2002 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

4-1-2002

In Re: Prof Ins Mgt

Precedential or Non-Precedential:

Docket No. 00-5201

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PRECEDENTIAL 

 Filed April 1, 2002 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 00-5201 

IN RE: PROFESSIONAL INSURANCE MANAGEMENT, 

 Debtor 

PROFESSIONAL INSURANCE MANAGEMENT 

v. 

THE OHIO CASUALTY GROUP 

OF INSURANCE COMPANIES; 

THE OHIO CASUALTY INSURANCE; 

OHIO LIFE INSURANCE COMPANY; 

OHIO SECURITY INSURANCE COMPANY 

and OCASCO BUDGET; 

WEST AMERICAN INSURANCE COMPANY; 

AMERICAN FIRE AND CASUALTY COMPANY, 

 Appellants 

On Appeal from the United States District Court 

For the District of New Jersey 

(No. 99-cv-05919 and No. 00-cv-00640) 

District Judge: Honorable Jerome B. Simandle 

Argued: May 14, 2001 

Before: SLOVITER, AMBRO, and GARTH, Circuit Ju dges 

(Filed: April 1, 2002) 

 

 Charles X. Gormally (Argued) 

 Carl J. Soranno (Argued) 

 Brach, Eichler, Rosenberg, Silver, 

 Bernstein, Hammer & Gladstone 

 101 Eisenhower Parkway 

 Roseland, New Jersey 07068 

 Attorneys for Appellants 

 The Ohio Casualty Group of 

 Insurance Companies, et al. 

 Michael A. Zindler 

 Teich, Groh, Frost & Zindler 

 691 State Highway 33 

 Trenton, New Jersey 08619 

 Samuel Mandel (Argued) 

 136 West Route 38 

 Moorestown, New Jersey 08057 
 Attorneys for Appellee 

 Professional Insurance Management 

OPINION OF THE COURT 

AMBRO, Circuit Judge: 

The primary issue presented by this appeal, stemming 

from a tortured procedural mess, is whether an insurance 

company must turn over to its terminated agent 

$259,315.95 in accrued commissions and interest, plus 

additional commissions that continue to be earned. The 

answer hinges on the interpretation of New Jersey’s Agency 

Termination Statute found at N.J. Stat. Ann. S 17:22-6.14a 

(West 2000), a matter of first impression in this Court.1 

_________________________________________________________________ 

1. Because we recognized that this issue was one of first impression in 

New Jersey, a majority of the panel granted a motion to certify the issue 

under New Jersey Court Rule 2:12A to the New Jersey Supreme Court. 

The motion had been granted just prior to oral argument initially 

scheduled for December 13, 2000. As a consequence, we filed a Petition 

for Certification with the New Jersey Supreme Court on January 24, 

2001. On February 21, 2001, the New Jersey Supreme Court denied our 

Petition, thereby making necessary this opinion. 

 2 

 

Specifically, the parties call upon us to resolve the question 

of whether The Ohio Casualty Group of Insurance 

Companies ("Ohio Casualty") terminated its agent, 

Professional Insurance Management ("PIM"), essentially at 

will or, instead, for gross and willful misconduct or failure 

to pay over to Ohio Casualty moneys due after receipt of a 

written demand therefor. See N.J. Stat. Ann.S 17:22- 

6.14a(d), (e). The Bankruptcy Court ruled, and the District 

Court affirmed, that the termination was at will. The 

consequence of this ruling is that New Jersey’s Agency 

Termination Statute requires Ohio Casualty to pay PIM 

commissions on all policies for one year following 

termination, and on automobile insurance policy renewals 

so long as PIM services the accounts. See N.J. Stat. Ann. 

S 17:22-6.14a(d), (l). Under a contrary ruling, PIM would 

have no right to these commissions. 

The remaining issues on appeal arise from the ruling that 

the termination was at will, namely, (1) whether Ohio 

Casualty can successfully interpose the equitable remedy of 

recoupment against moneys PIM owed prior to its petition 

under Chapter 11 of the Bankruptcy Code, and (2) whether 

PIM is entitled to pre-judgment interest on the 

commissions. 

For the reasons that follow, we vacate the order of the 

District Court requiring Ohio Casualty to turn over to PIM 

commissions due and accruing, plus interest. We remand 

to the Bankruptcy Court to apply to the facts of this case 

the legal determination that the initial at-will termination 

can become a termination for cause between the notice of 
termination and the effective termination date. We also 

vacate the orders denying the equitable remedy of 

recoupment and awarding PIM pre-judgment interest, 

pending the resolution of this question by the Bankruptcy 

Court on remand.2 

_________________________________________________________________ 

2. The claims of constructive trust and contempt of court addressed by 

the District Court were not raised on appeal. Therefore, we render no 

opinion on those issues and the orders with respect to each remain 

unchanged. 

 3 

 

I. Factual and Procedural Background 

The facts of this case are set out at length in previous 

opinions of this Court3 and the District Court,4 and the 

letter opinions of the Bankruptcy Court dated July 12, 

1999 and October 22, 1999. The following discussion 

recounts the factual history bearing on the matters in this 

appeal. Despite our shortened recounting of the facts, they 

nonetheless remain complex. 

PIM is a New Jersey-licensed insurance broker and agent. 

In 1980, PIM entered into an agency agreement with Ohio 

Casualty that permitted PIM to market Ohio Casualty’s 

personal and commercial insurance policies. This 

agreement permitted Ohio Casualty to cancel the contract 

on 90 days notice and also reads in relevant part: 

 The Company [Ohio Casualty], in the exercise of the 

 right reserved to it above, may, at its option, retain all 

 commissions which are payable or which may become 

 payable under contracts of insurance represented by 

 such expirations, or renewals thereof, and apply same 

 against the amount of the Agent’s [PIM’s] indebtedness 

 to the Company, or may sell, assign, transfer or 

 otherwise dispose of such expirations to any other 

 agent or broker. If, in either event, the Company does 

 not realize sufficient return to satisfy Agent’s 

 indebtedness to the Company in full, the Agent shall 

 remain liable for the unpaid balance. Amounts realized 

 by the Company in excess of such indebtedness, less 

 expenses incurred by the Company in handling or 

 other disposition of such expirations, shall be paid to 

 the Agent. 

 . . . This agreement may be suspended or canceled for 

 non-payment of balances due. During suspension, 

 commissions due and payable to the Agent for 

 Automatic Renewal type policies will be applied against 

 balances due, to the extent of the indebtedness. 

_________________________________________________________________ 

3. See In re Professional Ins. Management, 130 F.3d 1122 (3d Cir. 1997). 

4. See Professional Ins. Management v. The Ohio Cas. Group of Ins. Cos., 

246 B.R. 47 (D.N.J. 2000). 
 4 

 

In re Professional Ins. Management, No. 94-1312, letter op. 

at 10 (Bankr. D.N.J. July 12, 1999). 

PIM located customers, ascertained their insurance 

needs, and sold them Ohio Casualty policies. For personal 

automobile insurance policies, Ohio Casualty collected 

premiums directly from the policyholders and sent PIM its 

sales commissions. For other types of insurance, namely 

commercial lines, PIM collected the premiums, deducted its 

commissions, and then forwarded the balance to Ohio 

Casualty. 

Each month, a reconciliation process occurred whereby 

Ohio Casualty provided PIM an account statement detailing 

each insurance account, the type of insurance, the gross 

premium, the commission rate, and details of the amounts 

currently due, past due and due in the future. PIM would 

customarily receive Ohio Casualty’s monthly statement at 

the beginning of each month. PIM would then compare its 

own records to the statement, and would reconcile the 

items contained in the currently due column. If PIM 

disagreed with an entry, it would line off the entry and 

provide an explanation and documentation in support. Ohio 

Casualty would then carry forward the item into the past 

due column where it would remain until Ohio Casualty 

researched the item and the parties resolved the issue. 

PIM’s reconciliation and payments were due by the 15th of 

the month. If an item that Ohio Casualty determined was 

due was not paid after a "please remit" notice, an Ohio 

Casualty account technician would issue an "open item 

letter" demanding payment and, at times, threatening 

suspension unless payment was received by a certain 

deadline. The relevant point is that in the reconciliation 

process the parties mixed the policy types and took credits 

against all policies in one monthly transaction, as per the 

agency agreement. In addition, in the case of agent 

indebtedness, the agency agreement specifically called for 

the application of commissions due against balances due 

regardless of the policy type. 

In order to make its product more attractive in a highly 

competitive market, Ohio Casualty formed its own premium 

finance company, Ocasco. Ocasco offered to finance large 

premiums, particularly those in the commercial market, at 

 5 

 

no interest for premiums over $10,000 and at a nominal 

interest rate for premiums under $10,000. The vast 

majority of premiums on commercial policies sold by PIM, 

96%-98% of its premiums in 1992 and 1993, were 

financed. In those cases, an agreement was prepared by the 

agent -- PIM, signed by the insured, and sent to Ocasco. 

Ocasco would process the agreement and send a voucher 

back to PIM. PIM then forwarded the voucher in lieu of 
cash to Ohio Casualty when it made its monthly payments. 

Because PIM could not deduct its commissions from the 

vouchers directly, it was using the small percentage of cash 

receipts to pay its commissions. The volume of premiums 

PIM financed through Ocasco and the length of voucher 

processing time created accounting difficulties for PIM. As 

a result, PIM would credit vouchers prematurely and use 

vouchers-in-hand to credit premiums in the pipeline. The 

latter practice was permitted by an agreement between 

Ocasco and PIM. 

Ohio Casualty complained of PIM’s accounting 

procedures as early as 1989. PIM typically had 25% or 

more of its amount due in the past due column, and PIM’s 

accounting practices with respect to past due balances and 

credits were the subject of at least nine letters from Ohio 

Casualty. After much discussion between the parties, 

Ocasco agreed to send its vouchers directly to Ohio 

Casualty. Despite this improvement and PIM’s clarifications 

of its past due balances, accounting problems continued 

into 1993. PIM was twice threatened with suspension that 

year. 

Finally, on November 15, 1993, Ohio Casualty sent the 

following letter of termination to PIM: 

 We have had a lot of conversations about continued 

 existing problems with your agency regarding clearing 

 accounting differences in a timely fashion resulting in 

 a continued high "over 90 days" debt and continued 

 problems with your agency reimbursing Ocasco Budget 

 promptly on accounts that have been canceled. On 

 many, the Accounting Department had to reimburse 

 Ocasco and now since we have requested your agency 

 not to use Ocasco on new accounts, we are beginning 

 6 

 

 to get similar problems and requests from other 

 premium finance companies. 

 Along with the above problems you are heading for the 

 third consecutive unprofitable year (twelve months 

 86.9% thru October 30, 1993) and a six year Loss 

 Ratio of 62.6%. 

 At this time it is necessary that I advise you that we 

 are terminating your Agency Agreement effective March 

 1, 1994 and that you will no longer have the authority 

 to write new business or bind coverage effective 

 November 19, 1993. We will honor all prior binding 

 commitments, subject to our underwriting rules, made 

 prior to that date. 

In re Professional Ins. Management, No. 94-1312, letter op. 

at 32 (Bankr. D.N.J. July 12, 1999). This initial termination 

letter was followed by an "official form letter" dated 

November 19, 1993 establishing the procedures for 

termination and renewals. Attached to this form letter were 
copies of the agency termination notice and offer letters 

that Ohio Casualty intended to send to PIM’s insureds. Id. 

at 33. The forms submitted to the New Jersey Department 

of Insurance noted that the reasons for PIM’s termination 

were poor loss ratio, continued accounting differences, and 

continued payment problems with premium finance 

companies and canceled accounts. Id. at 34. The 

termination was effective on March 1, 1994. Thereafter, PIM 

was to continue to receive commissions on commercial 

renewals for one year following termination and on 

automobile policy renewals so long as PIM serviced the 

accounts, in accordance with the notice of termination and 

the New Jersey Agency Termination Statute.5 

_________________________________________________________________ 

5. The New Jersey Agency Termination Statute, codified at N.J. Stat. 

Ann. S 17:22-6.14a, governs the rights of a terminated agent. The 

relevant subsections (d), (e) and (l) provide: 

 d. Termination of any such contract for any reason other than one 

 excluded herein shall become effective after not less than 90 days’ 

 notice in writing given by the company to the agent and the 

 Commissioner of Banking and Insurance. No new business or 

 changes in liability on renewal or in force business, except as 

 7 

 

At the time Ohio Casualty sent the notice of termination, 

it claimed that PIM owed over $200,000. In November and 

_________________________________________________________________ 

 provided in subsection l. of this section, shall be written by the 

 agent for the company after notice of termination without prior 

 written approval of the company. However, during the term of the 

 agency contract, including the said 90-day period, the company 

 shall not refuse to renew such business from the agent as would be 

 in accordance with said company’s current underwriting standards. 

 The company shall, during a period of 12 months from the effective 

 date of such termination, provided the former agent has not been 

 replaced as the broker of record by the insured, and upon request 

 in writing of the terminated agent, renew all contracts of insurance 

 for such agent for said company as may be in accordance with said 

 company’s then current underwriting standards and pay to the 

 terminated agent a commission in accordance with the agency 

 contract in effect at the time notice of termination was issued. Said 

 commission can be paid only to the holder of a valid New Jersey 

 insurance producer’s license. In the event any risk shall not meet 

 the then current underwriting standards of said company, that 

 company may decline its renewal, provided that the company shall 

 give the terminated agent and the insured not less than 60 days’ 

 notice of its intention not to renew said contract of insurance. 

 e. The agency termination provisions of this act shall not apply to 

 those contracts: 

 (1) in which the agent is paid on a salary basis without commission 

 or where he agrees to represent exclusively one company or to the 

 termination of an agent’s contract for insolvency, abandonment, 

 gross and willful misconduct, or failure to pay over to the company 
 moneys due to the company after his receipt of a written demand 

 therefor, or after revocation of the agent’s license by the 

 Commissioner of Banking and Insurance; and in any such case the 

 company shall, upon request of the insured, provided he meets the 

 then current underwriting standards of the company, renew any 

 contract of insurance formerly processed by the terminated agent, 

 through an active agent, or directly pursuant to such rules and 

 regulations as may be promulgated by the Commissioner of Banking 

 and Insurance; . . . 

 * * * 

 l. A company which terminates its contractual relationship with an 

 agent subject to the provisions of subsection d. of this section shall, 

 at the time of the agent’s termination, with respect to insurance 

 8 

 

December of 1993, Ohio Casualty continued to send PIM 

monthly statements and reconciliations and PIM continued 

to make payments. Correspondence between Ohio Casualty 

and PIM confirmed Ohio Casualty’s intent to renew 

commercial policies through PIM for one year. In January of 

1994, however, PIM filed suit against Ohio Casualty and 

shortly thereafter the statements and accounting practices 

between them broke down completely. Id. at 34. Also in 

January of 1994, PIM began to take improper credits 

against moneys owed to Ohio Casualty, a fact not subject 

to dispute on appeal. The essence of the impropriety was 

_________________________________________________________________ 

 covering an automobile as defined in subsection a. of section 2 of 

 P.L.1972, c. 70 (C.39:6A-2), notify each named insured whose policy 

 is serviced by the terminated agent in writing of the following: (1) 

 that the agent’s contractual relationship with the company is being 

 terminated and the effective date of that termination; and (2) that 

 the named insured may (a) continue to renew and obtain service 

 through the terminated agent; or (b) renew the policy and obtain 

 service through another agent of the company. 

 Notwithstanding any provision of this section to the contrary, no 

 insurance company which has terminated its contractual 

 relationship with an agent subject to subsection d. of this section 

 shall, upon the expiration of any automobile insurance policy 

 renewed pursuant to subsection d. of this section which is required 

 to be renewed pursuant to section 3 of P.L.1972, c. 70 (C.39:6A-3), 

 refuse to renew, accept additional or replacement vehicles, refuse to 

 provide changes in the limits of liability or refuse to service a 

 policyholder in any other manner which is in accordance with the 

 company’s current underwriting standards, upon the written 

 request of the agent or as otherwise provided in this section, 

 provided the agent maintains a valid New Jersey insurance 

 producer’s license and has not been replaced as the broker of record 

 by the insured. However, nothing in this section shall be deemed to 

 prevent nonrenewal of an automobile insurance policy pursuant to 

 the provisions of section 26 of P.L.1988, c. 119 (C.17:29C-7.1). 

 The company shall pay a terminated agent who continues to 

 service policies pursuant to the provisions of this subsection a 
 commission in an amount not less than that provided for under the 

 agency contract in effect at the time the notice of termination was 

 issued. 

N.J. Stat. Ann. S 17:22-6.14a(d), (e) and (l) (West 2000). 

 9 

 

that PIM applied credit for commissions it earned on 

personal automobile policy lines against the commercial 

premiums it collected on behalf of Ohio Casualty, claiming 

that Ohio Casualty had wrongly withheld these same 

personal automobile policy lines commissions beginning in 

October of 1993. 

In a letter dated May 26, 1994, nearly three months after 

PIM was effectively terminated, Ohio Casualty demanded 

that PIM surrender to it the agency records, declared that 

PIM was indebted to it for $294,284.29, and demanded 

payment. Also in May, PIM attempted to sell its book of 

business ("Book of Business") to Anderson Jackson Metts 

("AJM"). In anticipation of the sale, PIM brokered certain 

contracts to AJM. After Ohio Casualty successfully obtained 

injunctive relief to have the proceeds of the sale, if any, 

placed in escrow, the sale fell through. 

On August 5, 1994, PIM filed for bankruptcy protection 

under Chapter 11 of the United States Bankruptcy Code, 

11 U.S.C. S101, et seq.6 PIM’s indebtedness to Ohio 

Casualty as of the time of the petition was later fixed at 

$252,642.40.7 On August 15, 1994, Ohio Casualty sent 

letters to PIM’s customers informing them of the 

termination of the agency relationship and of their options. 

Pursuant to a Bankruptcy Court order under which the 

status quo was maintained, Ohio Casualty took over PIM’s 

Book of Business in September of 1994, and employed AJM 

as the servicing agent. This order was appealed to the 

District Court. On June 30, 1995, the District Court 

affirmed the Bankruptcy Court’s ruling that Ohio Casualty 

_________________________________________________________________ 

6. Under subsection (e) of the Agency Termination Statute, the 

termination of an agent for insolvency precludes the agent’s collection of 

commissions pursuant to subsection (d). In this case (and without 

considering the effect of the S 365(e)(1)(A) of the Bankruptcy Code 

banning, inter alia, the termination of a contract solely because of 

insolvency), because PIM filed for bankruptcy five months after the 

effective date of termination, its insolvency could not have been a reason 

for its termination and subsection (e) does not apply on this basis. 

7. The fixing of Ohio Casualty’s pre-petition claim was resolved on 

September 10, 1996, after lengthy hearings on PIM’s motion to expunge 

Ohio Casualty’s claim. In re Professional Ins. Management, No. 94-1312, 

letter op. at 35 n.53 (Bankr. D.N.J. July 12, 1999). 

 10 

 

owned the Book of Business, but reversed and remanded as 
to whether it could be sold or transferred. 

On March 7, 1996, the Bankruptcy Court reversed itself 

and held that Ohio Casualty had an unperfected security 

interest in PIM’s Book of Business, and directed the Book 

of Business to be returned to PIM effective April 1, 1996. 

On April 19, 1996, the Bankruptcy Court (1) ordered Ohio 

Casualty to rescind notices of non-renewal to 65 of 69 auto 

policy holders under New Jersey’s 2 for-1 requirement;8 (2) 

tolled the 12-month statutory period giving PIM a right to 

renewals on commercial policies from April 1, 1996 to June 

30, 1996 (subtracting several months for PIM’s delay in 

seeking relief from an earlier ruling); and (3) granted PIM 

the right to collect on commissions post April 1, 1996.9 

On July 8, 1996, the District Court (Rodriguez, D.J.) 

affirmed the April 19, 1996 decision as to the tolling period 

and to Ohio Casualty having an unperfected security 

interest in the Book of Business, but reversed the 2-for-1 

decision and the rescission of the cancellation letters, and 

found Ohio Casualty had no perfected security interest in 

post-petition commissions owed to PIM. In re Professional 

Ins. Management, No. 96-2499, slip op. at 16, 25-26, 30 

(D.N.J., July 8, 1996). The District Court further remanded 

to the Bankruptcy Court the issue of whether PIM’s 

termination was covered under subsection (d) or (e) of the 

Agency Termination Statute. Id. at 15. This Court upheld 

the District Court’s reversal with respect to the 2-for-1 

ruling and the holding that the Bankruptcy Court could not 

_________________________________________________________________ 

8. New Jersey’s 2-for-1 insurance regulation, which provides that for 

every New Jersey auto policy canceled the carrier must write two new 

policies, does not directly bear on this appeal. The issues arising during 

the period post-termination and prior to April 1, 1996, and the claim 

that Ohio Casualty terminated PIM in retaliation for PIM’s refusal to 

violate the New Jersey Fair Automobile Insurance Reform Act of 1990, 

N.J. Stat. Ann. S 17:33B-1 (West 2000) (the"FAIR Act"), are before the 

Bankruptcy Court in a different proceeding. 

9. Ohio Casualty contends on appeal that the proceeds of this sale and 

commissions earned on commercial policies pre-April 1, 1996 arise from 

the identical commercial expirations that PIM failed to remit premiums 

on pre-petition, and therefore recoupment should be ordered. Ohio 

Casualty’s Motion to Expand the Record at 6. 

 11 

 

order Ohio Casualty to pay commissions to PIM until the (d) 

or (e) determination was made. In re Professional Ins. 

Management, 130 F.3d 1122 (3d Cir. 1997). 

In July of 1998, the Bankruptcy Court held seven days of 

hearings on the (d) versus (e) issue. In the midst of these 

hearings, Ohio Casualty issued a Notice of Discontinuance 

informing PIM that effective September 1, 1998, Ohio 

Casualty would stop accepting renewals and service 

requests from PIM for automobile policies under subsection 

(l) and would not pay PIM commissions. The Bankruptcy 
Court enjoined this Notice of Discontinuance. 

Throughout the hearings, the Bankruptcy Court limited 

its inquiry into the record to the period prior to November 

15, 1993 -- the notice of termination date. The Bankruptcy 

Court found that, as of the month-end prior to the 

termination notice, only $24,774 of the $217,000 listed as 

due to Ohio Casualty prior to reconciliation was actually in 

the past due column, and of that amount only $1,930 was 

marked due and payable.10 Such a small amount of arrears, 

the Bankruptcy Court ruled, did not substantiate Ohio 

Casualty’s claim that PIM was terminated for gross and 

willful misconduct or for failure to pay over premiums due 

under subsection (e) of the Agency Termination Statute. In 

re Professional Ins. Management, No. 94-1312, letter op. at 

59-60 (Bankr. D.N.J. July 12, 1999). The Bankruptcy Court 

concluded that PIM’s termination therefore fell under 

subsection (d) of the Agency Termination Statute, 

essentially the "at will" provision. This meant that PIM was 

entitled to renewal commissions for one year on all policies, 

subject to the tolling period instituted by the Bankruptcy 

Court, and for renewal commissions on automobile policies 

under subsection (l) of the statute for as long as PIM 

serviced those accounts. 

In a Supplemental Decision on September 15, 1999, the 

Bankruptcy Court rejected Ohio Casualty’s claims of 

recoupment and constructive trust, and on October 14, 

1999, the Bankruptcy Court ordered that all commissions 

_________________________________________________________________ 

10. Support for the Bankruptcy Court’s accounting for the reduction in 

the amount PIM owed Ohio Casualty at the time of the notice of 

termination is detailed in its July 12, 1999 letter opinion. 

 12 

 

after April 1, 1996 be turned over to PIM. Ohio Casualty 

appealed and requested a stay. After Ohio Casualty failed to 

turn over the commissions, the Bankruptcy Court found 

Ohio Casualty in contempt in a letter opinion dated 

November 17, 1999. The Bankruptcy Court issued its final 

decision in the matter before us on January 5, 2000 in a 

letter opinion wherein it ruled that Ohio Casualty owes PIM 

commissions plus pre-judgment interest from April 1, 1996 

forward, in the amount of $259,315.95. 

The District Court affirmed the Bankruptcy Court’s 

determination that PIM’s termination fell under subsection 

(d) of the Agency Termination Statute and ruled that the 

Bankruptcy Court’s failure to consider evidence of PIM’s 

conduct between the time of notice and the time of 

termination was error, though harmless in the context of 

the District Court’s analysis. Professional Ins. Management 

v. The Ohio Cas. Group of Ins. Cos., 246 B.R. 47, 65 (D.N.J. 

2000). It affirmed the denial of recoupment and 

constructive trust and the award of prejudgment interest. 

Id. at 67, 69, 71. However, the District Court reversed the 

finding that Ohio Casualty was in contempt for failure to 
turn over commissions to PIM on the ground that Ohio 

Casualty filed a timely appeal after the automatic ten-day 

stay. Id. at 73. This appeal followed. 

II. Jurisdiction 

As a threshold matter, we must be satisfied that we have 

appellate jurisdiction. Metro Transp. Co. v. North Star 

Reinsurance Co., 912 F.2d 672, 676 (3d Cir. 1990). At oral 

argument, we posed the question of the statutory basis for 

exercising jurisdiction in this case. To resolve this question, 

we sought supplemental briefing from the parties. 

Specifically, we asked whether we could exercise 

jurisdiction over an appeal based on the traditional 

jurisdiction provisions in 28 U.S.C. SS 1291-1292, the 

bankruptcy jurisdiction provision in 28 U.S.C. S 158(d), or 

whether we should otherwise exercise jurisdiction in light of 

the factors set forth in In re Blatstein, 192 F.3d 88, 94 (3d 

Cir. 1999). After reviewing the submissions of the parties, 

we conclude that jurisdiction is proper in this case under 

28 U.S.C. S 158(d) and shall entertain the appeal. 

 13 

 

In the context of an appeal from the District Court 

reviewing a Bankruptcy Court decision, our own 

jurisdiction is prescribed by S 158(d). Consequently, our 

review is limited to final orders and judgments of the 

bankruptcy courts and district courts: "The courts of 

appeals shall have jurisdiction of appeals from all final 

decisions, judgments, orders, and decrees entered under 

subsections (a)11 and (b)12 of this section." 28 U.S.C. 

S 158(d). Although district courts may grant leave to appeal 

from interlocutory orders, no such power is granted to 

courts of appeals. In re White Beauty View, Inc. , 841 F.2d 

524, 525 (3d Cir. 1988). 

"The finality of the [orders] must be resolved with respect 

to the decisions of both the bankruptcy judge and the 

district court." Id. at 526 (citing In re Meyertech Corp., 831 

F.2d 410, 413-14 (3d Cir. 1987)). Ordinarily in civil 

litigation only those orders that dispose of all issues as to 

all parties to the case are considered final. In re Meyertech 

Corp., 831 F.2d at 414. However, considerations unique to 

bankruptcy appeals have led us consistently in those cases 

to construe finality in a more pragmatic, functional sense 

than with the typical appeal. In re Amatex Corp., 755 F.2d 

1034, 1039 (3d Cir. 1985). With this understanding, 

 [w]e interpret finality pragmatically in bankruptcy 

 cases because these proceedings often are protracted 

 and involve numerous parties with different claims. To 

_________________________________________________________________ 

11. Subsection (a) of section 158 grants the District Court jurisdiction to 

hear appeals 

 (1) from final judgments, orders, and decrees; 
 (2) from interlocutory orders and decrees issued under section 

 1121(d) of title 11 increasing or reducing the time periods referred 

 to in section 1121 of such title; and 

 (3) with leave of the court, from other interlocutory orders and 

 decrees; 

 of bankruptcy judges entered in cases and proceedings referred to 

 the bankruptcy judges under section 157 of this title. 

28 U.S.C. S 158(a). 

12. This jurisdictional subsection is not implicated by this appeal. 

 14 

 

 delay resolution of discrete claims until after final 

 approval of a reorganization plan, for example, would 

 waste time and resources, particularly if the appeal 

 resulted in reversal of a bankruptcy court order 

 necessitating re-appraisal of the entire plan. 

In re White Beauty View, 841 F.2d at 526. 

This relaxed sense of "practical finality" is not without 

limitation. It must be balanced against our traditional 

antipathy toward piecemeal appeals.13 In re Meyertech 

Corp., 831 F.2d at 414. For example, although an order of 

the bankruptcy court expunging a creditor’s claim is final, 

Walsh Trucking Co., Inc. v. Insurance Co. of North America, 

838 F.2d 698, 701 (3d Cir. 1988), an order of the 

bankruptcy court finding the debtor’s attorneys subject to 

sanctions (but not determining the amount or form of the 

penalty) is not final, In re Jeannette Corp., 832 F.2d 43 (3d 

Cir. 1987). Similarly, in In re Brown, 803 F.2d 120 (3d Cir. 

1986), we ruled that a district court order remanding to the 

bankruptcy court for a determination of damages was not 

a final order. 

In this case, the District Court was satisfied that 

jurisdiction was proper either as an appeal of a final order 

of the Bankruptcy Court under 28 U.S.C. S 158(a) or as an 

appeal of an interlocutory order granting an injunction 

_________________________________________________________________ 

13. Even within the context of S 1291, balancing "the inconvenience and 

costs of piecemeal review on the one hand and the danger of denying 

justice by delay on the other" is appropriate. Cox Broadcasting Corp. v. 

Cohn, 420 U.S. 469, 479 n.7 (1975). As the Supreme Court noted in Cox 

Broadcasting: 

 [O]ur cases long have recognized that whether a ruling is "final" 

 within the meaning of S 1291 is frequently so close a question that 

 decision of that issue either way can be supported with equally 

 forceful arguments, and that it is impossible to devise a formula to 

 resolve all marginal cases coming within what might well be called 

 the "twi-light zone" of finality. Because of this difficulty this Court 

 has held that the requirement of finality is to be given a "practical 

 rather than a technical construction." Cohen v. Beneficial Industrial 
 Loan Corp., 337 U.S. 541, 546 (1949). 

Id. 

 15 

 

under 28 U.S.C. S 1292(a)(1).14 Professional Ins. 

_________________________________________________________________ 

14. The Bankruptcy Court order of July 30, 1999, pertaining to the 

applicability of subsection (e) of the Agency Termination Statute, 

provides in relevant part: 

Ordered as follows: 

 1. That Ohio’s cross-motion for an order declaring that N.J.S.A. 

 17:22-6.14a(e) restricts Debtor’s entitlement to renewal commissions 

 is denied; 

 2. That the provisions of N.J.S.A. 17:22-6.14a(d) apply regarding 

 the termination of Debtor’s agency relationship with Ohio; 

 3. That any other issues remaining for resolution shall proceed in 

 accordance with this Court’s Opinion filed July 12, 1999 . . . . 

The Bankruptcy Court order of October 14, 1999, pertaining to the 

turnover of commissions and clarified in the letter opinion of October 22, 

1999, reads in relevant part: 

 ORDERED that the Debtor is entitled to receive commissions due on 

 its Ohio book of business from April 1, 1996 and continuing 

 through and after the date of this Order; and it is further 

 ORDERED that Ohio be and is hereby directed to turnover to the 

 Debtor within seven (7) days from the date of the entry of this Order, 

 the sum of Two Hundred Sixteen Thousand Five Hundred Sixty-nine 

 and 79/100 ($216,569.79) Dollars in direct bill commissions that 

 have accrued since April 1, 1996 through July 26, 1999, as well as 

 all direct bill commissions after July 26, 1999 to the date of this 

 Order . . . and it is further . . . 

 ORDERED that Ohio be and is hereby directed to pay to the Debtor 

 all direct bill commissions that accrue to the Debtor as a terminated 

 agent under New Jersey law after the date of this Order, . . . and it 

 is further . . . 

 ORDERED that the Debtor’s claim for commissions due for the 

 period August 1994 through April 1996 be and are hereby preserved 

 and reserved pending a determination of Ohio’s administration claim 

 by this Court; and it is further 

 ORDERED that Ohio’s application for a constructive trust to be 

 imposed on the above commissions for its benefit be and is hereby 

 denied; and it is further 

 ORDERED that Ohio’s application for this Court to exercise its 

 equitable powers to grant Ohio a right of recoupment from these 

 commissions in order to satisfy the Debtor’s pre-petition debt to 

 Ohio be and is hereby denied . . . . 
 16 

 

Management, 246 B.R. at 59-60. With respect toS 158(a), 

the District Court noted that 

 the Bankruptcy Court specifically declined to 

 characterize the nature of the October 14, 1999 Order, 

 "except to note that [it] was a final resolution of the 

 debtors’ motion for turnover of commissions from April 

 1, 1996, which motion was made in Adversary 

 Proceeding No. 94-1312, and to recognize that 

 additional issues remain to be heard in that proceeding 

 . . . ." 

Id. at 57 (citing In re Professional Ins. Management, No. 94- 

1312, letter op. at 3 (Bankr. D.N.J. Oct. 22, 1999)). The 

Bankruptcy Court also denied Ohio Casualty’s request for 

a stay of the October 14, 1999 Order pending resolution of 

the remaining issues in the adversary proceeding because 

none of the issues remaining in the case "relate to debtor’s 

entitlement to commissions since April 1, 1996." In re 

Professional Ins. Management, No. 94-1312, letter op. at 3 

(Bankr. D.N.J. Oct. 22, 1999). 

Invoking the doctrine of "practical finality," the District 

Court agreed that the issues decided by the Bankruptcy 

Court were discrete and that "no effect or impact of those 

decisions would change as a result of the Bankruptcy 

Court’s future ultimate decision as to whether PIM is 

entitled to damages for wrongful termination." Professional 

Ins. Management, 246 B.R. at 59. Therefore, the District 

Court ruled that the Bankruptcy Court orders of July 30, 

1999 and October 14, 1999 were final orders subject to its 

review. 

We agree with this conclusion. We note that Congress 

had previously provided that orders in bankruptcy cases 

finally disposing of discrete disputes within the larger case 

may be immediately appealed, and that "a bankruptcy 

court order ending a separate adversary proceeding is 

appealable as a final order even though that order does not 

conclude the entire bankruptcy case." In re Moody, 817 

F.2d 365, 367-68 (5th Cir. 1987) (citing In re Saco Local 

Development Corp., 711 F.2d 441, 445-46 (1st Cir.1983)). 

The Bankruptcy Court’s orders finally determined whether 

Ohio was obligated to pay PIM commissions following the 

 17 

 

termination of its agency agreement and the amount of that 

obligation. PIM disagrees, contending that the order is 

interlocutory and that additional, related issues remain to 

be heard before the Bankruptcy Court. It is true that the 

Bankruptcy Court is still considering the resolution of 

significant issues between these two parties, specifically (1) 

an adversary proceeding alleging Ohio Casualty’s wrongful 

termination of PIM under the FAIR Act, and (2) the 
allegation that Ohio failed adequately to service the Book of 

Business pre-April 1, 1996, resulting in commissions owed 

to PIM during this period. However, we agree with the 

District Court that this appeal is entirely distinct and that 

the issues noted above are unaffected by our resolution of 

this appeal.15 

Moreover, the two orders, considered together, effect a 

turnover of commissions, which is widely regarded as a 

final order for purposes of appeal. 

 Following the lead of every circuit court that has 

 considered the question directly or indirectly, we hold 

_________________________________________________________________ 

15. Ohio Casualty submitted the recent decision of the New Jersey 

Supreme Court, R. J. Gaydos Ins. Agency, Inc. v. Nat’l Consumer Ins. Co., 

773 A.2d 1132 (N.J. 2001), pursuant to Federal Rule of Appellate 

Procedure 28(j), as possibly negating our authority to decide this matter 

on appeal. In Gaydos, the New Jersey Supreme Court held that the FAIR 

Act "does not create a private right of action for an agent to pursue a 

claim that it was wrongly terminated as a result of an insurer’s alleged 

FAIRA violations." Id. at 1147. Instead, the FAIR Act vests enforcement 

powers exclusively with the Commissioner of Insurance. Id. The Court 

noted that the New Jersey Legislature did not adopt the FAIR Act to 

benefit insurance agents and insulate them from potential termination. 

Id. However, the Court held that the agent could assert a common-law 

contract claim for breach of the implied covenant of good faith and fair 

dealing stemming from the carrier’s termination of the agency 

agreement, citing to N.J.S.A. 17:22-6.14a(d) -- the same statute at issue 

in this appeal. Id. at 1148. Because we conclude that the FAIR Act claim 

currently before the Bankruptcy Court will not be affected by our 

disposition of this case and because the Agency Termination Statute, 

enacted to protect the rights of terminated insurance agents, provides a 

common-law cause of action, the Courts below did not abuse their 

discretion in failing to defer to the Commissioner of Insurance. This 

matter was properly before the Bankruptcy and District Courts, and as 

an appeal of a final order is properly before us. 

 18 

 

 that a bankruptcy court’s turnover order, in a separate 

 adversary proceeding, compelling a defendant to turn 

 over property in his possession to the trustee in 

 bankruptcy, is a final order and hence appealable as of 

 right. 

In re Moody, 817 F.2d at 366. See also In re Cash Currency 

Exchange, Inc., 762 F.2d 542, 546 (7th Cir. 1985); In re 

Flying W. Airways, Inc., 442 F.2d 320, 321 n.1 (3d Cir. 

1971); Sproul v. Levin, 88 F.2d 866, 869 (8th Cir. 1937); cf. 

George A. Fuller Co. of P.R., Inc. v. Matta, 370 F.2d 679, 680 

(1st Cir. 1967); O’Keefe v. Landow, 289 F.2d 465, 466 n.1 

(2d Cir. 1961). We conclude that the effect of the 

Bankruptcy Court’s determination that subsection (d) of the 

Agency Termination Statute was triggered by Ohio’s 

termination of PIM, in conjunction with the turnover order, 

completely disposed before that Court of the issues under 

appeal. Therefore the Bankruptcy Court orders were final, 
appealable orders to the District Court under 28 U.S.C. 

S 158(a).16 

Having concluded that the Bankruptcy Court orders were 

_________________________________________________________________ 

16. In addition, we agree that the District Court, sitting as an appellate 

court, was authorized to hear the appeal from the Bankruptcy Court as 

an appealable injunctive order under 28 U.S.C. S 1292(a), which 

provides: 

 (a) Except as provided in subsections (c) and (d) of this section, the 

 courts of appeals shall have jurisdiction of appeals from: 

 (1) Interlocutory orders of the district courts of the United States, 

 the United States District Court for the District of the Canal Zone, 

 the District Court of Guam, and the District Court of the Virgin 

 Islands, or of the judges thereof, granting, continuing, modifying, 

 refusing or dissolving injunctions, or refusing to dissolve or 

 modify injunctions, except where a direct review may be had in 

 the Supreme Court . . . . 

28 U.S.C. S 1292(a)(1). Both the District Court and the Bankruptcy Court 

characterized the Bankruptcy Court orders as providing injunctive relief. 

"The injunctive character of these orders is . . . evident from the [larger, 

continuing order to pay commissions and] the duty imposed upon Ohio 

Casualty with respect to the ongoing accrual of PIM’s commissions, 

namely, to pay them over as they are earned, now and in the future." 

Professional Ins. Management, 246 B.R. at 59. 

 19 

 

final, we now briefly discuss the finality of the District 

Court order of February 29, 2000. That order: 

 (1) affirmed the Bankruptcy Court order with respect 

 to subsection (d) of the Agency Termination Statute; 

 (2) affirmed the turnover of accrued commissions and 

 interest and continuing commissions; 

 (3) vacated the order holding Ohio Casualty in 

 contempt for failure to pay over commissions; 

 (4) directed the Clerk of Court to withdraw 

 $259,215.95 from the registry of Court and make 

 payment to PIM’s counsel; and 

 (5) ordered Ohio Casualty to calculate the additional 

 interest and commissions due to date. 

Professional Ins. Management, No. 99-5919, order (D.N.J. 

Feb. 29, 2000). Just as the Bankruptcy Court proceeding 

below fully adjudicated a specific adversary proceeding 

between the parties, the challenged order of the District 

Court does the same.17 Therefore, jurisdiction over this final 

order is proper in our Court pursuant to 28 U.S.C.S 158(d). 

III. New Jersey’s Agency Termination Statute 
Having jurisdiction over this appeal, we now turn to the 

merits of the District Court’s decision regarding New 

Jersey’s Agency Termination Statute. "Because the District 

Court sat as an appellate court, reviewing an order of the 

Bankruptcy Court, our review of the District Court’s 

determinations is plenary." In re Rashid, 210 F.3d 201, 205 

(3d Cir. 2000). "In reviewing the bankruptcy court’s 

determinations, we exercise the same standard of review as 

the district court." Fellheimer, Eichen & Braverman, P.C. v. 

Charter Technologies, Inc., 57 F.3d 1215, 1223 (3d Cir. 

_________________________________________________________________ 

17. Notably, the District Court did not remand to the Bankruptcy Court 

for additional findings or legal determinations. Thus, the merits of the 

discrete adversary case before the District Court were finally adjudicated. 

As a result, we do not need to elaborate on the four factors set forth in 

In re Blatstein, 192 F.3d 88, 94 (3d Cir. 1999), which provides additional 

guidance on our jurisdiction where the District Court remands to the 

Bankruptcy Court in whole or in part. 

 20 

 

1995). Therefore, we review the Bankruptcy Court’s legal 

determinations de novo, its factual findings for clear error, 

and its exercises of discretion for abuse thereof. In re Engel, 

124 F.3d 567, 571 (3d Cir. 1997). 

After reviewing the voluminous record before us, we 

conclude that both the Bankruptcy Court and the District 

Court correctly interpreted the provisions of the Agency 

Termination Statute to be predicated on the termination of 

an agency relationship. We agree with the District Court 

that an "at will" termination (under N.J. Stat. Ann. S 17.22- 

6.14a(d)) could morph into a "for cause" termination (under 

N.J. Stat. Ann. S 17.22-6.14a(e)) prior to the effective date 

of termination and that the Bankruptcy Court erred when 

it set the notice date as the relevant point of inquiry into 

whether the statute’s "at will" or "for cause" provisions 

apply. However, we do not subscribe to the District Court’s 

conclusion that the Bankruptcy Court’s error was 

nonetheless harmless. Because neither the District Court 

nor the Bankruptcy Court considered the relevant conduct 

(PIM’s failure to pay over premiums due between the date 

of notice and the effective date of termination) and whether 

Ohio Casualty recognized this conduct as a reason for 

termination (irrespective of whether it was aware of 

subsection (e)), the error was prejudicial and the case is 

remanded to the Bankruptcy Court. 

A. Interpretation of the Statute 

That New Jersey considers the insurance industry to be 

strongly affected by the public interest is demonstrated 

through its comprehensive regulation of the industry. In 

enacting the "No Fault Law," for example, it was the New 

Jersey Legislature’s intent to provide insureds"the 

advantage of guaranteed renewals of indefinite duration 

with a particular company." Sheeran v. Nationwide Mutual 
Insurance Co., Inc., 404 A.2d 625, 629 (N.J. 1979). With 

respect to New Jersey’s Agency Termination Law, the 

Legislature was "primarily concerned with the rights of 

insurance agents. . . . The protection which it affords to the 

insured public, although important, is only secondary." Id. 

at 630. The Legislature enacted the statute to "regulate the 

termination of agency agreements between insurance 

companies and their independent agents." Cohen v. Home 

 21 

 

Ins. Co., 230 N.J. Super. 72, 75 (App. Div. 1989). The 

legislative history and case law also reflect a concern "that 

New Jersey policyholders should not be deprived of the 

benefit of continued effective policy service by motivated 

agents." In re Terminated Aetna Agents, 248 N.J. Super. 

255, 260 (App. Div. 1990), certif. denied, 126 N.J. 319 

(1991). This case illustrates a point of conflict over the 

protection of the interests of agents and the public at the 

expense of the insurance carrier. 

PIM’s entitlement to renewal commissions, following the 

termination of its agency relationship with Ohio, is 

governed by New Jersey’s Agency Termination Statute. As 

already noted, if Ohio terminated PIM because of gross and 

willful misconduct or failure to pay premiums due after 

written notice, New Jersey law would preclude PIM from 

receiving post-termination commissions or renewals. On the 

other hand, if Ohio terminated PIM at will, New Jersey law 

provides PIM with the right to renewal commissions on the 

commercial policies for one year, and automatic renewal 

commissions on personal automobile policies indefinitely. 

Both the District Court and the Bankruptcy Court 

interpreted the exception to S 17:22-6.14a(d) created in (e) 

to apply specifically to terminations, as opposed to 

situations where an agent fails to remit premiums at some 

point after the termination of the agency relationship. What 

Ohio Casualty initially disputes is the Courts’ construction 

of subsection (e) to include the phrase "or failure to pay 

over to the company moneys due to the company after his 

receipt of a written demand therefor, . . ." as a termination 

condition rather than an independent reason disqualifying 

the agent from receipt of commissions. 

To aid in this interpretation, we turn first to general rules 

of statutory construction established by the United States 

Supreme Court. As a general rule, "the meaning of a statute 

must . . . be sought in the language in which the act is 

framed, and if that is plain . . . , the sole function of the 

courts is to enforce it according to its terms." Caminetti v. 

United States, 242 U.S. 470, 485 (1917); see, e.g., Vreeland 

v. Byrne, 370 A.2d 825 (N.J. 1977). In applying this rule, 

courts have generally agreed that where a legislature has 

"made a choice of language which fairly brings a given 

 22 

 
situation within a statute, it is unimportant that the 

particular application may not have been contemplated by 

the legislators." Sears, Roebuck & Co. v. United States, 504 

F.2d 1400, 1402 (Cust. Ct. Pat App. 1974); see, e.g., Barr 

v. United States, 324 U.S. 83, 90 (1945); Vreeland, 370 

A.2d at 832 (finding no room for judicial interpretation). 

The New Jersey Supreme Court upheld these principles of 

statutory construction in the insurance regulation context 

when it rejected a defendant’s argument to rewrite the clear 

wording of New Jersey’s No-Fault Act to exempt that 

defendant from its proscriptions. Sheeran, 404 A.2d at 628. 

The District Court applied these general rules of statutory 

construction and agreed with the Bankruptcy Court’s 

interpretation of the statute, noting that "[t]he plain and 

unambiguous language of subsection (e) . . . clearly 

establishes that subsection (e) applies if the termination is 

a result of gross and willful misconduct or failure to pay 

over funds; the causal relationship is a necessary predicate 

to subsection (e)’s applicability." Professional Ins. 

Management, 246 B.R. at 63 (italics in original). Upon 

review of the text, this reading is correct. 

Ohio Casualty asserts that strict application of 

subsection (e) produces the inequitable result of preserving 

(indeed requiring) PIM’s right to receive commissions even 

where it failed to remit premiums after the date of 

termination. The District Court, sympathetic to the 

inequities posed by Ohio Casualty’s situation, agreed that 

the ruling in Department of Insurance v. Universal 

Brokerage Corp., 303 N.J. Super 405 (App. Div. 1997), 

supports the policy that a "terminated agent cannot profit 

from failure to remit premiums after demand therefor even 

when it occurs after the termination date." Professional Ins. 

Management, 246 B.R. at 63. Nonetheless, the Court 

explained that while "[t]his policy statement may well have 

an effect on the Bankruptcy Court’s equitable 

determinations . . .[,] Universal Brokerage did not interpret 

subsection (e)" nor could it alter the effect of the statute’s 

plain language. Id. at 63-64. The District Court firmly 

declared that "this Court is not free to rewrite the statute 

to preclude that result where the unambiguous language of 

subsection (e) does not." Id. at 64. The purpose and policy 

 23 

 

behind this statute -- to preserve the rights of terminated 

agents and to maintain the benefit of continued service by 

motivated agents -- support this interpretation. We 

therefore conclude that the Bankruptcy Court and the 

District Court correctly read subsection (e) necessarily to 

apply to the termination of agents as opposed to an agent’s 

conduct independent of termination. 

B. Application of the Statute 

On appeal, Ohio Casualty claims that PIM’s improper 

credits and failure to turn over commercial premiums from 

January, 1994 forward was a continuation of the improper 
accounting practices and indebtedness for which Ohio 

Casualty initially terminated PIM. PIM’s conduct, therefore, 

arguably constitutes gross and willful misconduct and the 

failure to pay over premiums due, thus qualifying as a 

termination under subsection (e) of the Agency Termination 

Statute. Moreover, Ohio Casualty advises us that the 

Agency Termination Statute does not direct how a carrier is 

to terminate an agent; the agency contract does. According 

to Ohio Casualty, "the sole purpose of the Statute is to 

guide the renewals of policies of agents after termination." 

Ohio Casualty’s Br. at 36. 

Whether Ohio Casualty’s allegations legitimately 

constituted a reason for termination under subsection (e) 

was the inquiry that the Bankruptcy Court undertook. In 

reaching its holding that PIM’s termination was effectively 

at will (i.e., under subsection (d)), the Bankruptcy Court 

limited its review of the record to the period prior to the 

date of the notice of termination. In re Professional Ins. 

Management, No. 94-1312, letter op. at 65 (Bankr. D.N.J. 

July 12, 1999). "It cannot be disputed that the agency 

relationship between the debtor and Ohio was terminated 

by letter dated November 15, 1993. Any indebtedness that 

arose following the termination will not be considered as a 

basis for the activation of subsection (e)." It did so because 

PIM was effectively prevented from writing new business 

pursuant to the terms of the notice of termination, and 

because by that time Ohio Casualty’s reasons for 

termination were already fully formed. Professional Ins. 

Management, 246 B.R. at 64. 

 24 

 

The District Court ruled that this limited review was 

erroneous.18 Although noting that the Bankruptcy Court’s 

"decision to ignore evidence from after November 15, 1993 

was based on an incorrect assumption that an agent could 

not be terminated under both subsection (d) and 

subsection (e)," the District Court nevertheless found this 

error harmless. Professional Ins. Management, 246 B.R. at 

64-65. In its harmless error analysis, the District Court 

relied on evidence in the record that Ohio Casualty gave 

PIM 90-days notice, paid PIM commissions in apparent 

accordance with subsection (d), and never gave a 

subsequent notice to PIM (or anyone) that it was terminated 

for failure to remit premiums. The District Court concluded 

that there was simply no evidence that Ohio Casualty 

affirmatively changed the character of the termination 

between November 15, 1993 and March 1, 1994. Id. at 65. 

We agree with the District Court that the Bankruptcy 

Court’s failure to extend its inquiry to PIM’s conduct postNovember 15, 1993 is error. However, we cannot support 

the District Court’s conclusion that the Bankruptcy Court’s 

error in this matter was harmless under Rule 61 of the 

Federal Rules of Civil Procedure.19 See In re Barclay 

_________________________________________________________________ 

18. The District Court distinguished the Bankruptcy Court’s equating the 
notice of termination to a "practical termination" due to the inability of 

the agent to write any new business. 

 By the very terms of subsection (d) . . . , though the agent is 

 practically "terminated" as of the date upon which the Notice is sent 

 because it cannot write new business, the termination itself does 

 not become effective in less than ninety days (and Ohio Casualty 

 gave slightly more than ninety days notice by listing March 1, 1994 

 as the effective date). In many instances, there are practical 

 differences beyond the statutory ones as well: even though agents 

 cannot write new business in the ninety day period, they may 

 attempt to move the entire book of business to another insurance 

 company during that time. 

Professional Ins. Management, 246 B.R. at 65 n.11. 

19. Rule 61 states that 

 [n]o error in either the admission or the exclusion of evidence and 

 no error or defect in any ruling or order or in anything done or 

 omitted by the court or by any of the parties is ground for granting 

 25 

 

Industries, Inc., 736 F.2d 75 (3d Cir. 1984) (overturning 

District Court’s harmless error ruling in the context of a 

Bankruptcy Court’s failure to consider factors relevant to 

the legal determination at issue). The Bankruptcy Court’s 

limited time-frame precludes the application of the correct 

legal determination made by the District Court, namely that 

the reasons for terminating an agent can change between 

the time of notice and the effective date of termination. 

Consequently, the relevant factual inquiry was not made: 

whether PIM’s conduct post-notice legitimately qualifies as 

a reason for termination under subsection (e) and whether 

Ohio Casualty recognized this conduct (not necessarily 

subsection (e) itself), sometime prior to March 1, 1994, as 

one of the reasons for terminating PIM. Such an omission 

appears to us as inequitable. 

Contrary to the ruling of the District Court, we conclude 

that the fact that Ohio Casualty gave PIM 90-days notice 

and continued its commissions for a period of one year 

does not automatically place the termination under 

subsection (d). First, Ohio Casualty was obligated to do so 

according to its agency contract with PIM. Ohio Casualty 

continued to renew and pay commissions in accordance 

with the contract and subsection (d) because, at the time, 

PIM had not yet taken the improper credits. In addition, 

Ohio Casualty’s employees admitted at trial that they were 

not aware of subsection (e) when the initial termination 

notice was sent. Professional Ins. Management , 246 B.R. at 

64. The question, however, is not whether Ohio Casualty 

complied with the Agency Termination Statute when it 

terminated PIM, but whether the reason Ohio Casualty 

terminated PIM was one of the reasons listed in subsection 

(e). Ohio Casualty’s knowledge of subsection (e) is irrelevant 

to answer this question. 

_________________________________________________________________ 
 a new trial or for setting aside a verdict or for vacating, modifying, 

 or otherwise disturbing a judgment or order, unless refusal to take 

 such action appears to the court inconsistent with substantial 

 justice. 

Fed. R. Civ. P. 61. 

 26 

 

Furthermore, that Ohio Casualty did not send a 

subsequent notice of termination to PIM citing the improper 

credits taken after January, 1994 does not disqualify Ohio 

Casualty from the protection that subsection (e) affords. In 

fact, subsection (e) does not contain a notice requirement. 

The only requirement triggering subsection (e) is that the 

agent be terminated for one of the reasons listed. We 

cannot reconcile the District Court’s recognition of this fact20 

with its subsequent conclusion that because Ohio Casualty 

never notified anyone that PIM was being terminated for 

one of the reasons listed in subsection (e), it therefore by 

default terminated PIM at will. After Ohio Casualty sent 

PIM its initial termination notice alleging improper 

accounting procedures resulting in substantial 

indebtedness (which, if proved, would satisfy subsection 

(e)), Ohio Casualty was not thereafter required to re-notify 

PIM that its increased indebtedness stemming from 

additional improprieties was yet another reason for the 

termination. The District Court’s expressed concern (when 

it declared that "an insurance company cannot just decide 

that an agent’s termination is now under subsection (e) 

without telling anybody; there must be some evidence that 

the insurance company told someone--perhaps the 

insureds themselves--that renewals would no longer come 

through the terminated agent," Professional Ins. 

Management, 246 B.R. at 65) is not implicated by the facts 

of this case. Ohio Casualty’s continued correspondence 

with PIM post-termination declaring that premiums were 

due and payable and documenting the improper credits 

_________________________________________________________________ 

20. The District Court pointed out this feature of subsection (e): 

 Nothing in subsection (e), . . . indicates that a formal Notice of 

 Termination must be sent; an insurance company can terminate an 

 agent immediately upon discovering the agent’s gross or willful 

 misconduct or failure to pay over moneys due after receipt of a 

 written demand therefor, without being subject to the agency 

 termination provisions of subsection (d). Because no separate Notice 

 is needed for a subsection (e) termination, and because the 

 subsection (d) termination cannot, by law, be effective for ninety 

 days after the Notice is sent, it is possible that a subsection (d) 

 termination can transform into a subsection (e) termination before 

 the effective date of the subsection (d) termination passes. 

Professional Ins. Management, 246 B.R. at 64-65. 

 27 

 
effectively put PIM on notice of the reasons for its 

termination and satisfied any implied notice requirement.21 

Because a termination under subsection (d) of the statute 

can be converted into a subsection (e) termination based on 

conduct of the agent between the time of notice of 

termination and the effective date of the termination, and 

this can occur without formal notice by Ohio Casualty to 

PIM that a termination under (e) has occurred, the 

Bankruptcy Court needs to apply this legal determination 

to the evidence of PIM’s improper credits and failure to 

remit premiums after November 15, 1993, in ascertaining if 

that conduct is sufficient under subsection (e) to effect 

PIM’s termination as Ohio Casualty’s agent and whether 

Ohio Casualty recognized this conduct, sometime prior to 

March 1, 1994, as one of the reasons for terminating PIM.22 

IV. Conclusion 

Accordingly, we vacate the order of the District Court and 

remand to that Court so that in turn the case may be 

remanded to the Bankruptcy Court for further proceedings 

consistent with this opinion. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

21. In light of the circumstances of this case, which involved the 

potential morphing of a subsection (d) termination into a subsection (e) 

termination, we need not decide what notice, if any, must be given in 

other cases arising under subsection (e) when there is an insufficient 

basis to find an effective notice. 

22. Our disposition of this case makes it premature for us to resolve the 

question of the availability of the equitable remedies of recoupment and 

of prejudgment interest, as they would be appropriate only if the 

Bankruptcy Court rules on remand that the agency relationship remains 

governed by subsection (d). We express no opinion as to the merits of 

these determinations, but leave that decision for the Bankruptcy Court 

in the first instance. 

 28