Stagg v. Insurance Company,
77 U.S. 589 (1870)

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U.S. Supreme Court

Stagg v. Insurance Company, 77 U.S. 10 Wall. 589 589 (1870)

Stagg v. Insurance Company

77 U.S. (10 Wall.) 589


1. Where there is an express contract for the compensation of an insurance agent, no proof of a general custom as to such compensation is admissible which is in conflict with the contract.

2. Where such agent had received a general circular from his company which contained in clear language the terms of his compensation, and had acted on that circular without complaint for several years, he is estopped to deny that he was employed on those terms.

3. The production of a circular of prior date with other terms as to compensation does not alter the case.

Stagg became the agent of the Connecticut Mutual Life Insurance Company, in October, 1849, by his acceptance of a circular which contained this language:

"The usual compensation of agents, so far as we know, is 10 percent commission on the premiums, with one dollar for each policy, and 5 percent on the premiums on the renewal of policies."

This circular gave him certain instructions about his agency, and some suggestions as to the modes of inducing persons to insure with the company. In about a year afterwards he received another circular like the former one in its main purpose, but much more full and specific; a sort of short essay on the subject of life insurance, setting forth its

Page 77 U. S. 590

advantages, and pointing out the various reasons which the agent might advantageously suggest to persons whom he should address, why they should insure their lives, and do this with the Connecticut company rather than with any other company. This second circular, intended obviously for his careful perusal and study throughout, contained, in lieu of the language above cited, from the first one, the following:

"For your services as above, you will be allowed a commission of 10 percent on the first premiums (cash and notes), and 5 percent on all subsequent renewal premiums so long as you continue the agent of the company."

The plaintiff received and acted on this latter paper for about fifteen years, when he was discharged. He now brought this suit, claiming some $3,000 as the 5 percent commission on the renewal premiums of policies originally made by him as agent which had been received by the company since he was discharged.

To support this claim, he undertook to prove by other insurance agents that such was the custom as between insurance companies and their agents. But the court ruled as matter of law that there was an express contracts in the case, and that the custom could not be admitted.

It also ruled that the later circular was substituted as a new contract instead of the first one, and that its fair construction was to limit the agency to the pleasure of the company, and to terminate the right of the agent to commissions on renewal premiums with the revocation of his agency.

These rulings, or more particularly the second one, made the error complained of.

Page 77 U. S. 592

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