Wallace v. Hatem

Menchine, J., delivered the opinion of the Court. Newton I. Steers, Jr., Insurance Commissioner of Maryland, as Receiver of the National Guild Insurance Company and National Insurance Underwriters, Inc. (receiver), appellee, filed suit in the Superior Court of Baltimore City against Leo Wallace individually and T/A Leo Wallace Insurance Agency (agent), appellant, seeking to collect unpaid premiums in full for insurance policies issued by National Guild Insurance Company (insurer) that had been sold by agent. Prior to trial Thomas J. Hatem, as successor Insurance Commissioner, was substituted as. receiver ©I the two corporations. Appellee receiver claimed to be entitled to unpaid premiums on policies issued by agent, even though the premiums never had been collected by him, because of the following provisions of an agency agreement executed by agent and insurer, to wit: “2.

The agent shall, unless specifically otherwise directed in writing, collect all premiums on business written for and accepted by the Company and shall transmit .such premiums to the Company on a daily basis. All premiums received by the agent shall be held by the agent as trustee for the Company. The keeping of an account with the agent on the Company’s books,, as a creditor or debtor ²³⁹ account, is only a record memorandum of business transacted, and neither such keeping of account, nor alteration in compensation rate, nor failure to enforce prompt remittance or compromise or settlement or declaration of balance of account shall be held to waive the understanding that the premiums collected by the agent are trust funds or change the character of such premiums.” (Emphasis added.) The agent agreement also provided: “This Agency Agreement is to be effected through National Insurance Underwriters Inc., 7835 Eastern Avenue, Silver Spring, Maryland, through whom all communications relating thereto shall be transmitted.” All subsequent accounting procedures had been carried on between agent and National Insurance Underwriters Inc. The receivership included both corporations and no contention is made that the issue before us requires separate rather than joint resolution. The cause had, in the first instance, been submitted to a special master who recommended entry of judgment for agent for costs.

After exceptions to the master’s report had been taken, the case was submitted to Judge Solomon Liss, without the aid of a jury. All evidence that had been submitted to and considered by the master was submitted to the trial judge, who also heard additional testimony. He rejected the recommendation of the master and extended judgment in favor of the receiver. It is agreed by the parties that at the time of insolvency there were unpaid premiums on policies written by agent totalling $9,029.57, of which $6,710.42 was represented by policies issued to one Applefeld and $2,319.15 was represented by policies issued to other insureds.

Agent appellant disputes liability for the entire claim but alternatively contends that in any case there is no liability attaching to him in connection with the premiums owed on the Applefeld policies. ²⁴⁰ Trimble v. Coppage, 259 Md. 176 , 269 A. 2d 563 (1970) is plain authority for these propositions: 1. That unremitted and unearned premiums in the hands of an agent are assets of the estate of an insolvent insurer (p. 181 [566]); and 2. That an agent is liable to the receiver for uncollected premiums as to which credit had been extended by the agent, if responsibility for their payment had been undertaken by the agent under the provisions of his agency agreement (p. 179 [564]). In that case the agent was held liable to the receiver for such uncollected credit premiums.

Agent appellant suggests, however, that Trimble, supra, is distinguishable because the agency agreement in that case contained the specific language “Agent agree[d] to pay General Agent all'premiums accruing on insurance written under this Agreement, whether or not collected by Agent from the' insured.” Comparing that languáge with the language of the subject agency agreement as heretofore recited, agent contends that he did not undertake to assure payment to the insurer of premium , payments for which credit had been extended. He argues, in sum, that the language of the agency agreement obligated him to transmit to the insurer only those premiums collected by him without any assumption of personal responsibility to insurer for payment of premiums for which credit had been extended. In Eagle Ins. Co. v. Albright, 474 P. 2d 920 (Wash.

App. 1970) insurer and agent had entered into an agency agreement that in pertinent part read as follows: “(1) Agent has full power and authority to receive and accept proposals for insurance covering such classes of risks as the Company may, from time to time, authorize to be insured; to collect, receive and receipt for premiums on insurance tendered by the Agent to and accepted by the Company and to retain out of premiums so collected, as full compensation on business so ²⁴¹ placed with the Company, commissions as may be from time to time mutually agreed upon.” (p. 923) In positing the question before it, the court said: “The central issue of