American Casualty Insurance & Security Co. v. Arrott

Insurance — Agent—Cancelation of policy by agent after notice of receivership. Where an agent of an insurance company has notice that the company is going out of business because of insolvency, and that its affairs will be placed in the hands of a receiver, he cannot use moneys of the company in his hands to cancel policies, the holders of which have not given the notice in writing required by the policies; and if he so use the money of the company, he will be liable to account for it to the receivers subsequently appointed.

Appeal, No. 135, Oct. T., 1896, by-defendant, from judgment of C. P. No. 3, Allegheny Co., May T., 1895, No. 657, on verdict for plaintiff. Assumpsit to recover moneys received for premiums on insurance. Before McClung, J. The Lets appear by the opinion of the Supreme Court. The court charged as follows: This case has resolved itself practically into a question of law. It seems that the legal plaintiff, the casualty company, or rather the company whose receiver is plaintiff, had employed the defendant as agent, and that he was its agent at the time of its failure in 1898; that on the. 23d of November of that year a receiver was appointed for that company, and this suit grows out of a dispute arising about the settlement of the accounts of Mr. Arrott, the agent, with that receiver. Mr. Arrott rendered an account showing that he had received certain moneys and made certain disbursements. His account showed a balance due to him of some $290, or perhaps of $289 ; it would appear that since, it has been increased in some way by some items, a few dollars over $290, perhaps $297, that is, admitting that he was entitled to all the credits the account showed, there would be a balance due him of $289 or $297, as the case may be. The receiver, however, disputes the credits that he claims to the extent of $2,126.10. That would wipe out his claim of a balance, and leave a balance coming to the receiver of $1,837.03. The disputed credits which Mr. Arrott claims, are, first, the return premiums paid on some twenty-five policies, amounting to $1,562.42, and certain expenses, salary of inspectors, and rents, amounting to $563.68. As to this second item of $563.68, if you believe the uncontradicted testimony of the witnesses, Mr. Arrott is entitled to that credit, and I will assume that that is allowed, and the claim of the plaintiff is reduced that amount. There is practically no controversy about that. That leaves for consideration only the question as to whether the defendant is entitled to credit for these return premiums. [Undoubtedly, when this receiver was appointed, and it is proper to say that that appointment of receiver was followed up by a deed of assignment, dated, I believe, November 27, undoubtedly upon the appointment of the receiver, the legal title to this money in Mr. Arrott’s hands pass to that receiver, and he would have no right to pay it out, and to charge the company with, it, unless he showed equitable considerations, which do not appear in this case. The burden would be upon him to show that it would be inequitable to charge him with that amount of money. There has been nothing shown here which would justify the court in holding that he has successfully assumed that burden. It is admitted that a telegram putting him upon his guard was received upon the morning of November 23,1893; that is, it is practically admitted that that was received at his office, though he says that he did not personally receive it nor know of it. Under those circumstances, there is nothing in the case which would justify the court in allowing a finding that he had acted under such circumstances as would entitle him to claim this money against the receiver. It would be practically preferring these parties; it would be practically paying out the money which was in his hands and which would be distributable by the receiver amongst all the creditors, to parties who were not then strictly creditors but who, by his act, perhaps proper enough in itself, would become creditors of the concern. It was doubtless natural enough that he should desire to pay it to these parties who had taken out policies through him, but as a matter of law, he did not have the right to prefer them in that way. They could surrender their policies and claim a pro rata share against the insolvent corporation, but it would not do, under the circumstances, to permit an agent to act in this way and prefer creditors in whom he was interested. The result of this is, that if you find, as is practically conceded, and as you should find, that he is entitled to this credit of $568.68, then your verdict should be for the $1,562.42 less $297.81, which would be $1,264.61, as I calculate it. Counsel for the plaintiff has a calculation, which a hasty glance indicates, is practically the same — in fact, it is exactly the same as that which I have arrived at in a slightly different way. The company, of course, would be entitled to interest from the time at which it should have been paid, up until the time of the rendition of your verdict.] [2] Verdict and judgment for plaintiff for $1,447.97. Defendant appealed. Error assigned among others was (2) above instruction, quoting it.