Opinion
No. 31305.
June 11, 1934. Suggestion of Error Overruled September 11, 1934.
1. INSURANCE.
Purpose of statute forbidding special inducements in making of insurance contracts was to subserve a public policy intended to promote solvency of insurance companies; to give equal opportunity in cost of insurance to those engaged in business; and to assure equality of opportunity and privilege to all local insurance agents (Code 1930, section 5319).
2. CONTRACTS.
Contract by which insurance agent induced insured to take out policies by making payment about amount of premium on past-due note owing by third party to insured, being in violation of statute forbidding special inducements in making of insurance contracts, insured held not entitled to recover from insurance companies premiums paid under policies, later canceled, which premiums had never been forwarded by agent to insurance companies, on ground that parties to an illegal contract should not recover money paid under contract (Code 1930, sections 5316, 5319).
APPEAL from Circuit Court of Leflore County.
Ward Allen, of Greenwood, and Butler Snow, of Jackson, for appellants.
Appellants are not bound to appellee upon the contract made with appellee by appellants' agent for the reason that the agent was acting adversely to appellants' interests and in furtherance of the interests of appellee, third parties and his personal interests, all of which was at the time unknown to appellants and known to appellee.
2 C.J., Agency, page 837, sec. 519, pages 868-869, sec. 549; 21 R.C.L., Principal and Agent, page 844, sec. 24.
The court erred in excluding from the record the evidence offered by appellants to show that their agent failed to pay to them any portion of the premium money collected from appellee.
The contract sued on is void and the parties are in pari delicto by reason of the fact that a portion of the premium paid appellants' agent by appellee was rebated to appellee and appellee was given special benefits, etc., as inducements to enter into said contracts of insurance in violation of section 5319, Mississippi Code of 1930.
13 C.J., Contracts, pages 492-496, sec. 440, page 497, sec. 441; 32 C.J., Insurance, page 1194-1195, sec. 325; Wooten et al. v. Miller, 15 Miss. 380, 7 Smedes Marshall, 380; Hoover v. Pierce, 26 Miss. 627; Deans v. McLendon, 30 Miss. 343; Walton v. Tusten et al., 49 Miss. 569; McWilliams, County Treasurer, v. Phillipps, 51 Miss. 196; Woodson v. Hopkins, 85 Miss. 171, 37 So. 100, 38 So. 298, 107 Am. St. Rep. 275, 70 L.R.A. 645; Bellew v. Williams, 109 Miss. 74, 67 So. 849; Mitchell v. Campbell, 111 Miss. 806, 72 So. 231; Rideout v. Mars, 99 Miss. 199, 54 So. 801, 35 L.R.A. (N.S.) 485, Ann. Cas. 1913C 770.
Pollard Hamner, of Greenwood, for appellee.
Where an agent of an insurance company inspects a risk, issues and delivers the policy of insurance for his principal and collects the premium due upon the policy, he is the general agent of the company and his knowledge is the knowledge of his principal. In other words, what he does his principal does.
Fire Marine Ins. Co. v. Loving, 163 Miss. 119, 140 So. 727; Big Creek Drug Co. v. Stuyvesant Ins. Co., 115 Miss. 333, 75 So. 768; Agricultural Ins. Co. v. Anderson, 120 Miss. 278, 82 So. 146; Lamar Life Ins. Co. v. Kemp, 154 Miss. 890, 124 So. 62; Hartford Fire Ins. Co. v. Clark 154 Miss. 418, 122 So. 551; Interstate Life Accident Ins. Co. v. Ruble, 160 Miss. 206, 133 So. 223.
Inasmuch as the supreme court of Mississippi has decided that payment to the agent is payment to the principal, the lower court was eminently correct in excluding evidence that Price James Company, Incorporated, failed to pay the premiums collected to his principal.
Coming to the second defense that a rebate was given by appellant's agent to appellee and appellee was given special benefits, etc., in violation of section 5319, Mississippi Code of 1930, we meet the decision of the county judge sitting as a jury holding as a conclusion of fact from the evidence that there was no rebate and this finding of facts will not be disturbed.
Viewed from the most extreme position it cannot be said that the Greenwood International Company got the two insurance policies for less than four hundred thirty-seven dollars and fifty cents each. In other words, there was no discrimination in favor of the Greenwood International Company by writing its policy for less than a full premium as there was in the Rideout case, 99 Miss. 199, 54 So. 801, 35 L.R.A. (N.S.) 485, Ann. Cas. 1913C 770.
Interstate Life Accident Ins. Co. v. Ruble, 160 Miss. 206, 133 So. 223.
The return to an applicant for life insurance by the agent as a part of his commission is not within the operation of a statute forbidding life insurance companies to make discriminations in favor of particular persons in rates charged for insurance, and further providing that no company or agent shall pay or allow, as an inducement to insurance, any rebate of premium payable on the policy, or any valuable consideration or inducement whatever not specified in the policy.
Interstate Life Ins. Co. v. Dalton, 23 L.R.A. (N.S.) 722.
On August 6, 1931, Price James Co., Incorporated, was the agent in Greenwood of appellant insurance companies, and appellee was the lessee of a certain brick store building in said city, which building appellee was obliged to keep insured. Policies of insurance in other companies then existed for twenty thousand dollars, expiring on October 25, 1931. On the date first aforesaid the said insurance agency approached appellee and proposed that, if appellee would consent to take two ten thousand dollar insurance policies with the two companies represented by said agency, and on which the established lawful premium would be four hundred thirty-seven dollars and fifty cents each, the agency would pay to appellee in cash four hundred fifty dollars to be applied on a certain open account and note past due to appellee by a third party named. Appellee accepted said proposition and the inducement thereby offered, and on said date, August 6, 1931, delivered to the agency the check of appellee for eight hundred seventy-five dollars, and the agency at the same time delivered to appellee the agency's check for four hundred fifty dollars to be applied to the account and past-due note of the third party. The policies were issued and tendered to appellee, but, upon being sent to appellee's landlord, some objection was made thereto, the exact nature of which does not appear, and the policies were canceled and surrendered before the date, October 25, 1931, on which they were to go into effect.
After the cancellation of the policies, which, as stated, was before the date upon which they were to go into effect, appellee called upon the insurance agency for the return of the premium paid as aforesaid, but appellee was postponed by excuses until the agency was taken over by others. Demand was then made upon appellant companies for the return of the premiums, to which they replied that they had never received them. Suit was then brought against the companies for the premiums, and appellee recovered judgment therefor.
Two defenses to the suit were made by the appellant insurance companies, but we will discuss only the defense based upon the statute forbidding special inducements in the making of insurance contracts. Section 5319, Code 1930, reads in part as follows: "To prevent unjust and unlawful discrimination, no fire insurance company doing business in Mississippi shall make any distinction or discrimination in favor of parties insured, nor shall any such company or agent pay or allow as inducements to insure, any rebate or premium payable on the policy . . . or any special favor or advantage or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the policy. . . ." A violation of this statute is made a criminal offense by section 5316, Code 1930.
The purpose of the statute is to subserve a definite public policy of which there are three main considerations: (1) To promote solvency on the part of insurance companies and to preserve their premium receipts from depreciation below the established legal premium rates; (2) to give equal opportunity in the cost of insurance to those engaged in business in open and legitimate competition with others in the same business; and (3) to assure equality of opportunity and privilege to all local insurance agents to build and retain their business upon none other than the fair, open, and sound basis of efficient attention and honest and impartial methods.
Appellee substantially admitted by the only witness which it introduced that it would not have agreed to change from its present insurance companies and from its present agent to the companies represented by James Co., and to that agency, and would not have paid the said premiums to said agency except for the inducement offered and paid by the agency as aforesaid on a past-due note owed to appellee by said third party, as to which it is to be mentioned that it is not shown that the insurance companies owed a cent to said third party. If this sort of device or subterfuge could be permitted to circumvent the statute, then two or three powerful insurance companies could organize a corporate agency to operate in every locality in the state, and, by directly or indirectly paying part of the insurance premiums over on past-due accounts or notes of third parties, could secure all the insurance business in the state, and drive all other agents out of business. This is enough, without elaboration, to disclose that the contract or agreement made between appellee and the agency in this case was in violation of the statute; and, under familiar and well-established principles, appellee, being a party to the illegal contract or agreement, can recover back no money paid under it. Rideout v. Mars, 99 Miss. 199, 54 So. 801, 35 L.R.A. (N.S.) 485, Ann. Cas. 1913d 770.
Reversed, and judgment here for appellants.