Rozen v. Cohen

• Decision Date: 08 February 1966
• Parties: Harold ROZEN et al. v. Morris COHEN.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 451

214 N.E.2d 451

350 Mass. 231

Harold ROZEN et al. v. Morris COHEN.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Jan. 3, 1966.

Decided Feb. 8, 1966.

Alan G. Miller, Boston, for defendant.

Arthur E. Nicholson, Boston (Harold M. Linsky, Boston, with him), for plaintiffs.

Before WILKINS, C. J., and WHITTEMORE, CUTTER, KIRK, and REARDON, JJ.

CUTTER, Justice.

Cohen presents exceptions to the refusal of the trial judge (a) to direct a verdict for him upon count 7 of the declaration, asserting breach of contract; (b) to the failure of the judge to enter a verdict in accordance with leave reserved; and (c) to give certain requested instructions. Other counts (including counts in tort) are not now in issue.

Count 7 alleges (a) that Cohen 'entered into a contract with' the Rozens to act as their agent 'to satisfy * * * [their] insurance needs * * * as determined by * * * [them] and to keep * * * [them] advised of matters pertinent thereto'; and (b) that Cohen 'without authority and in breach of its [sic] contractual obligations did wilfully induce * * * various insurers * * * to cancel several insurance contracts,' with the consequence that the Rozens 'were unable to obtain the coverage * * * previously afforded, were caused to lose the benefit of the insurance contracts,' and were required to obtain new contracts at greatly increased cost. Cohen filed a general denial. The evidence at the trial in its aspect most favorable to the Rozens is stated below.

Cohen was broker for the Rozens in connection with fire insurance covering two properties (the locus) on Columbus Avenue, Boston. He procured eighteen policies of fire insurance for a total of $90,000 covering the locus in November, 1952. The titles to the locus were in the names of 'straws' for the Rozens. The policies were issued in the names of the appropriate 'straws' but payments on account of premiums, when made, were by the Rozens. In November, 1957, the policies were renewed in the same form for five years. Cohen 'attended to renewals and handled other insurance matters concerning' the locus and the Rozens' business. During the whole period, the Rozens 'paid the premiums * * * at irregular times and in undetermined amounts. Payments were almost always slow and late,' and until August 5, 1958, Cohen 'accepted over-due payments.'

On August 5, 1958, Cohen visited the Rozens' premises and 'became involved in a heated dispute with * * * Harold Rozen, in reference to an over-due balance.' Harold Rozen ordered Cohen from the premises. On August 7, 1958, Cohen wrote to the general insurance agents, John C. Paige & Company (Paige), requesting cancellation of the policies for nonpayment of premiums. The Rozens then owed Cohen $59.76 on account of these policies. ¹ A letter, in evidence, was sent by Cohen on the same date to the attention of one of the Rozens, with a copy to the other. It is quoted in the margin. ² On August 13, 1958, Paige sent notices, some dated August 12, 1958, concelling the eighteen policies. The notices did not mention 'non-payment as a reason for cancellation.' They 'were induced by * * * [Cohen's] letter of August 7th.'

The Rozens were unable to replace the eighteen policies except at rates in excess of what was paid for the cancelled policies. The total difference in premium from August 23, 1958, until November 28, 1962 (the date of expiration of these five year policies), was $6,366.51. There was a verdict for the Rozens on count 7 in the sum of $7,977.61.

1. We consider first Cohen's exceptions to the judge's refusal to direct a verdict for him upon count 7 and to enter a verdict for him under leave reserved.

Cohen, as broker, in procuring insurance for the Rozens was for limited purposes their agent. See Schooner Dartmouth, Inc. v. Piper, 349 Mass. 347, ----, 208 N.E.2d 214; ^a Couch, Insurance 2d, §§ 25.1-25.4. See, however, G.L. c. 175, § 169. As such, subject to the terms of the agency and within its scope, he was, of course, under a duty of fidelity to them as principals, at least while the agency continued to be in effect. J. C. Penney Co. v. Schulte Real Estate Co., 292 Mass. 42, 44, 197 N.E. 458. Mackey v. Rootes Motors Inc., 348 Mass. 464, 467-468, 204 N.E.2d 436. ^b See United States v. Drumm, 329 F.2d 109, 112 (1st Cir.). This, however, does not mean that Cohen was thereby precluded from taking appropriate action to protect his own proper interests arising out of the brokerage relationship. See Ruby S. S. Co. v. Johnson & Higgins, 18 F.2d 948, 949-950 (2d Cir.), cert. den. 275 U.S. 544, 48 S.Ct. 83, 72 L.Ed. 417. See Restatement 2d: Agency, § 415. See also analogy of a power given for security and of exercise of an agent's lien, ibid. §§ 138 (comment d), 418, 464.

The premiums on insurance to be procured, of course, were to be paid by the Rozens. This has not been shown to have been other than the usual insurance brokerage arrangement ³ outlined in the Ruby S. S. Co. case, supra, under which the insured's broker pays the premiums, when they are due, to the insurer or its general agent and collects them from the insured. We assume that Cohen was under contractual obligation to use reasonable efforts (see Heaphy v. Kimball, 293 Mass. 414, 418, 200 N.E. 551; Rayden Engr. Corp. v. Church, 337 Mass. 652, 659, 151 N.E.2d 57) to procure the original insurance (which he seems to have done in satisfactory fashion) and perhaps also renewals of that insurance while the broker relationship continued. In any event he was entitled to be indemnified for the cost of any premiums which he had advanced or for which he was liable to the insurers or their agents. See Restatement 2d: Agency, § 439. See also Couch, Insurance 2d, § 25.65. This type of arrangement impliedly calls for premium payments by the insured within a reasonable time unless different arrangements for payments are expressly made. It cannot reasonably be inferred that it is intended that a broker in effect shall be a banker for his insureds for an indefinite period.

The usual standard fire insurance policy (G.L. c. 175, § 99, as amended through St.1951, c. 478) obviously is based upon the expectation that the insured will pay the stated premiums, even if such payment is not thereby made a condition precedent to the attaching of the risk. See Gechijian v. Richmond Ins. Co., 305 Mass. 132, 142, 25 N.E.2d 191. See also American Mut. Liab. Ins. Co. v. Condon, 280 Mass. 517, 524-525, 183 N.E. 106. Acceptance of such policies justifies the implication of a promise by the insured to pay the premiums. See Corbin, Contracts, §§ 144, 562. See also ibid. §§ 633, 635. The Rozens' habitual failure to pay the premiums when due, and their slow paying, was conduct which would warrant Cohen in taking reasonable measures to protect his interest in any balances due to him, and in recovery of advances by him of premiums made to the insurers (or the insurers' general agents), even by requesting the insurers to exercise the broad power of cancellation reserved by them under the policy. ⁴

The question for decision is whether the jury could reasonably conclude that Cohen committed a breach of contract by protecting his interests and asking the insurers to cancel the policies for nonpayment of premiums. It is not argued that there was noncompliance by the insurers with the provisions of G.L. (Ter.Ed.) c. 175, § 187C (as amended through St.1936, c. 215) or § 187D concerning such cancellations.

The jury would not have been warranted in concluding that any agency or fiduciary relationship survived the conference of August 5, 1958. Such a conclusion would be wholly inconsistent with the evidence (a) of the considerable history of slow, late premium payments; (b) of the dispute concerning overdue payments on August 5 when Cohen was ordered from the Rozens' premises; and (c) of Cohen's letter of August 7, 1958 (fn. 2), when there still remained a balance of overdue premiums of $59.76 on policies issued in November, 1957, more than eight months earlier.

The Rozens have not shown either that they had made any express advance arrangement with Cohen for premium payments in instalments, or that, after August 5, they had any reasonable basis, because of his prior acquiescence in late payments, for expecting further consideration...