/b/a K. H. Bair & Company, Appellees.

No. 5529.

United States Court of Appeals Tenth Circuit.

July 12, 1957.

J. C. Ryan, Albuquerque, N. Mex., and David Watkiss, Salt Lake City, Utah (W. A. Keleher and A. H. McLeod, Albuquerque, New Mex., Fred M. Standley, Atty. Gen. for the State of New Mexico, Frank Zinn, Santa Fe, New Mex., and Pugsley, Hayes & Rampton, Salt Lake City, Utah, on the brief), for appellants.

F. L. Nohl, Albuquerque, N. Mex., for appellees.

Before PHILLIPS, PICKETT and LEWIS, Circuit Judges.

LEWIS, Circuit Judge.

This case is one of a series brought about by the insolvency and the appointment of a receiver by the United States District Court in Utah to administer the affairs of Inland Empire Insurance Company, an Idaho corporation with its principal place of business in Salt Lake City, Utah, but having assets and liabilities in twenty-one states. See Inland Empire Insurance Co. v. Freed, 10 Cir., 239 F.2d 289; Continental Bank & Trust Co. v. Apodaca, 10 Cir., 239 F.2d 295.

On October 24, 1954, plaintiffs-appellees, hereinafter called Bair, were appointed agents for Inland for the State of New Mexico to sell and service Inland's insurance policies. Each of such policies contained a provision that in the event of cancellation by the company the premium would be prorated and the unearned portion refunded to the policyholder; that in the event the policy was canceled by the holder the unearned premium would be determined for refund under a short rate cancellation schedule. By custom and practice, sums so paid an insured by an agent were set off against any amounts due Inland by the agent, and, in effect, constituted a refund to the agent for the payments made to policyholders.

On September 8, 1955, because of Inland's financial difficulties, an Idaho state court issued an injunction restraining actions against the insurance company and further restrained the company from disposing of any of its property except as authorized by the Idaho State Commissioner of Insurance. On September 12th, R. F. Apodaca, Superintendent of Insurance for the State of New Mexico, called upon Bair and discussed Inland's status and the problems involved for New Mexico agents in protecting their clients. On the following day Bair received this letter:

"September 12, 1955 "Mr. K. H. Bair 1325 East Central Ave Albuquerque, New Mexico "Re: Inland Empire Insurance Company Boise, Idaho

"Dear Mr. Bair:

"This office has received a telegram from the Honorable Leo O\'Connell, Commissioner of Insurance of the State of Idaho, stating as follows:

"`A Restraining order has been issued on officers of Inland Empire by Third District Court in Idaho and a hearing on an order for rehabilitation has been set for September 30, 1955. Your cooperation is urgently requested and your agents representing Inland Empire should be advised to immediately remit all balances due to the Company. Inland Empire is solvent but has no funds to pay claims due to the withholding of balances by agents. It is only through the cooperation of all commissioners that the problems confronting Inland can be successfully worked out and the policyholders and creditors can be protected.\'

"As soon as you prepare your Agency Accounts Current Report with the Inland Empire, kindly forward a copy to this office in order to maintain our information up to date with respect to the matters affecting the Inland Empire Insurance Company.

"No doubt you relize (sic) that it is important to handle all transactions affecting the business of the Inland Empire with due regard to the public interest involved.

"Very truly yours s/ R. F. Apodaca, Supertendent of Insurance"

On that day, September 13th, Bair caused the surrender to him of all policies sold or serviced by him for Inland and issued to each policyholder identical coverage in other companies; also on that date Mr. Apodaca took possession of Bair's license to sell Inland Empire insurance.

Bair initiated this action against Inland in the United States District Court for the District of New Mexico on November 8, 1955, claiming a total due him of $34,490.97 as the prorated value of unearned premiums upon the canceled Inland policies and earned commissions upon the same policies. Continental Bank and Trust Company, receiver,¹ and Apodaca who had been appointed Conservator of Assets of the Inland Empire Insurance Company in New Mexico, were permitted to intervene. The receiver entered a counterclaim for money allegedly due the insurance company by reason of premiums collected but unremitted by Bair in the amount of $11,662.76. The trial court, holding that the cancellations occasioned under these circumstances were attributable to Inland by the terms of the policies, awarded Bair $24,650.06 for unearned premiums on policies canceled on a pro rata basis and $6,907.26 as earned commissions on policies canceled. Inland was awarded judgment on its counterclaim for unremitted collections of $2,833.65, such award not being subject to setoff.

The appellants, representing the insurance company in its insolvency, preliminarily contend that after the appointment of a...