Case Name: G-H INSURANCE AGENCY, INC., Appellant, v. The TRAVELERS INSURANCE COMPANIES, Respondent
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1978-01-19
Citations: 270 S.C. 147
Docket Number: 20587
Parties: G-H INSURANCE AGENCY, INC., Appellant, v. The TRAVELERS INSURANCE COMPANIES, Respondent.
Judges: Rhodes and Gregory, JJ., concur.
Reporter: South Carolina Reports
Volume: 270
Pages: 147–176

Head Matter:
20587
G-H INSURANCE AGENCY, INC., Appellant, v. The TRAVELERS INSURANCE COMPANIES, Respondent.
(241 S. E. (2d) 534)
David M. Ratchford, and Donald E. Jonas, of Ratchford, Eleaser and Cooper, Columbia, for Appellant,
Clinch Heyward Belser, and Charles E. Baker, of Belser, Baker, Belser, Barwick & Tool, Columbia, for Respondent,
January 19, 1978.

Opinion:
Lewis, Chief Justice:
This is an appeal from an order sustaining a demurrer to the complaint upon the ground that the complaint fails to allege a cause of action. Under settled principles, the facts as alleged in the complaint are taken to be true for the purposes of determining the sufficiency of the complaint against demurrer; and the facts are stated accordingly.
Plaintiff-appellant, G-H Insurance Agency, Inc.. (G-H), has operated on insurance agency for a number of years, soliciting and writing automobile insurance business for the defendant-respondent, Travelers Insurance Companies (Travelers), under an agency contract.
The law in South Carolina regulating the sale of automobile insurance underwent an important revision with the passage in 1974 of Act 1177, currently codified as Section 38-37-10 et seq. of the 1976 Code of Laws. The complaint alleges that, prior to the foregoing revision in the insurance law, G-H was encouraged by Travelers to solicit and write automobile insurance for those who would be classified as nonstandard risks and who could thus, under the then existing insurance law of this State, be charged a higher premium than those classified as standard risks; and that, as a result of the encouragement of Travelers, G-H wrote approximately fifty (50%) percent of the policies for Travelers as nonstandard risk policies subject to the higher premium.
The aforesaid 1974 revision of the insurance law eliminated the distinction between insureds and made it illegal to discriminate in rates, except as provided by the Insurance Commissioner, thus forcing automobile insurers, including Travelers, to establish a uniform rate structure for all insureds.
Following the adoption of the 1974 changes in the insurance law, Travelers notified G-H that the agency contract between them would be terminated as of October 1, 1975. This termination was made, according to the allegations of the complaint, in an effort by Travelers to avoid insuring those previously listed as nonstandard risks at the new uniform rate since G-H had a high volume of such business; and such termination was, therefore, in violation of Section 38-37-10 et seq. of the 1976 Code of Laws, particularly Section 38-37-940(2) which is as follows:
No insurer of automobile insurance shall cancel its representation by an agent primarily because of the volume of automobile insurance placed with it by the agent on account of the statutory mandate of coverage nor because of the amount of the agent's automobile insurance business which the insurer has deemed it necessary to reinsure in the Facility.
Upon receiving notification of the termination of the agency contract, G-H made application to the Insurance Commissioner to prohibit such cancellation, but was informed that the Commissioner was without authority to intervene.
G-H then instituted this action to enjoin the termination of the agency contract and to recover damages in the amount of one million ($1,000,000.00) dollars allegedly resulting from the cancellation of the agency. The present cause of action rests upon the allegations that Code Section 38-37 940(2), quoted above, prohibits an insurance company from cancelling any agency to avoid writing insurance for higher risk insureds, and that the provisions of this statute accordingly modified a company's contractual authority to cancel an agent's license.
Travelers contends, on the other hand, that the statute in question does not grant any private cause of action for a violation thereof. Its demurrer to • the complaint on this ground was sustained, from which this appeal is prosecuted.
For the purposes of this decision, it is therefore conceded that, (1) prior to the 1974 insurance law revision, an agency-agreement existed between G-H and Travelers under which G-H, at the instigation of Travelers, procured for Travelers a large volume of nonstandard risk automobile insurance for which a higher premium was charged; (2) after the enactment of the 1974 statute, the distinction between insureds was eliminated and Travelers, as other insurance companies, was required to establish a uniform rate structure for all insureds; (3) Code Section 38-37-940(2), supra, prohibited Travelers, or any other insurance company, from cancelling an agency agreement in order to avoid writing insurance for higher risk or nonstandard insureds; (4) although prohibited by the quoted code section from doing so, Travelers terminated the agency of G-H, the appellant, "in an effort to avoid insuring those previously listed as nonstandard risks at the new uniform rate since the plaintiff (G-H) has a high volume of such business;" and (5) G-H has suffered damage by reason of the cancellation of the agency contract.
In the present posture of this litigation, there can be no doubt that the agency agreement was cancelled by Travelers in violation of the clear and specific provisions of Code Section 38-37-940(2) which prohibits the termination of such agency because of the writing of nonstandard risks. Travelers argues that it is not responsible for the damages resulting to its agent from its unlawful and wrongful breach of the agency contract, but is only responsible to the State for such penalties as may be provided under the State's regulatory powers. See: Code Section 38-37-940(1). The contention of Travelers, sustained by the lower court, is that the statute establishes no civil liability of any kind so as to create any private cause of action for a violation thereof.
There is no contention in this appeal that the State was without authority to enact the statutory prohibition against cancellation of the agency contract in question. It is only contended that the agent, whose agency contract was unlawfully terminated, has no right of redress for the resulting damages to him, because, it is argued, the purpose of the prohibition was to protect the public interests and not the private rights of agents, relying upon such decisions as Taggart v. Home Finance Group, Inc., 239 S. C. 345, 123 S. E. (2d) 250.
The question here is not whether the statute creates a private cause of action for its violation. This action is one for the alleged wrongful and unlawful cancellation of the agency contract, a right existing in G-H, the plaintiff, irrespective of the statute. The statute in question becomes relevant only in determining whether the cancellation was wrongful.
There can be no doubt that the cancellation of the agency contract was wrongful if the statutory prohibition against its termination was enacted for the benefit of the agent.
It must be conceded that the quoted Code Section [38-37-940(1)] was enacted as a part of the system designed to regulate insurance companies. There is, however, no specific language in the statute limiting its purpose and application to the benefit of the public to the exclusion of insurance agents. The present code section is a part of the statute enacted to assure non-discriminatory automobile insurance coverage, but other provisions of the statute mandated such coverage without the necessity for the enactment of Section 38-37-904 (1) prohibiting, under certain conditions, the cancellation of agency contracts. See: Sections 38-37-310 and 38-37-320. We may therefore validly conclude that the adoption of the present section was motivated by some purpose beyond that of protection of the public alone.
The plain language used in the present section, relating to cancellation of agency contracts, shows that the General Assembly intended to also protect the private rights of insurance agents in bringing about the directed insurance reforms. The statutory prohibition against termination of agency agreements was imposed, therefore, largely for the benefit of the insurance agents; and an agent who is terminated because of the prohibited reasons may recover in a private action for any damages sustained from such wrongful termination.
The line of decisions relied upon by respondent are inapplicable where, as here, the regulatory statute is intended to confer a private benefit.
The demurrer to the complaint should have been overruled.
The judgment is accordingly reversed.
Rhodes and Gregory, JJ., concur.
Littlejohn and Ness, JJ., dissent.