Court Opinion

ID: 9652502
Source: CourtListenerOpinion
Date Created: 2023-08-23 17:24:51.287058+00
Date Added: 2024-06-11T18:12:51.897764
License: Public Domain

TAMILIA, Judge,
dissenting.
I respectfully dissent to the position taken by the majority that there existed an enforceable agreement between American Associates of Meat Processors (Association) and Casualty Reciprocal Exchange (Casualty). The oral agreement between the Association and Casualty was for Association to endorse Casualty resulting in Association members purchasing Casualty insurance in return for which the Association members would receive a return of at least ten percent of the premiums paid each year. While this practice continued for at least 15 years, and was interrupted only during the last year when the Association terminated its relationship with Casualty, I do not believe the Association can enforce the agreement. The agreement only has validity within the context of the insurance law. I believe 40 P.S. § 275, Rebates and inducements prohibited, clearly governs this matter. However the Association viewed the arrangement, Casualty at this time treats it as an agency relationship in which the Association procured the clients with whom Casualty entered into individual contracts. These contracts permitted but did not require Casualty to pay rebates, which was permissible under section 275. See Girard Trust Bank v. Life Insurance Co. of North America, 243 Pa.Super. 152, 364 A.2d 495 (1976). When the *186money was paid to Association, which could receive it pursuant to assignments to them of individual amounts, they returned most of the premiums, except for a small percentage, to the individual insureds. Independent of the rebates, the Association received sums each year for promotional activity on the part of Casualty. Despite the fact that Casualty refused to pay the rebate the year the Association withdrew its endorsement, which may likely be the reason for non-payment, Casualty alone had the right to determine whether a dividend (rebate) was payable. It is acknowledged that Casualty suffered a loss in its cost-receipt ratio during that year as well as earlier years. Payment during earlier loss years could be justified by desire to retain the large account with hopes that the future would show an improvement. Such a decision could be a rational one whereas payment of a rebate when the account was terminated in the face of a loss in cost-premium ratio would not. Since the decision by Casualty was one it alone had the option to make in terms of its dividend policy, compelling it to make such rebate when it could not be justified on a business basis, clearly would bring them into violation of section 275.
While appellee maintains the illegality of the agreement was not alleged in the complaint, as appellant has stated in its brief and as concurred in by the en banc Court, the defense of illegality of an agreement may be raised at any time and is never waived. Shafer v. A.I.T.S., Inc., 285 Pa.Super. 490, 428 A.2d 152 (1981).
Since the rebates in this instance, to be in compliance with the law, were payable only to the policy holders, and whether or not they would be made in any given year was a determination which could only be made by Casualty, despite any understanding with Association, there was no enforceable agreement with Casualty to compel payment in this instance. I would vacate the Order of the trial court and grant judgment n.o.v.