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01/11/71 Jonathan Woodner Co. Et Al v. Aetna Insurance Company

January 11, 1971





Petition for Rehearing Denied February 12, 1971.


Wright, Tamm and Robinson, Circuit Judges. J. Skelly WRIGHT, Circuit Judge (dissenting).


This is an appeal from an order entered on July 1, 1969, by the United States District Court for the District of Columbia granting a judgment in favor of the defendant, Aetna Insurance Company. *fn1 The order was entered pursuant to the trial judge's written findings of fact and conclusions of law based on two days of trial, affidavits and briefs. Since counsel has not objected to the trial court's findings of fact and since we find no error in the conclusions of law, we would affirm.

This is an action against Aetna for the recovery of insurance premium refunds, that is, unearned premiums on insurance policies cancelled prior to their expiration date. The plaintiffs are corporations primarily engaged in operating and maintaining apartment hotels and other properties for lease. The various plaintiffs obtained insurance policies covering the properties owned by them through the Washington Insurance Agency, Inc. (hereinafter "WIA"). WIA is not a party to this action, but at all times pertinent hereto was the general agent of Aetna as well as of other insurance companies. Under the agency contract between them, WIA had the power to sign and issue binding insurance contracts for Aetna. WIA placed plaintiffs' insurance with Aetna as well as with other insurance companies it served. Plaintiff, Jonathan Woodner Company (hereinafter "Woodner"), as parent corporation of the other plaintiffs, agreed to be responsible for all insurance premiums due on policies issued to the other plaintiffs. The Aetna policies about which this suit is centered were issued during the period from 1963 to 1966 and each contained a provision that in the event of cancellation prior to the expiration date, the paid premium allocable to the unexpired term would be refunded. During the period March 1, 1966 to June 10, 1966, all of the subject policies were cancelled, the gross unearned premiums thereon totaling $20,329.57.

WIA had handled exclusively all of the insurance needs for the properties of plaintiff Woodner located in the Metropolitan area. Throughout the greater part of their business relationship, WIA maintained for this company what is known as an "open account," which account was later enlarged to include all transactions with WIA of each of the other plaintiffs. The account related to insurance purchased from various companies including Aetna. The mentioned "open account" worked in the following manner. The premiums paid to Aetna and other insurance companies by WIA for policies for plaintiffs would be entered in the open account as debits. Sums received on account of plaintiffs' policies were entered by WIA in the open account as credits. When policies were financed through a bank and the bank sent its check to WIA to cover the premiums, the amount of the check went in the open account as a credit. Under invoice agreements the insured, as security for the loan, assigned to the bank the return premiums on the policies so financed up to an amount sufficient to satisfy the unpaid balance under the invoice agreements. Whenever policies were cancelled and unearned premiums (which had not been assigned) were refunded, the amount of these premiums would be entered as a credit in the open account.

On March 10, 1966, Mr. Lewis Rowen, the Controller and Secretary of Woodner, telephoned Mr. Rosenberg of WIA and advised him that in the future a Mr. Matarasso would be handling all the Woodner properties regarding insurance. A week later, Mr. Matarasso visited WIA and discussed the matter of cancellation of current policies. Mr. Matarasso did not give WIA definite information as to the effective date of cancellation, it being understood, however, that Matarasso wanted to get binders giving temporary insurance coverage before the current policies were cancelled. In the following weeks WIA received binders covering some of the policies and correspondence from Matarasso advising that other binders were on their way to WIA. On April 21, 1966, WIA received a one paragraph letter dated April 20, 1966, written by Mr. Rowen which stated: "We have appointed the firm of A. Matarasso & Co., Inc. as our insurance agents for all properties previously handled by you." By early June, all policies which had been placed by WIA for the plaintiffs had been cancelled. The full amount of unearned premiums which are the subject of this suit had been refunded by Aetna to WIA. WIA added to the refunds the amount of its unearned commissions allocable to the unexpired period, and credited the open account with this gross amount. A final account, dated June 15, 1966, was rendered by WIA to plaintiffs, which account shows all disbursements and all credits made in connection with the cancellation of these policies.

In a letter to Aetna, dated June 28, Mr. Rowen listed the Aetna policies, which are the subject of this suit, and requested that the unearned premium refunds thereon be sent directly to plaintiffs. Aetna replied to Mr. Rowen in a letter dated June 29, 1966, informing Mr. Rowen that Aetna did not deal directly with its insured, and assuring him that the matter had been turned over to Aetna's agent, WIA. At no time did plaintiffs direct WIA to return the unearned premium refunds to the plaintiffs and not to apply them to the open account. Aetna had never dealt directly with plaintiffs in the past with respect to receiving orders for insurance and refunding unearned premiums upon cancellation of policies. In fact, WIA maintained an "open account" for the insureds throughout the greater part of this twenty-year business relationship. Prior to June 28, 1966, there was no communication from plaintiffs to Aetna requesting that unearned premiums be returned directly to plaintiffs and not to WIA.

The plaintiffs' main contentions on appeal are twofold. First, the plaintiffs contend that they had expressly terminated their relationship with WIA more than three months prior to complete remittance of the unearned premiums by the insurer to WIA. *fn2 Because the purported agency relationship between WIA and the insured was terminated, they argue, WIA had no authority to receive the premium returns on June 9, 1966. It is asserted that since WIA was a general policy-writing agent for Aetna, the knowledge of this agency termination is appropriately imputable to Aetna, the principal. Before we mention the plaintiffs' second contention we will deal directly with their first argument.

Although it is quite agreed that WIA no longer had authority to purchase insurance policies for Woodner, it seems evident that WIA was expected to cancel the policies with Aetna. Mr. Rowen's March 10, 1966 telephone call to Mr. Rosenberg advising him that a Mr. Matarasso would be handling all the Woodner properties regarding insurance, the subsequent conversation between Rosenberg and Matarasso at which time Rosenberg was told to cancel their policies as soon as they received binders (Rosenberg Tr. 65), and the April 20, 1966 letter written by Mr. Rowen naming A. Matarasso & Co., Inc. as their "insurance agents for all properties previously handled by " (emphasis added), indicate very strongly that WIA was to arrange for the cancellation of the policies. Inasmuch as WIA was to cancel these policies, it could be assumed, unless there were contrary instructions, that the cancellation and refunding of unearned premiums were to be handled as they had been the past twenty years. At no time prior to June 28, 1966 did plaintiffs direct anyone to return the unearned premium refunds to the plaintiffs and not to apply them to the open account. Plaintiffs were in contact with WIA throughout the months in which these cancellations were being effected. Plaintiffs had ample opportunity to instruct WIA regarding the unearned premium refunds which would be forthcoming from the policies to be cancelled. In the absence of directions from plaintiffs in regard to these unearned premiums Aetna and WIA handled the cancellation and refunds as in the past. All such handling had been completed prior to plaintiffs' June 28, 1966 letter to Aetna in which plaintiffs made their initial request that refund checks be sent directly to them. Thus, even if we impute the knowledge of WIA to Aetna, plaintiffs would still be estopped from asserting that premium refunds have not been returned to them by Aetna, as the procedure used was a continuation of a long course of conduct and uninterrupted custom adopted by WIA and plaintiffs. See Goodman v. Dicker, 83 U.S.App.D.C. 353, 169 F.2d 684 (1948).

The plaintiffs' second contention is based on their interpretation of D.C.Code ยง 35-1334 (1967) which provides in pertinent part:

Any policy-writing agent or salaried company employee authorized by any company to solicit, negotiate, bind, write, or issue policies or applications therefor shall, in any controversy between the insured or his representative and the said company, be held to be the agent of the company which issued or effected the policy solicited or so applied for, anything in the application or policy to the contrary notwithstanding. (Emphasis added.)

Any payment made by or on behalf of the insured to any broker for policies issued to such broker for delivery to the insured or issued directly to the insured on the order of such broker, shall, in controversies between the insured ...

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