Opinion ID: 2402652
Heading Depth: 1
Heading Rank: 3

Heading: The Alleged Failure to Pay Premiums Due

Text: This charge, based on the specific wording of Section 111 of the old law, was brought against Mrs. Nuger as President of the AA Agency; Mr. Nuger as its Secretary-Treasurer; the AA Agency; and the Nugers individually. Much testimony was taken before the Commissioner at the hearing on May 11, 1962 in respect of the charge and additional testimony was taken before the lower court on appeal. The salient elements of the case against the appellants may be summarized as follows: The AA Agency was licensed as a resident broker in Maryland from May 1, 1960 to May 1, 1962 and the Nugers were granted authority on the AA Agency's license to act for it. Mr. Nuger was licensed to act as a solicitor for National Mutual Insurance Company of D.C. (the Washington Company); James P. McCloskey was licensed as an agent of the Washington Company from July 1, 1960 to June 30, 1961. In December, 1961, the National Mutual Company of Maryland, Inc. (the Maryland Company) took over the assets of the Washington Company. An audit by the Commissioner of McCloskey's accounts as agent for the Washington Company for the months of March through June of 1961, showed a premium balance due and owing from the AA Agency to McCloskey and that McCloskey owed premiums to the Washington Company. McCloskey advised the Washington Company and the State Insurance Department of Maryland that he had been unable to collect certain premiums due under policies written through the AA Agency. On August 29, 1961, the Commissioner wrote the Nugers and the AA Agency informing them of the dispute between the Washington Company and McCloskey and asking for a detailed statement of the policies issued; the premiums collected on policies the Washington Company had issued to or by the AA Agency for the period beginning March 1, 1961; a statement of the amounts which had been remitted either to the Washington Company or its agent in respect of such premiums; and a detailed statement of any credits applicable to these specific accounts. No reply to this letter was received prior to the hearing on May 11, 1962. The Commissioner's audit showed that the premium balance due from the AA Agency to McCloskey was secured by one note for $3,000 and six notes for $1,000 each, in the total amount of $9,000; these notes were made by Mr. Nuger payable to the Maryland Company. The testimony indicated that the $9,000 was the agreed balance due from the AA Agency to the Washington Company at the time the Maryland Company took over the Washington Company's accounts. The notes were all dated December 14, 1961 and the maturities ranged from fifteen days to one hundred and eighty-eight days. The President of the Maryland Company testified that none of the notes had been paid in full. The Treasurer of the Maryland Company testified that the premium balances totaling $9,000 were for policies that the AA Agency and its principals, Mr. and Mrs. Nuger, acting as insurance brokers, had placed through McCloskey, as agent for the Washington Company, and that between December 1 and December 14 of 1961 the Maryland Company had demanded the payment of the past due premium balances of the AA Agency from that Company and the Nugers and that the balances had not been paid. The Maryland Company had made an effort to collect the balance due on these notes but had not been successful, except for payments totaling $2400. Mr. Nuger testified that credits due him under a contract between him and the Maryland Company would more than offset the balance of the indebtedness evidenced by the notes. The contract referred to, however, provided that Mr. Nuger was to obtain a solicitor's license to act for the Maryland Company, which he did not have during the time he claims benefits under the contract for acting as a solicitor. The Nugers also contend that while the amounts were due from the AA Agency in May, 1962, in June or July of that year Mr. Nuger entered into an agreement with the Maryland Company for payment and that the payment was waived in lieu of the contract because the Maryland Company wanted the volume produced by the AA Agency. The so-called waiver was subsequent to the hearing before the Commissioner and the Commissioner's decision. The precise respective rights and liabilities of Mr. and Mrs. Nuger, the AA Agency for which they acted, and the Washington and Maryland Companies, were not before the Commissioner or the lower court for adjudication, but the involved dealings were pertinent to show whether or not the Nugers, on behalf of the brokerage concern for which they acted and which they controlled, had failed or refused to pay premiums which they had collected to the insurer or its agent. The licensing provisions of the law are for the protection of the public. Goldsmith v. Manufacturers' Liability I. Co., 132 Md. 283, 289, 103 Atl. 627 (1918). See also Smirlock v. Potomac, 235 Md. 195, 200 A.2d 922 (1964) holding that similar licensing provisions in respect of real estate brokers are regulations for the benefit of the public; and Snodgrass v. Immler, 232 Md. 416, 194 A.2d 103 (1963) in which there was a similar holding in respect of the licensing of architects. See also Babb v. Bolyard, 194 Md. 603, 608-09, 72 A.2d 13 (1950) in which Judge Markell, for the Court, discussed the difference between the scope of common law actions, such as deceit, and the purposes of enactments for the benefit of the public, such as the Federal Securities Act and the Maryland Retail Installment Sales Act. While there was some conflict in the testimony as to the complicated dealings between the various companies and the Nugers and the amounts still due by them, or either of them, in connection with their brokerage company's indebtedness, there was substantial evidence on which the Commissioner could properly have found that at the time of the hearing on May 11, 1962, both Mr. and Mrs. Nuger had been deliberately derelict in the performance of their duties in the prompt payment of premiums collected by them, which the Act required of them for the protection of the public. The public has an interest in the prompt transmittal of premiums paid for insurance policies, so that the coverage of the policies for which payment has been made will be assured. There is also a public interest, recognized by the statute, in the administrative supervision of the persons licensed by the Commissioner, who are entrusted with the collection of the premiums and the securing of the policies. Mrs. Nuger could not evade the responsibility inherent in her position through the acceptance of notes of Mr. Nuger, which were not paid when due. There was substantial evidence that the Nugers had been guilty of the wilful violation of Section 111 and a finding that their licenses should be revoked was supported by the entire record. The court below, even with the additional testimony given before it, had ample basis to make a similar finding. The effect, if any, of the Commissioner's finding in respect of the AA Agency will be considered hereafter.