American Casualty Insurance & Security Co. v. Arrott

Opinion by Mr. Justice Fell, This action is brought by the receivers of the American Casualty Insurance and Security Company to recover from the defendant the amount of the premiums collected by him from policy holders while he was acting as agent of the company. In the settlement of his accounts with the company the defend ant claimed credit for return premiums paid by him on the cancelation of policies. The question in the case is whether these payments were properly made. The defendant was authorized to accept the surrender of policies and to return the unearned premiums to policy holders when demand was made upon him in the ordinary course of business. It was alleged however that he surrendered the policies in question after the termination of his agency, and with knowledge that an application had been made for the appointment of receivers, for the purpose of securing those who had procured policies through him and of protecting his own interests. The receivers were appointed November 23, 1893. On the evening , of the 22d, the general agent of the company, with whom the defendant’s contract was made, telegraphed him to write no more policies for the company, and that a receiver would be applied for the next morning. The telegram was delivered at the defendant’s office early on the morning of the 23d. Within the next five days the policies issued through him were canceled and the return premiums paid to the insured or used by the defendant to procure for them new policies in other companies which he represented. Many of these policies, if not all of them, were sent for by the defendant, and the holders of nearly two thirds of them were not entitled to surrender without having given ten days’ notice in writing. The fair inference from the testimony is that the cancelation was at the instance of the defendant, and that he hastened to complete it before he should receive official notice of the actual appointment of the receivers. The effect of the cancelation and repayment by him was to prefer the policy holders in whom he was [5] interested at the expense of the other policy holders and the general creditors of the insolvent company. There can be no legal justification of the defendant’s conduct, though it may be free from the taint of moral wrong. He represented the company and held its money received by him as agent. The money belonged to the company, and he could part with it only in the regular course of the business which had been intrusted to him and when acting within the scope of his agency. He had no power at any time to cancel policies unless the holders could demand cancelation under the terms of their agreement with the company; and when he received notice that the company was going out of business because of insolvency and that its affairs would be placed in the hands of receivers, his agency, if not terminated for all purposes, was at least limited to the cancelation of policies which the holders were entitled to have canceled when regularly presented. He was still held to the letter of his authority and to represent his principal, and not those having adverse interests. The burden of showing that he was justified in making the payments for which credit is asked was with him, and having failed in this, a verdict was properly directed against him. The judgment is affirmed.