United States Court of Appeals

FOR THE EIGHTH CIRCUIT

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No. 03-2522

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Protective Life Insurance *

Company, a Tennessee *

Corporation; Lincoln Benefit *

Life Company, a Nebraska *

Corporation, *

*

Appellees, *

* Appeal from the United States

v. * District Court for the Western

* District of Missouri.

Jim Orr & Associates, Inc., a *

Missouri Corporation, *

*

Appellant. *

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Submitted: March 5, 2004

Filed: October 7, 2004 

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Before BYE, McMILLIAN, and RILEY, Circuit Judges.

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RILEY, Circuit Judge.

Jim Orr and Associates, Inc. (Orr) appeals the district court’s adverse grant of

summary judgment in this diversity action by Protective Life Insurance Company and
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Protective Life Insurance Company purchased Lincoln’s credit life and

disability insurance business in 1997. The parties refer to plaintiffs collectively as

“Lincoln.” 

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Lincoln Benefit Life Company (collectively, Lincoln1) to recover portions of

commissions Lincoln paid to Orr. We reverse and remand.

Lincoln provides credit life and disability insurance to borrowers of loans for

expensive items such as automobiles and jewelry. Orr was an insurance agent for

Lincoln from March 1989 until November 1997. Lincoln required purchasers of

insurance to pay, up front, the entire premium for the life of the policy. If the insured

requested early cancellation of the policy, Lincoln would return a portion of the

prepaid premium. Concomitantly, Lincoln paid Orr a commission up front based on

a percentage of the entire premium paid by the purchaser, on the assumption the

policy would remain in effect for the intended policy period. 

During the time Orr acted as Lincoln’s insurance agent, Orr partially refunded

to Lincoln any commissions attributable to cancelled policies (“chargebacks” for

“unearned commissions”) via reductions in new commissions. The parties disagree,

however, whether the agency agreement between Lincoln and Orr actually required

Orr to pay those chargebacks, and if so, whether the requirement continued even after

Orr terminated its agency relationship with Lincoln. Specifically, in October 1999,

approximately two years after Orr terminated its relationship with Lincoln, Lincoln

demanded Orr repay $148,271.72 in commissions it had received for policies that had

been cancelled after Orr terminated the contract. When Orr refused, Lincoln filed the

instant breach-of-contract action. 

Both parties rely on the following contract language: 
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Fiscal Responsibility

The AGENT shall immediately pay to the COMPANY all monies

received by him or his subagents on all applications obtained and

policies and certificates issued. All such funds shall be segregated by

the AGENT and held by him in trust, and shall not be used by him for

any purpose.

Should the COMPANY for any reason cancel a policy or

certificate and return the premium, the AGENT shall promptly return all

commissions received on such policy or certificate to the COMPANY.

Lincoln moved for summary judgment and submitted numerous depositions

and affidavits indicating Lincoln regarded the Fiscal Responsibility clause as

implementing its policy of requiring agents to refund partial commissions on

cancelled policies--a policy Lincoln maintained was universal in the insurance field.

Jim Orr testified all other companies with whom he had worked specifically

addressed chargebacks in their contracts, and he had negotiated with Lincoln to

ensure no chargeback clause was included in his contract; however, Orr

acknowledged he had orally agreed to pay chargebacks while the contract was in

effect. 

The district court concluded the Fiscal Responsibility clause was unambiguous

and required Orr to repay the unearned commissions regardless when the agency

contract terminated, because no provision limited Orr’s duty to repay if the contract

terminated. Orr argues the agency contract unambiguously precluded any obligation

to pay, because, among other things, neither the contract’s Fiscal Responsibility

clause nor its Termination clause imposed a post-termination duty on Orr to refund

partial commissions. Alternatively, he argues, if the contract was ambiguous, and

resort to extrinsic evidence was appropriate, then Lincoln had not demonstrated any

industry practice and the proper interpretation of the Fiscal Responsibility clause was

governed by Jim Orr’s testimony. 
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We review de novo the grant of summary judgment, as well as the district

court’s interpretation of state law and the contract. See Centric Jones Co. v. City of

Kearney, Neb., 324 F.3d 646, 648-49 (8th Cir. 2003). The parties and the district

court applied Missouri law, and we do so as well. 

The Fiscal Responsibility clause does not mention early cancellations of

policies, partial returns of premiums, or partial refunds of commissions, and the

contract arguably is silent as to Orr’s duty to pay refunds after cancelling its agency

agreement. We conclude these omitted terms were not clearly implied-in-law terms

of the contract, cf. Pollock v. Berlin-Wheeler, Inc., 112 S.W.3d 73, 78-79 (Mo. Ct.

App. 2003) (implied-in-law terms include agent’s duty not to compete, employee’s

fiduciary duty, and implied-in-law warranty); Birdsong v. Bydalek, 953 S.W.2d 103,

120 (Mo. Ct. App. 1997) (every contract imposes general duty of good faith and fair

dealing), and thus we cannot agree with the district court that the clause

unambiguously required Orr to pay chargebacks on policies cancelled early, either

during the agency agreement or afterwards. We cannot agree with Orr, however, that

the contract unambiguously precluded any obligation to pay. Rather, we conclude the

contract is ambiguous. 

For example, the Termination clause, which provides, “[u]pon termination the

AGENT shall in no manner act for the COMPANY and shall promptly remit to the

COMPANY any monies then held for it” (emphasis added), could be interpreted to

demonstrate the parties did not agree to an ongoing duty to pay chargebacks. On the

other hand, the Termination clause could be interpreted not to qualify the Fiscal

Responsibility clause, which may or may not be conclusive as to Orr’s duty to pay.

Given our conclusion a latent ambiguity exists, resort to extrinsic evidence is

appropriate. See State Farm Mut. Auto. Ins. Co. v. Esswein, 43 S.W.3d 833, 842

(Mo. Ct. App. 2000) (when contract is ambiguous, a court may resort to extrinsic

evidence to determine true intent of parties). Our review of the record, however,
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convinces us the parties’ intent cannot conclusively be determined from the available

extrinsic evidence. Thus, we remand so a factfinder may examine the contract

language and the evidence presented by the parties to determine whether Orr was

required to pay chargebacks during the life of the agreement, and whether any such

obligation survived termination of the agency relationship. See Vandever v. Junior

Coll. Dist. of Metro. Kan. City, 708 S.W.2d 711, 717 (Mo. Ct. App. 1986) (if court

cannot resolve ambiguity based on all circumstances, evidence, and rules of

construction, or if resolution of ambiguity requires weighing evidence, issue is for

jury).

Accordingly, we reverse and remand for further proceedings.

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