A Wyoming insurance agent accused the insurer that terminated his appointment of reneging on its promises for paying him after termination.
He had applied to become an agent for the carrier group in 2011. A general agent responsible for recruiting and training new agents met with him and gave him a recruiting brochure. The brochure described various benefits that agents of the group could receive. Among the descriptions was “Retirement Compensation.” Pertaining to the group as a whole, this section stated:
“All first-year and renewal commissions are vested and payable to you the day you start with (group,) and continue as long as renewal commissions are paid, which is generally 10 years. There is no retirement age.”
Regarding the property-casualty (P&C)carrier within the group, it stated:
“Lifetime annuity, either single life or joint survivor based on lifetime loss ratio, length of service, and average compensation over the last 60 months. Minimum age for eligibility is 55 with at least 5 years of service and over 750 property and casualty units in force.”
On each page of the brochure, the words FOR RECRUITING PURPOSES ONLY were printed in all caps.
The agent subsequently received appointments from both the P&C carrier and its affiliated life insurance and annuities carrier. He signed separate contracts with each. The P&C contract stated that it was the “sole agreement” between the agent and the carrier. It also permitted either party to terminate the contract without cause by giving the other party at least 30 days’ advance notice.
The contract referred to a Post-Termination Compensation Schedule and stated that qualified agents would be paid after termination based on a formula in the schedule.
From the beginning, the partnership was unsuccessful. Underwriters complained to the general agent that this agent submitted unacceptable risks or applications for auto insurance with the vehicles misclassified. His customers were also unhappy and regularly complained about him. Eventually, the general agent started documenting the complaints. He also asked his assistant general agent to report to him any complaints about agents in the Cheyenne region. The assistant did so, and the general agent forwarded the complaints about the agent to the group’s management.
In late 2018, the P&C carrier notified the agent that it was terminating his contract effective mid-January 2019. Following termination, the carrier paid him in accordance with the Post-Termination Compensation Schedule. In response, he sued both carriers and the assistant general agent on several grounds that included breach of contract, acting in bad faith, age discrimination, and conspiracy.
The carriers and the assistant general agent asked the court to rule in their favor based on the law. The court did so and the agent appealed.
In February 2024, the Wyoming Supreme Court upheld the trial court’s verdict. The judges ejected the agent’s argument that the compensation schedule was not valid because he had not signed it and he did not receive it. They also found that he could not show bad faith when the contract permitted either party to cancel without cause. The contract took precedence over the words in the brochure, defeating his argument that he had been misled. Lastly, they ruled that his claims against the assistant general agent did not hold up because the assistant was the legal representative of the carrier, and they had already found the carrier not liable.
This case illustrates the vital importance of agents reading and understanding contracts before signing them. The contract referred to a compensation schedule. The agent could have requested a copy of it for review before signing. The schedule should not have come as a surprise. By giving him 35 days’ notice of termination, the carrier complied with the contract. His case was weak from the start.
Agents, especially exclusive agents, must know what they are agreeing to before they sign contracts. Once they have signed, they are at the mercy of the words they have agreed to.
