Lincoln Nat. Life Ins. Co. v. Insurance Com'r of State of Md.

• Decision Date: 01 September 1991
• Docket Number: No. 147,147
• Citation: 612 A.2d 1301,328 Md. 65
• Parties: LINCOLN NATIONAL LIFE INSURANCE COMPANY v. INSURANCE COMMISSIONER OF THE STATE OF MARYLAND, et al. ,
• Court: Maryland Court of Appeals

Page 65

328 Md. 65

612 A.2d 1301

LINCOLN NATIONAL LIFE INSURANCE COMPANY v. INSURANCE COMMISSIONER OF THE STATE OF MARYLAND, et al.

No. 147, Sept. Term, 1991.

Court of Appeals of Maryland.

Oct. 6, 1992.

Bryan D. Bolton (Stewart P. Hoover, Shapiro and Olander, on brief), Baltimore, for petitioner.

Meg L. Rosthal, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on brief), Baltimore, for respondents.

Argued Before MURPHY, C.J., and ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW, KARWACKI and ROBERT M. BELL, JJ.

RODOWSKY, Judge.

The question presented here involves the construction of Md.Code (1957, 1991 Repl.Vol.), Art. 48A, § 234B(b). It reads:

"If an insurer intends to cancel a written agreement with an agent or broker, or intends to refuse any class of renewal business from the agent or broker, the insurer shall give the agent or broker not less than 90 days written notice. Notwithstanding any provision of the agreement to the contrary, the insurer shall continue for not less than one year after termination of the agency agreement to renew through the agent or broker any of the policies which have not been replaced with other insurers as expirations occur. This subsection shall not apply to: (1) agents or brokers or policies of a company or group of companies represented by agents or brokers who by contractual agreement represent only that company or group of companies if the business is owned by the company or group of companies and the cancellation of any contractual agreement does not result in the cancellation or refusal to renew any policies of insurance; or (2) life, health, surety, wet marine and title insurance policies."

This statute states two rules in absolute terms and then states two exceptions. We shall refer to the rule stated in the first sentence as the "notice rule." We shall refer to the rule stated in the second sentence as the "renewal rule." The third sentence of subsection (b) states two separately numbered exceptions. The exception numbered (1) we shall call the "captive agent exception" ¹ and the exception numbered (2) we shall call the "lines of business exception." The question is whether the lines of business exception applies to both rules or only to the renewal rule.

The question presented arises out of the complaint made to one respondent, Insurance Commissioner of Maryland (the Commissioner), by the other respondent, Gerald R. Veydt (Veydt). Veydt, by contract effective January 1, 1985, was appointed as an agent to "solicit applications for Individual Life Insurance, Individual Disability Insurance, Group Insurance, Annuities and [to] solicit subscriptions for securities offered by or through" the petitioner, Lincoln National Life Insurance Company (Lincoln National), and certain related companies. An Insurance Code prerequisite to that appointment is that Veydt be an individual licensed to act as an agent for life and health insurance and annuities. Art. 48A, §§ 167, 176 and 178. ² The contract between Veydt and Lincoln National provided that either party could terminate the appointment, with or without cause. No minimum period for a notice of termination was provided in the contract. By letter dated March 28, 1988, Lincoln National terminated Veydt's agency appointment effective March 31, 1988. Veydt complained to the Commissioner, contending that § 234B(b) required that he be given at least ninety days notice of termination. Lincoln National contended that § 234B(b) did not apply to the termination of appointments to write the lines of business covered by Veydt's agency contract with Lincoln National.

At the hearing in the Insurance Division, Lincoln National presented evidence describing the differences in company-agent relationships between agents appointed to solicit life and health lines, on the one hand, and property and casualty lines, on the other hand, particularly as to renewals of policies and the earning of commissions. There is no material dispute of fact in the instant matter concerning the general contours of these differences. They are well summarized by the Court of Special Appeals in the subject case. "Unlike property and casualty insurance policies, which typically have to be renewed annually or semi-annually, life, health, surety, wet marine, and title policies remain in effect for a specified period of time, or for a particular occasion, or until a certain event or occurrence, and are not renewed periodically." Insurance Comm'r v. Lincoln Nat'l Life Ins. Corp., 89 Md.App. 114, 123, 597 A.2d 992, 996 (1992) (footnote omitted).

With respect to commissions, the intermediate appellate court summarized the evidence in stating Lincoln National's position.

"[A]n agent who produces property and casualty insurance policies, which renew annually or semi-annually, must get the insured to renew in order to earn his or her commission. If the agency is terminated, the agent will not receive the renewal commission. The 90-day termination notice provision and one year policy renewal provision offer some protective cushion for the agent's non-vested commission income until the agent secures a contract with another company through which to place similar insurance. Conversely, life insurance and health insurance agents have a contractual right with the company to receive certain continuing commissions based on the policy holders maintaining their policies. These types of policies are ongoing; if the agent terminates with the company, the company is still responsible to pay commissions for a certain period of time, sometimes for as long as the policy is in force and maintained by the policy holder. These types of policies are also more stable; agents' commissions are vested and they do not need the protection of 90-days notice."

Id. at 124, 597 A.2d at 996-97.

Lincoln National also argued that the legislative history of § 234B(b), which we shall review below, demonstrated that the lines of business exception was intended to apply to the notice rule.

The Commissioner, through a designee, ruled that Lincoln National had violated § 234B(b) by failing to give Veydt the required notice. The administrative agency construed the statute by emphasizing that the lines of business exception referred only to "policies" whereas the captive agent exception referred to "agents or brokers or policies." The Commissioner explained the perceived significance as follows:

"When the Legislature chose to use the word 'policy' in [the lines of business exception], it meant precisely that and nothing more. Had the Legislature intended to exempt life and health agents and brokers as well, it would have used the same language as that found in [the captive agent exception], which is 'agents or brokers or policies of a company or companies....' When the Legislature uses certain words in one part of a statute and omits them from others, one must assume that the omission was intentional.... [The] statute is to be read 'so that no word, phrase, clause or sentence is rendered surplusage or meaningless.' Holy Cross Hospital v. Health Services Cost Review Commission, 283 Md. 677[, 684, 393 A.2d 181, 184-85] (1978). There is an obvious distinction between an 'agent or broker' and a 'policy', and one must assume that the Legislature used the word 'policy' intentionally. Therefore, I find that the 90 day termination provision applies inasmuch as the agents are not exempt."

(Citation omitted).

The Commissioner was "not persuaded by Lincoln National's arguments concerning legislative history and presumed legislative intent." Indeed, the administrative agency stated the Maryland rule of statutory construction to be that "[w]hen the language of a statute is clear and unambiguous one should not turn to extrinsic evidence as an aid to construction."

Lincoln National sought judicial review in the Circuit Court for Baltimore City. That court reversed. The circuit judge concluded that the statute clearly stated that both exceptions applied to both rules.

Veydt and the Commissioner appealed to the Court of Special Appeals which reversed the Circuit Court for Baltimore City. Lincoln Nat'l, 89 Md.App. 114, 597 A.2d 992. The intermediate appellate court, paraphrasing the Commissioner's approach, reasoned as follows:

"Where the legislature intended to except both agents and policies from the provisions of subparagraph (b), it did so explicitly and unequivocally. 'Captive' agents as well as policies written by the companies represented by 'captive' agents are expressly excepted. But with respect to life, health, wet marine, and title insurance, the legislature excepted only the policies, not the agents representing the companies that issue such policies. To interpret the statute as Lincoln would have us do, we would have to add words to the third sentence of § 234B(b) to make the pertinent portion of it read, in substance, as follows:

This subsection shall not apply to--(2) life, health, surety, wet marine and title insurance policies and agents and brokers who represent companies that issue such policies. (Added words emphasized.)"

Id. at 124-25, 597 A.2d at 997. The court answered Lincoln National's legislative history argument by stating that it saw "nothing in the statute, or its history, or its apparent purpose that persuades us that the General Assembly intended it to be read as if the additional language were inserted." Id. at 125, 597 A.2d at 997.

We granted Lincoln National's petition for certiorari. We shall end the volley with a reversal of the Court of Special Appeals and a rejection of the Commissioner's ruling on this question of law.

The two exceptions to § 234B(b) are introduced by the following legislative directive: "This subsection shall not apply to:" the captive agent exception "or" the lines of business exception. "This subsection" means subsection (b) of § 234B. Both exceptions apply to the entire subsection. That is what the language says. There is no ambiguity in "[t]his...