Texas All Risk General Agency, Inc. v. Apex Lloyds Ins. Co. (Texas Court of Appeals, November 10, 2010)
The agent in this reinsurance coverage matter appealed from a trial court’s verdict in a non-jury trial which awarded the insurer, Apex, a judgment for breach of a general management agreement on the sale of policies within a specific geographic region. Specifically, the agent claimed the court erred in its interpretation of the contract and without a showing of a breach of the territorial limitations, Apex was not allowed a recovery.
The agency entered into a managing agreement with Apex, whereby the agency would sell insurance policies as a managing general agent of Apex. The agreement contained a provision that restricted the percentage of policies that could be issued in certain counties. Specifically, the agency was restricted from writing no more than ten percent of its policies with wind exposure in Harris County for a six month period from May 2007 to November 2007. The agreement also required the agency to submit monthly reports to Apex relating to the location of where the policies were written. After successive months of violating the terms of the restrictions Apex notified the agency of the breach and then terminated the agreement based on the continued breach.
The agent complained that the trial court erred in its interpretation of the territorial limitations by finding that the agency was in breach of the agreement. The court held that the intent of the parties was that the agency was not to write more than ten percent of its policies in Harris County, and that the monthly reports were to determine compliance on a monthly basis. Indeed, the agency’s computer software gave it the ability at all times to control where it wrote the policies. Thus, the agreement was not ambiguous.
Further the court held that the agreement was not “unreasonable, inequitable, or oppressive.” Rather, it concluded that the trial court’s interpretation was reasonable in light of the other provisions of the agreement and the reinsurance agreement. Specifically, if the agency were to have the entire six month period in which to determine its compliance, the purpose of the monthly and quarterly reports would be meaningless. Lastly, the court held that the subsequent performance by both parties pursuant to the agreement constituted an adequate consideration and therefore, the agreement was not illusory at the time of enforcement.
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Paul Steck and Jeffrey Kingsley