A.S.B. Ins. Co. v. . Anderson , 130 N.Y. 134 ( 1891 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] There was upon the evidence no controversy of fact, but the questions presented had relation to the legal consequences, as between the parties, of the action of the defendants in inducing and procuring the assured to surrender the plaintiff's policies of insurance, and to demand a rebate of the premium paid to it. The motive of the defendants for doing this does not appear further than may be implied from the fact that the defendants also induced R. Hoe Co., the assured, to take in lieu thereof insurance in the Hartford Steam Boiler Insurance Company, which the defendants then represented. Their relation of agency to the plaintiff had terminated by the terms of their contract with it in that respect, and they had rightfully become the agents of the rival company in the business of like insurance. Their relation with the latter company required the defendants to subserve its interest faithfully and diligently; and consistently with that relation, it was in the line of their duty to induce R. Hoe Co. to take insurance in the company the defendants then represented. But the question is whether any consideration was due from them for the contracts they had, as agents for the plaintiff, made while they held that relation to it. They had, pursuant to such agency and for it, insured the property of Hoe Co., and that was done under a contract by which they were entitled to and did receive thirty percentum of the premiums paid. This was compensation for their skill and services as agents of the plaintiff. Although their fiduciary relation to the plaintiff had terminated, the contract of insurance they in that character had made with the assured, remained only partially executed, the time of its indemnity had not expired, and as a consequence the premiums paid were not fully earned. The defendants had, pursuant to their contract of agency with the plaintiff, received thirty cents of every dollar of those premiums. They received this from the plaintiff in consideration of the services by them performed in its business and behalf by virtue of the contract between them. The policies of insurance were made subject to the right reserved to the assured of surrendering them and having a rebate and reimbursement pro tanto of the premiums paid; and this without prejudice to the defendants since they had fully performed the services of creating the relation of insurer and assured. This is all they undertook to do for their stipulated compensation. But when they had accomplished this were they at liberty to defeat the purpose or duration of the contract of insurance and retain the fruits of it to the prejudice of the plaintiff? It quite clearly seems that they could not do so without failure to observe their obligation arising out of the contractual relation which they had assumed with the plaintiff and pursuant to which they made for it the contract of insurance. When their agency for the plaintiff terminated the unearned portion of the premium upon the Hoe Co. policies existed in the contract executory in character, and of which the defendants had received thirty per centum by virtue of their contract with the plaintiff. There is no well supported principle which would enable them to take from the plaintiff the benefit of the contract of insurance it had through them made, and retain the portion of the consideration received by them, and which they had caused the plaintiff to restore to the assured. The question was not one of disability arising out of fiduciary relation; that had ceased to exist between the parties. It was one founded in contract pursuant to which the defendants had received compensation out of the proceeds of the transaction measured by the term of indemnity, and by causing the defeat of the operation of the contract of insurance they had created, before its stipulated period expired, and thus requiring the plaintiff to rebate a portion of the premium, they caused a partial failure of consideration of the contract they assumed to perform, and to the extent at least of the amount received by them of the sum which the plaintiff was thus required to refund, they became liable to reimburse it. The power of an agent to create rights by contract for his principal includes an implied duty to observe and not to defeat or destroy them. The facts in the present case did not necessarily require the conclusion of bad faith on the part of the defendants, although it may have been permitted. Nor was the action tried by the court upon the theory that they were chargeable with that imputation; and for that reason if for no other, there was no error or prejudice in the exclusion of certain evidence offered by the defendants. And the question was finally treated by the parties at the trial as one of law only. In that view the measure of damages as founded upon the contract between the parties, by which the defendants' agency was created and pursuant to which they issued the policies, was that which the court adopted in the direction of the verdict. And that amount the plaintiff was entitled to recover.

In legal contemplation the relief of the plaintiff from its contract of insurance was of some value to it at the time the policies were canceled, although it turned out that no loss would have been suffered if they had continued effectual until the end of the term for which they were issued.

The judgment should be affirmed, without costs in this court to either party.

All concur.

Judgment affirmed.