Trimble v. Coppage

Singley, J., delivered the opinion of the Court. These two controversies, consolidated on appeal because they involve identical questions, were precipitated by the insolvency of The National Motors Insurance Company (National Motors) for which the appellee Coppage was appointed receiver on 9 March 1964. On that day, Coppage notified National Motors’ agents, including the appellants Trimble and Thompson (the Agencies) that existing National Motors’ policies had been cancelled by the receivership, and later billed the agents for full annual premiums, less commissions, on all policies in force when the receiver was appointed. When the Agencies took the position that the receiver was entitled to collect only such premiums as had been earned as of the date of the receivership, Cop-page brought suit in the Circuit Court for Baltimore County.

From a summary judgment in favor of Coppage for the full amount of the premiums, less commissions, the Agencies have appealed. We shall affirm. The crux of the matter lies in the provisions of the agreement which each of the Agencies entered into with National Motors’ general agent. It provided, in part: “Remittance of premiums.

Agent agrees to pay General Agent all premiums accruing on insurance written under this Agreement, whether ¹⁷⁸ or not collected by Agent from the insured. Agent shall hold and keep all premiums received by it as a Fiduciary trust for General Agent until delivered to it, and no course of dealing between Agent and General Agent shall be held to waive assertion of said trust relationship as to such premiums collected by Agent. General Agent shall render to Agent, monthly, a statement of money due General Agent on business placed by Agent with General Agent, and Agent ■agrees that settlement of said account shall be made on the basis of such statement, unless such ¡statement prepared by General Agent shall be altered or amended by mutual agreement between Agent and General Agent. Agent shall pay to General Agent the balance shown to be ■due on such statement within sixty days after the end of the month for which such statement .is rendered; i.e. premiums written in January are due and payable on or before March............, provided that in the event of suspension, revocation or termination of the authority of Agent ■ or of cancellation or termination of this Agreement, all accounts owing to General Agent shall become due and payable immediately.” * ❖ * “Termination: This Agreement may be suspended or terminated by either party at any time by giving written notice to the other, but such suspension or termination shall not affect the liability of Agent to account to General Agent for any moneys received by Agent and which are payable to General Agent under this Agreement.” The Agencies argue, although the entry of the summary judgment denied them an opportunity to prove, that there were instances where they had extended credit to their policyholders, or were collecting premiums in installments.

In such cases, they say, it would be inequitable to ¹⁷⁹ permit the receiver to collect an unearned premium in full. The answer is, of course, found in the agreement, in which the Agencies undertook to pay premiums accruing on policies within 60 days of the end of the month in which the policies were written, whether or not the premiums had been collected from the insured. A similar contention that there was no segregation of premiums collected, but that these were commingled with the general funds of the Agencies, falls in the face of the provision in the agreement that a course of dealing will not bar the assertion of the trust relationship. In 50 Op.

Att’y Gen. 262 (1965), the Honorable Thomas B. Finan, then Attorney General of Maryland and now a member of this Court, in an opinion given the State’s Insurance Commissioner, concluded that “an agent has no right to claim a credit for unearned premium on policies cancelled by operation of law or otherwise through the insolvency of the insurer, but that only the affected policyholder may assert such a claim which should be filed in the receivership proceedings,” relying primarily upon Bothwell v. Employers Underwriters Agency, 145 Md. 36 , 125 A. 504 (1924) and The American Cas. Ins. Co.’s Case, 82 Md. 535 , 34 A. 778 (1896), both of which are relied upon by the appellee. Although the Attorney General’s opinion dealt only with premiums which had been collected and held by agents, we think that the same principle is applicable to premiums which have not been collected, for the payment of which agents are responsible under the provisions of an agency agreement.

While Bothwell dealt with the question whether the receivers of an insolvent insurance company were entitled to collect from the company’s agents commissions paid on premiums unearned when policies were cancelled by the insolvency, and held that the commissions were not collectible, it would appear to be authority for two propositions: first, that the insolvency of an insurance company effects a cancellation of its outstanding policies by operation of law; and second, that the