Rizzo v. Price

• Decision Date: 07 March 1972
• Citation: 162 Conn. 504,294 A.2d 541
• Court: Connecticut Supreme Court
• Parties: Nicholas B. RIZZO v. Claude W. PRICE, Jr., et al.

Page 541

294 A.2d 541

162 Conn. 504

Nicholas B. RIZZO v. Claude W. PRICE, Jr., et al.

Supreme Court of Connecticut.

March 7, 1972.

Thomas F. Parker, Hartford, for appellant (plaintiff).

Morton C. Hansen, Jr., Hartford, with whom, on the brief, were Joseph J. Fauliso and Morton N. Katz, Hartford, for appellees (defendants).

Before HOUSE, C.J., and THIM, RYAN, SHAPIRO and LOISELLE, JJ.

THIM, Associate Justice.

This action was based on a contract arising out of the dissolution of an insurance agency partnership in which the plaintiff Nicholas B. Rizzo and the named defendant Claude W. Price, Jr., were partners and the defendant Theodore Thompson was an employee. The plaintiff sought to recover damages resulting from an alleged breach of the contract. The defendants admitted the material allegations of the complaint but denied that the agreement was a valid contract. They also interposed four special defenses: (1) Lack of consideration, (2) failure of consideration, (3) unjust enrichment and (4) that the contract was illegal. The court found the issues for the defendants and from the judgment rendered the plaintiff appealed to this court. The parties stipulated that the principal amount due the plaintiff if the agreement in suit and the performance thereof is valid should be $2130.78.

The unassailed finding of facts discloses the following: In 1960 or 1961, Rizzo and Price started an insurance agency known as the Copper Hill Agency. During the partnership, the Dalene Hardwood Flooring Company's insurance account was the most valuable, representing more than 50 percent of the value of the agency. The defendant Thompson was the procuring cause of the Dalene account and had been paid 35 percent of the commission earned by the agency from that account. In 1965, the parties decided to dissolve the partnership and commenced to negotiate its dissolution. They agreed on a division of the assets and came to an agreement on the disposition of the Dalene account. On September 28, 1965, they executed a written agreement whereby any commission received at any time from the Dalene account by any one of the parties would be divided within five days of receipt as follows: (a) 35 percent to Thompson, (b) 32 1/2 percent to Rizzo and (c) 32 1/2 percent to Price. Pursuant to this agreement, the defendants made payments to the plaintiff for several years but refused to pay any share of the commission generated by the account in 1969. This refusal to make the agreed-on payments was on the advice of counsel that such payments were prohibited by statute.

When the new policies in question were negotiated in 1969, the plaintiff was not a licensed agent under the provisions of § 38-72 of the General Statutes with any of the insurance companies which issued the Dalene policies. Nor was he licensed with any company for which he was then accustomed to transact insurance business of the same character as the insurance sold by the defendants to Dalene. At the time, the plaintiff was licensed by only one company to sell casualty insurance. Other than placing a few orders for surety bond coverage with this company, the plaintiff did not write any casualty insurance. In fact, since the dissolution of the partnership in 1965, the plaintiff has not been actively engaged in the insurance business but, rather, has been operating a retail photography business on a full-time basis. With respect to the policies in question, or any other policies issued to Dalene, the court found that the plaintiff had nothing whatsoever to do with their being negotiated, quoted, written, serviced or issued.

From these facts the court concluded that the contract, which provides for sharing the commissions generated by the Dalene account, is illegal and void and would subject the parties to criminal liability under § 38-2 in that the arrangement conflicts with or is not authorized by the General Statutes. ¹ More specifically, the court concluded, inter alia, that the sharing of the commissions with the plaintiff was prohibited by §§ 38-75 and 38-92 of the General Statutes, since the plaintiff was not a licensed agent with any of the insurance companies issuing the policies in question, was not accustomed to transact insurance business of the same character as that involved in the Dalene account for any insurance company for which he was duly licensed to act as an agent, and did not solicit or bring such insurance business to the defendants. In assigning as error the court's conclusions, it is the plaintiff's contention that the performance of the agreement does not violate the applicable provisions of the insurance statutes.

Whether the facts warrant the court's conclusion that sharing the insurance commissions, as provided for in the contract, is prohibited by law depends on the construction given to the statutes within chapter 677, entitled 'Agents, Brokers and Adjusters.' After a careful analysis of the relevant statutes, we hold that the court erred in concluding that the proscriptions of that chapter are applicable to the case at bar.

In construing statutes to ascertain legislative intent, we must look to 'their legislative history, their language, the purpose they are to serve, and the circumstances surrounding their enactment. Connecticut Light & Power Co. v. Sullivan, 150 Conn. 578, 581, 192 A.2d 545; Mack v. Saars, 150 Conn. 290, 294, 188 A.2d 863.' Hartford Electric Light Co. v. Water Resources Commission, 162 Conn. 89, 97, 291 A.2d 721, 728. On delving into such considerations we find that chapter 677 is highly regulatory and imposes stringent requirements on those who sell insurance or receive commissions, one requirement being that agents must be licensed. General Statutes § 38-72. Since those purchasing insurance must rely on the advice of the agent and purchase insurance from or through him, the legislature sought to protect the public by a licensing procedure which insures that those engaged in the business are qualified. Statutes requiring a license or certification to act as an agent 'are adopted as a matter of public policy to further the public interest.' Dunn v. Phoenix Village, Inc., 213 F.Supp. 936, 947 (W.D.Ark.). '(T)he primary purpose . . . is to prevent or discourage the unregulated and unlicensed from carrying on . . . (the insurance business), thus protecting the public from surrendering its money in exchange for questionable or worthless pieces of paper denominated insurance policies.' State ex rel. Herbert v. Standard Oil Co., 138 Ohio St. 376, 381, 35 N.E.2d 437, 440; see 16 Appleman, Insurance Law and Practice § 8632, and cases cited. To promote such a protective policy, the legislature also enacted § 38-71, entitled 'Penalty for acting as agent . . . without license,' wherein acting as an insurance agent without a license is prohibited and subjects such violators to criminal prosecution. 'Any person who acts . . . as an insurance agent . . . unless such person holds a license . . . authorizing him so to act . . . shall be fined . . . or imprisoned.' § 38-71.

Both §§ 38-71 and 38-72 seek to protect the public from those who would 'act' as an insurance agent without a license. The words and phrases used in a statute 'shall be construed according to the commonly approved usage of the language.' General Statutes § 1-1; Hartford Electric Light Co. v. Water Resources Commission, supra; State v. Benson, 153 Conn. 209, 214, 214 A.2d 903. 'Or, stated another way, statutory language is to be given its plain and ordinary meaning.' Klapproth v. Turner, 156 Conn. 276, 280, 240 A.2d 886, 888; State v. Taylor, 153 Conn. 72, 82, 214 A.2d 362. Webster's Third New International Dictionary defines 'act' as, inter alia, 'a thing done or being done . . . something done by a person pursuant to his volition.' To 'act' as an agent within the meaning of chapter 677 is 'to solicit, negotiate or effect contracts of insurance or surety.' § 38-69.

In keeping with the legislative policy of preventing unlicensed persons from soliciting, negotiating or effecting insurance policies from a vulnerable public, § 38-92, entitled 'Payment of commissions to unlicensed persons,' was enacted. Under this statute it became a criminal offense for an insurance company, agent or broker to 'pay, directly or indirectly, any commission or other valuable consideration to any person . . . for services performed . . . as an insurance agent or broker unless such person . . . holds a license.' By prohibiting the payment of commissions, the legislature obviously hoped to dissuade unlicensed persons from circumventing the law by soliciting, negotiating and effecting insurance policies and then placing them through licensed agents in return for a commission. As with §§ 38-71 and 38-72, this statute prohibits an unlicensed person from seeking commissions for services rendered. In gleaning such an intent we have considered the practical interpretation placed on the statute by the insurance commissioner. See Cedar Island Improvement Assn. v. Clinton Electric Light & Power Co., 142 Conn. 359, 369, 114 A.2d 535. While not conclusive, it is relevant to our inquiry. It states: 'Its (General Statutes § 38-92) primary purpose is to strengthen the law which prohibits unlicenses persons from acting in any capacity as an agent or a broker.' (Emphasis supplied.) See Digest, Administrative Reports to the Governor, 1948-1949.

In analyzing the previously cited statutes a clear ...