Court Opinion

ID: 3886868
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:16:21.745247+00
Date Added: 2024-06-11T07:42:04.759140
License: Public Domain

The sole question in this appeal is whether the defendant, a foreign insurance company, is liable to the penalty provided in Section 4092, Vol. 3, Code 1922, for a violation of Section 4090. The State endeavors to sustain the alleged liability by showing that an agent of the company countersigned and issued a policy without having obtained a license as such agent required by Section 4069, two entirely separate and distinct propositions. Section 4090 prohibits a foreign insurance company from issuing a policy of fire insurance, upon any property located in this State, which has not been approved and countersigned "by an agent who is a resident of this State, regularly commissioned by the company doing business in this State."
Section 4092 provides for the imposition and enforcement of a penalty of $500.00 for the violation of Section 4090 (and other sections not pertinent to the present controversy).
It is not, and cannot successfully be, contended that the agent who issued the policy did not fully comply with the qualifications imposed by Section 4090; he was a resident of the City of Spartanburg in this State; was duly appointed and commissioned as an agent of the company, and countersigned and issued the policy.
It is contended that the agent was not at the time operating under a license issued by the State Insurance Commissioner, as required by Section 4069, and that because he was violating the law (which by the way provides no penalty), the company is liable for a penalty provided for a different infraction. *Page 345 
Section 4072 prohibits the issuance by insurance companies of policies otherwise than through duly authorized agents, which means of course agents duly authorized bythe company.
Section 4086 provides a penalty upon insurance companies for the violation of any of the provisions of Chapter 48, bythem, which manifests a purpose to punish them for theiracts or omissions and not those of their agents.
It appears that this prosecution is the result of a controversy which flared up during the administration of the predecessor of the present Insurance Commissioner, between the defendant company and the insurance department; the latter having set its face against the issuance of licenses in connection with what is known as the "Bank Agency Ruling" issued by the Commissioner April 30, 1928. This was a rule which attempted to limit the operation of insurance agencies to individuals, except that the Commissioner reserved the right to alter this ruling where he concluded, for certain reasons, that the bank agency operations should be recognized. The agency at Spartanburg was connected with the Bank of Commerce of that city; A.R. Coleman was one of the employees of the bank and also of the agency. He, Hicks, and other employees of the bank were licensed by the previous Commissioner in February, 1928, under Section 4069. Later the Commissioner learned that these agents were connected with the bank agency, and attempted to have them return their licenses, which they refused to do; they expired by their terms on March 31, 1928.
The present Commissioner was elected and took office April 2, 1928. The defendant sent to the Commissioner a list of agents which it had commissioned in this State which included the name of H.C. Hicks. With the list was sent a check for $41.00 covering licenses for 82 agents at 50 cents each. Licenses were issued to all except Hicks; the check, however, was cashed and no refund made to the defendant on account of the license refused to Hicks and no *Page 346 
notice was sent by the Commissioner to the home office of the company from which such notice of commissions had come, that Hicks would not be licensed.
A contest then developed over the "Bank Agency Ruling" in the latter part of April and in May, 1928, the corporation involved in such contest being a bank in Columbia which had attempted to do business through one of its agents.
The defendant receiving no official notice from the Commissioner that the licenses would not be issued, and the "Bank Agency Ruling" still being under discussion and dispute, continued during this period to write policies through agents regularly commissioned by it and who had held licenses up to March 31st. The Commissioner admitted upon the trial of this case that these agents were fit and proper persons, and that his only reason for refusing to license them was his "Bank Agency Ruling."
This "Bank Agency Ruling" was taken to the Courts in the fall of 1928, in a case entitled State ex rel. Vernon C.Earle v. Sam B. King, Insurance Commission, which was a petition for mandamus to require the Commissioner to issue him a license. Earle's name was one of those included in the list of four names, which also included that of A.R. Coleman. The matter was heard before his Honor, Judge Mauldin, at Columbia, who filed an order granting the petition for writ of mandamus, holding that the "Bank Agency Ruling" was unconstitutional on several grounds. From this ruling there was no appeal.
In June, 1928, the Commissioner first gave formal notice to the defendant that these agents coming within his ruling would not be licensed. This action thereafter, in August, 1928, was commenced.
The identical question presented in this appeal came up before, and was decided by his Honor, Judge Cochran, of the United States District Court, in a suit brought by the defendant in this case, to enjoin the present Insurance Commissioner from a threatened revocation of its license for this *Page 347 
same alleged violation of law by the agents in not obtaining licenses from the Commissioner. Counsel for the Commissioner in the hearing before his Honor, Judge Cochran, made a motion to dismiss the complaint (of the same effect as a demurrer in the State Court). Judge Cochran filed an order, March 11, 1929, refusing the motion. While his ruling and reasoning are not conclusive upon this Court, it is so clear and convincing, and so fully meets with my approval, that I include it herein as a part of this opinion:
"My view is that under the bill of complaint there is presented for my decision the pure question of law whether the Insurance Commissioner has the authority by law to revoke a license which has been duly issued to a foreign insurence company, upon the ground that some of the agents of the company who have been duly authorized and commissioned by that company, have countersigned and issued policies when they were not in fact licensed to do business as agents by the Insurance Commissioner. That question is to be determined of course by the statute law of South Carolina, and there is no decision of the State Court upon the point.
"I have examined all the Sections of Article 1 of Chapter 48, and there is nothing in the bill of complaint or the proceeding before the Commissioner to show that the plaintiff has failed to comply with the terms of the Article, unless it be Section 4064. That Section, as has already been stated, provides that the Insurance Commissioner may revoke the license of an insurance company when he finds that it has failed to comply with the law. It is upon this that the Commissioner bases his ruling, namely, that the plaintiff has violated the law; that is, has failed to comply with it. The real question then is whether there is any duty resting upon an insurance company to obtain licenses for its agents, and whether it violates the law when one of its agents who is not duly licensed countersigns and issues a policy.
"It is clear that the statutes of South Carolina prescribe both that an insurance company must obtain a license and *Page 348 
that each agent must obtain a license. Section 4069 of the Code of 1922 provides that `before doing business in this State for any insurance company or association, each agent shall procure from the Insurance Commissioner a license for which he shall pay one-half dollar as an annual department license fee.' It also provides that `before issuing such license the Insurance Commissioner shall determine that the agent is a fit and proper person'; and he is given power to revoke the license after thirty days' notice and examination, `whenever it shall appear that the agent has violated the law of this State, or has willfully deceived or dealt unjustly with a citizen of the State.'
"It is manifest from this Section that the duty of obtaining an agent's license rests not upon the company, but upon the agent. There is not a trace in any of the statutes upon the subject indicating that the Legislature intended to impose this duty upon the company; nor is there a trace of any intention that the license of the company to do business in the State might be revoked on the ground that an agent, who has not been licensed by the Commissioner, has issued policies; it may be that it would be good policy to require foreign insurance companies, when they commission agents and authorize them to do business, to see that they first obtain license before issuing policies. But that is a question of policy for the Legislature to decide; and the Legislature has not, so far, decided to impose that duty upon insurance companies, and certainly has not given the Commissioner any power to revoke a foreign company's license because of the failure of the agent to obtain his own license.
"It is true that it has been the custom of this particular company and other companies to forward the fees, together with a list of its agents, to the Insurance Commissioner, and request that licenses be issued to them. But this is merely a custom and is not directed by any law.
"The defendant's counsel rely also on Section 4090 of the Code of 1922 for South Carolina. But this Section clearly *Page 349 
has no application to the present case. It simply provides that `no fire insurance company * * * not incorporated under the laws of this State * * * shall make * * * any policy of insurance * * * of any kind * * * except after said risk has been approved, in writing, by any agent who is a resident of this State, regularly commissioned by the company doing business in this State, who shall countersign all policies so issued and receive the commission therein when the premium is paid, and the State shall receive the license fees required by law to be paid on the premiums collected for insurance on all property located in this State.' There is absolutely nothing to show that this Section was not complied with. The agents whose acts have been questioned were duly commissioned by the company, and there is no showing or claim that they failed in any of the things required by this Section. The only failure that is claimed is that they failed to comply with Section 4069, which requires agents to obtain a license from the Commissioner. It seems to me that the learned counsel for the defendant have confused the commissioning of an agent with the licensing of an agent. The commission must be issued, not by the Insurance Commissioner, but by the company; and this was done. The agent's license must be issued of course by the Commissioner; and this was not done; so that the question remains, as stated at the outset, whether the failure of an agent to obtain his license gives the Commissioner power to revoke the license of the company itself."
Assuming, however, what appears to me to be an untenable position, that the insurance company may be penalizedfor the failure of its agent to properly qualify himself for soliciting and issuing policies, by obtaining a license from the Commissioner, an obligation which the statute imposes upon the agent alone, it strikes me as more untenable to declare that the company may be penalized for its alleged failure to require the agent to procure a license when it appears that it made application to the Commissioner for *Page 350 
the license, accompanied by the cash fees, and was refused solely upon the ground that to grant it would be in conflict with the so-called "Bank Agency Ruling" of the Commissioner, a position later repudiated by a State Circuit Judge and a Federal District Judge. The State officials appear to have had so little faith in their contention that in neither instance did they ask for a review of the decision by an appellate tribunal.
The State charges a willful violation of the statute Section 4090 by the insurance company, as it had to do under the terms of the statute. I do not think that there is the slightest evidence tending to sustain this charge. The propriety of the "Bank Agency Ruling" was under constant discussion; the only solution of it judicially, was against the Commissioner's position; the circumstances negative any disposition on the part of the company arrogantly to fly into the face of the law: (a) The representatives of the Hicks Agency in Spartanburg had been approved as fit and proper persons and licensed by John J. McMahan, as Insurance Commissioner, up to March 31, 1928; (b) that such agents were duly commissioned by the Firemen's Insurance Company for the year 1928, and notice of such fact given to the Insurance Commissioner; (c) that applications for license for such agents were filed in due time with the proper fees enclosed; (d) that the only reason they were not licensed by Sam B. King, as Insurance Commissioner, was on account of his "Bank Agency Ruling"; (e) that the checks sent with such licenses were either cashed without refund to the company or retained uncashed; (f) that no notice of the refusal to license these agents was sent to the home office of the Firemen's Insurance Company, from which the applications had come, until after the policy in this suit was written; (g) that the "Bank Agency Ruling" was not issued until April 30, 1928, and by its terms the Commissioner reserved a wide discretion as to what bank agencies he would license. *Page 351 
For these reasons I think that the order of his Honor, Judge Whaley, sustaining the motion of the defendant for nonsuit, should be affirmed.