Lee v. Wisconsin Physicians Service (WPS), 75-145

• Decision Date: 15 March 1977
• Docket Number: No. 75-145,75-145
• Citation: 76 Wis.2d 353,252 N.W.2d 24
• Parties: Rox LEE, Respondent, v. WISCONSIN PHYSICIANS SERVICE (WPS), a division of the State Medical Society of Wisconsin, Appellant.
• Court: Wisconsin Supreme Court

Page 24

252 N.W.2d 24

76 Wis.2d 353

Rox LEE, Respondent, v. WISCONSIN PHYSICIANS SERVICE (WPS), a division of the State Medical Society of Wisconsin, Appellant.

No. 75-145.

Supreme Court of Wisconsin.

Submitted Feb. 2, 1977.

Decided March 15, 1977.

Syllabus by the Court

Wisconsin Physicians Service (WPS), a division of the State Medical Society of Wisconsin, defendant-appellant, appeals from a judgment awarding damages to Rox Lee, plaintiff-respondent. The damages represent the amount of certain insurance renewal commissions. Interest, cost and disbursements were also awarded to the plaintiff.

John P. Desmond and Murphy, Stolper, Brewster & Desmond, S. C., Madison, for appellant.

Richard E. Rosenberg and Nowlan, Mouat, Lovejoy, Wood & Cripe, Janesville, for respondent.

CONNOR T. HANSEN, Justice.

The parties stipulated to the facts. Lee is an insurance agent with his office in Janesville, Wisconsin. In 1962, he entered into a written agency agreement with WPS. It was renewed at various times. The agreement out of which this litigation arose, provided in part:

"Section I Authorization . . .

"(1) The Agent shall have the authority to procure applications for WPS sickness care contracts providing surgical, medical, hospital and other related benefits; to procure renewals of outstanding coverage originally secured by him; to communicate with and provide service to prospective and actual subscribers; and to secure and preserve public good will toward WPS. . . .

"(2) . . .

"(3) The Agent shall have no exclusive right to represent WPS.

"Section II Compensation

"Compensation to the Agent shall be computed and paid as set forth below. . . .

"(1) WPS shall pay to the Agent, each month, the balance of credits in the Agent's commission account as compensation for the Agent's services.

"(2) Accruals of commissions shall be determined by applying the rates shown in the 'Commission Schedule,' to premiums as they are received and accepted by WPS on business procured by the Agent.

"(3) . . .

"(4) . . .

"(5) . . .

"(6) The following acquisition and renewal commissions shall apply to the class of business indicated, written for WPS by the Agent. The classes by business listed below are as defined by WPS in the Underwriting rules which are in effect at the time such coverage is written. The 'Commission Schedule' shown is subject to modification by WPS by amendment hereto, upon sixty (60) days written notice to the Agent.

". . .

"Section IV Termination

". . .

"(3) Upon termination by WPS for other than a violation of this Agreement, commissions on business procured by the Agent, before termination and continuing in force shall accrue for a three (3) year period following termination, in the manner provided in Section II."

On or about May 13, 1969, while an agent for WPS, Lee solicited and obtained from Milton College a letter appointing him as its agent of record for purposes of its group employee benefits program. During the summer of 1969, he negotiated and obtained an agreement for a student health plan between the college and WPS, which plan became effective September 1, 1969, for a period of one year. The total earned premium for the plan was $21,507. In accordance with a verbal agreement between Lee and Herbert Dornfeld, agency manager of WPS, and not based upon the commission schedule in the original agency agreement, WPS paid Lee a total commission of 10 percent, or $2,150.53, for his initial procurement of the plan. Such a commission was consistent with the special practice of WPS on student health plans.

Subsequent to Lee's procuring the initial plan with the college, all further negotiations for renewal of it were between WPS and the college. Such procedure was in accordance with established practice and custom because WPS used an experience-rating factor in determining premium rates for groups of this size.

The WPS sales personnel proposed several renewal plans to the college for 1970-71. All contained a "loading factor" of 10 percent in the premium rate to cover Lee's commission. WPS took the position that the "loading factor" was necessary because of Lee's status as agent of record for the college. The college rejected all such proposals and ultimately notified WPS that it would prefer to deal directly with WPS and thus avoid the necessity of such "loading factor" for the agent's commission in the premium rate. By letter dated September 4, 1970, the college informed Lee that it was rescinding its previous agent-of-record letter and was henceforth going to deal directly with WPS.

WPS then directly offered a new proposal to the college which the college accepted for the period from September 10, 1970, through September 6, 1971. It was the same as one of the proposals previously rejected by the college except that the premium was reduced by 10 percent because of the absence of the agent's commission "loading factor." WPS paid no commission to Lee for the plan negotiated with the college for 1970-71. WPS dealt directly with the college in respect to the student health plan for the years 1971-72, 1972-73, 1973-74, 1974-75, and 1975-76, negotiating contracts with the college for each of those years. Lee was paid no commissions on the Milton College account except for the 1969-70 first-policy year.

By letter dated December 7, 1972, WPS cancelled its agency agreement with Lee, effective January 1, 1973. The termination was not the result of any violation of the agreement. Under the terms of Sec. IV(3) of the agreement, any commission on business procured by Lee before the termination, and continuing in force, would accrue for a three-year period and would be payable to Lee.

On December 14, 1973, Lee commenced suit against WPS for renewal commissions in the amount of 10 percent of the yearly earned premiums on the Milton College WPS student health plan for the period from September 1, 1970. He relied on the provisions of the written agency agreement, and also an alleged verbal agreement providing for commissions on the Milton College account at the rate of 10 percent of earned premiums as to the first year and all subsequent renewals, as the bases for his contention that he was entitled to the commissions.

WPS denied the existence of any verbal agreement between the parties concerning 10 percent commissions for renewals of the Milton College account, and denied that Lee was entitled to any renewal commissions on that account based upon the written agency agreement.

The parties stipulated that the sole issues at trial were whether WPS was obligated to pay commissions to the respondent on student health contracts written by WPS on Milton College subsequent to August 31, 1970, and, if so, the amount of said commissions. The parties agreed that the interrogatories directed by Lee to WPS and the answers thereto could be used as necessary to supplement the statement of facts in the stipulation.

Trial was to the court. Lee and Maurice Reese, an insurance expert, testified in his behalf. Joseph H. Hinkes, sales director for the Blue Shield Plan, WPS, testified for WPS. Judgment was entered in favor of Lee and it provided that he recover from WPS: (1) Renewal commissions from 1970-71 through the school year of 1973-74, in the amount of $10,460.25, ¹ plus interest; (2) renewal commission...