White v. Universal Underwriters Ins. Co.

• Decision Date: 21 April 1964
• Parties: Francis H. WHITE v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 868

197 N.E.2d 868

347 Mass. 367

Francis H. WHITE v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 5, 1963.

Decided April 21, 1964.

Waldo Noyes, Boston, for defendants.

Roger J. Donahue, Boston (George F. Hurley, Boston, with him), for plaintiff.

Before WILKINS, C. J., and SPALDING, WHITTEMORE, CUTTER and SPIEGEL, JJ.

WHITTEMORE, Justice.

White brought this bill for an accounting under an insurance agency contract against 'Universal Underwriters, a reciprocal insurance exchange Lynn Underwriting Company, Manager' (Universal), a Missouri corporation. The bill was filed May 27, 1960, and was later amended. Universal, by counterclaim, joins in the demand for an accounting and alleges a balance due it. White also claims damages against Universal for breach of the agency contract and for 'other action.' White claims from the other defendant, Universal Underwriters Insurance Company (Insurance Company), another Missouri corporation, a legal fee and expenses for obtaining a license to do business in Massachusetts. Universal and Insurance Company have appealed from a final decree that awarded White $142,540.35 against Universal and $8,747.50 against Insurance Company.

The facts are set out in a master's report. The agency contract between White and Universal is in three documents executed on April 18, 1958 (exhibits 1, 2, and 3), an addendum executed on January 5, 1959 (exhibit 4), and an oral agreement of the same day set out in paragraphs 2 to 9, inclusive, of a letter dated January 13, 1959, from Universal's vice-president and general manager, T. R. Krings, to White and his general manager.

Exhibit 1 is a comprehensive 'Agency Agreement' that designated White, under the style of Interstate Insurance Agency (hereinafter White), as an agent to place 'Automobile Physical Damage Insurance' with Universal. The agreement contains a provision for payment to White of so called retrospective commissions. To determine the commissions due at any time there is deducted from eight-five per cent of the earned premiums on all policies placed with Universal since the inception of the contract, the total of losses paid on the policies, a reserve for losses incurred but not paid, and commissions theretofore paid. Earned premiums are those allocable to the period prior to the date of the particular accounting. By other provisions of exhibit 1, Universal was to send to White monthly statements of premiums due Universal and to render quarterly accountings for commissions due.

Exhibit 2 is a 'General Agency Agreement' whereby Universal appointed White exclusive general agent for Massachusetts for material damage automobile insurance, that is 'Automobile Fire, Theft, Comprehensive and Collision' insurance. This agreement gave White power to bind the company in designated amounts, to appoint, transfer and close agencies, and to collect and hold in trust premiums. Exhibit 3 amended exhibit 1 to provide for an additional contingent commission. This commission was to be computed as of April 30 of each year. It was to be a percentage of net premiums written during the yearly period. The percentage increased with the total net annual premiums written. This additional commission was to be paid, however, only if eighty-five per cent of the premiums earned in the year exceeded the losses allocable thereto. Exhibit 4, effective retroactively from October 1, 1958, amended the agency agreement (exhibit 1) to extend the agent's authority to include the solicitation and sale of automobile property damage liability insurance within stated limitations.

By June 1, 1959, White had written physical damage policies calling for 'net written premiums of $243,946.52, and property damage policies calling for net written premiums of $242,240.16, or a total * * * of $486,186.68.' Prior to June 1, White had remitted $291,906.61 to Universal and had been paid $353.06 in commissions.

In late May, 1959, Universal and White agreed to terminate the agency contract. They also agreed that Universal would undertake the collection of outstanding accounts receivable, and would service the policies. The costs of so doing were to be met out of a special account set up by White upon which Universal might draw.

The agency contract was terminated June 1, 1959, and at the same time White assigned to Universal accounts receivable from brokers for policies placed by him with Universal and commissions receivable from Universal. The assignment was 'for the purpose of securing the performance of * * * [White's] overdue and undischarged obligations to * * * Universal * * *.' Also effective June 1, 1959, Universal reinsured with another company all risks insured under the physical damage policies placed by White and granted to the reinsurer all subrogation rights. The cost of the reinsurance was seventy per cent of the premiums allocable to the period after June 1, 1959. Universal and White agreed that they would divide equally the balance of these premiums.

Article 12(a) of the agency agreement dealt with the right to 'expirations' on termination of the agreement. ¹ The general agency agreement contained a more general, but consistent, provision as to expirations and as to the 'agency plant.'

The parties by 'expirations' meant the exclusive right to use, in soliciting renewals, the information in the records kept by White such as the initial and termination dates of each policy and the name of the broker. By 'agency plant' the parties meant 'the relations between White and his brokers, and the goodwill arising therefrom.'

White, on June 10, 1959, deposited $8,783.51 in the special account. Two letters dated June 4, 1959, and July 17, 1959, each addressed to Universal authorized the payment from the account of rent and certain office expenses.

After June 1, 1959, Universal took charge of White's office on Broad Street, Boston. In late June Universal opened on Franklin Street another office to handle claims. On July 1 White's old office was moved to quarters adjacent to the new claims office. On October 1, White's office was closed and the records were moved to Universal's adjacent office. About January 1, 1960, this office was moved by Universal to quarters in Wellesley. After June 1, 1959, the Universal personnel in Boston and Wellesley collected accounts receivable owed White, serviced the physical damage and property damage policies, and wrote additional property damage policies through brokers who 'prior to June 1, 1959, sent their business to Interstate.'

Other facts are stated below.

1. The accounting between White and Universal.

We consider first the method for determining White's commissions. The master computed commissions under three alternative theories. The first theory is that physical damage and property damage figures are to be combined in computing commissions due under the retrospective commission provisions. The second theory calls for computing separately the total commissions under the physical damage policies and under the property damage policies. This gives a higher total of commissions as the losses that accrued before the date of the reinsurance of physical damage policies exceeded eighty-five per cent of the premiums allocable thereto. The third theory yields the highest commission. Under it the property damage commission is to be computed under the retrospective provision but the physical damage commission is to be ten per cent of the premiums written. This percentage is said to be required by a ruling of the Insurance Commissioner. The final decree determines commissions under this theory.

The master's report states: 'I am unable to find that such a 'ruling' was ever promulgated. I further find that Univeral and * * * [White] took no action to modify, rescind or terminate any contract between them as a result of' a conference with an investigator of insurance advertising, at which the latter told White and Krings that the physical damage contract violated the law because it did not contain a provision for a minimum commission of ten per cent and that his statement was based on a ruling of the Commissioner.

White asserts that he could now produce the ruling. We do not take judicial notice of rulings of administrative officials. Finlay v. Eastern Racing Assn., Inc., 308 Mass. 20, 26-28, 30 N.E.2d 859. The record does not show that the ruling was before the judge. There was no motion to recommit so that it could be introduced before the master.

We hold that as between the first and second theories the first is correct. The January, 1959, addendum extended the authority to place insurance to include a second category, but it left the accounting and retrospective commission provisions applicable to the combined results. This, we think, is the reasonable construction of the formal contracts. It is confirmed by the letter of January 13, 1959, from Krings to White. This called for monthly retrospective statements including '3 * * * (e) Combined physical damage and property damage statement showing the total result under the contract.' The monthly statements were rendered accordingly. There is no suggestion that White did not acquiesce in this accounting.

We see no ambiguity and no occasion to determine whether, as White urges, this is the kind of contract to be construed against the insurer. See J. D'Amico, Inc. v. Boston, 345 Mass. 218, 224, 186 N.E.2d 716. We note, however, that if the experience under the physical damage policies had been good, the first theory would have yielded the higher contingent commission.

On the case as it now stands, therefore, the commissions are to be determined on the combined basis. However, since, as will appear, the case must be remanded, White should have an opportunity to show the asserted ruling. If the ruling is found valid and applicable (as to which we intend no suggestion), the commissions are to be determined...