Johnson v. Button

• Decision Date: 11 January 1917
• Citation: 91 S.E. 151
• Court: Virginia Supreme Court
• Parties: JOHNSON v. BUTTON, Ins. Com'r, et al.

91 S.E. 151

(120 Va. 339)

JOHNSON

v.BUTTON, Ins. Com'r, et al.

Supreme Court of Appeals of Virginia.

Jan. 11, 1917.

Appeal from Circuit Court of City of Richmond.

Ancillary proceeding by Joseph Button, Commissioner of Insurance, and others, against the American Union Fire Insurance Company, a foreign insolvent company. From the decree, Charles Johnson, general receiver of the company, appeals; cross-error being assigned. Amended and affirmed.

Kelley & Coulbourn, of Richmond, for appellant.

John B. Minor, of Richmond, and J. Winston Read, of Newport News, for appellees.

WHITTLE, J. The American Union Fire Insurance Company, a Pennsylvania corporation, having complied with the statutory requirements, including the deposit of $25,000 of securities with the treasurer of the commonwealth, was licensed to engage in the business of fire insurance in this state. To that end, on May 1, 1911, it appointed Sol Miller general agent for Virginia, which agency was subsequently extended so as to embrace the territory of West Virginia and include the business of the Monongahela Underwriters' Agency.

In March, 1913, the state of Pennsylvania, in a proceeding at the relation of its insurance commissioner, procured a decree from the court of common pleas of Dauphin county, in that state, determining the insolvency of the insurance company, and ordering its dissolution and liquidation of its business by the State Insurance Commissioner. By its terms the decree became effective March 27, 1913. On March 12, 1913, the commonwealth of Virginia at the relation of Joseph Button, Commissioner of Insurance, filed an ancillary petition in the circuit court of the city of Richmond against the company, al leging its insolvency and reciting the receivership proceedings against it in the Pennsylvania court. The petition also charged that there were unadjusted and unsettled demands against the company for fire losses sustained by policy holders in this state, and prayed that it be required to show cause why the Commissioner of Insurance should not take possession of Its assets therein and distribute the proceeds among those ascertained to be entitled thereto. A creditors' bill was likewise filed in the circuit court against the company, which prayed for similar relief and the two proceedings were heard together.

The compensation of Miller was fixed by written contract at 35 per cent, commissions upon all policies written by him and his subagents in this state. Miller filed his petition in the proceedings, in which, adverting to the Pennsylvania receivership, he alleged that:

He "was advised that the appointment of said receiver ipso facto canceled all the policies of said companies then outstanding; but in addition that he had been instructed by the proper officers of said receivership to discontinue writing business for said companies, and advised that all policies should be canceled. Thereupon petitioner and his subagents took the necessary steps to cancel said policies, and return the proper proportion of the premiums to policy holders."

The company made no answer to this petition by demurrer or other pleading, and the court directed a reference to one of its commissioners in chancery to inquire into the various matters involved in the subsidiary litigation.

With respect to the main contention of the general receiver, that the Virginia agents should be required to pay back unearned commissions on policies canceled at the time of the receivership, the commissioner made the following finding: That, after the receivership, these agents, in order to protect their policy holders, issued new policies in other companies for the unexpired terras of the old policies, which latter, in consideration of the new policies, were surrendered to the agents. The agents filed the old policies of which they held assignments and claimed the return premiums for the unexpired terms. And the commissioner was of opinion that they occupied the same position that the policy holders would have occupied if they had filed their policies direct; that the agents had performed their full duty to the companies in issuing policies, collecting premiums, and delivering the policies to the insured, and that the failure of the companies was through no fault of theirs; and that their only reason for appearing in this litigation was to file their claims for unearned premiums on the policies held by them as assignees.

The commissioner's findings upon the principal questions referred to him were adverse to the company, and the general receiver appealed from a decree confirming his report.

The contention of appellant with respect to the agents' compensation is that, inasmuch as their commissions were based upon "net premiums, " all claims for "return premiums" should be charged with their proportionate part of the commissions; and furthermore that, as the policies had not been canceled by the company, return premiums should be computed upon what is known as the "short rate" basis. The op-posing theory of the agents conformed to the findings of the commissioner as approved by the circuit court.

The affidavits of representative agents of a number of Are insurance companies show that it is the custom and usage with such companies to construe the term ...