Facts

Plaintiff Western Heritage Insurance Company (Western Heritage) and defendant Sovereign General Insurance Services Inc. (Sovereign) entered into a written agency agreement, to begin July 10, 1995. In March 1997, defendants Martin F. Sullivan Sr. and Gloria Sullivan agreed to a separate contract with Western Heritage, whereby the Sullivans became guarantors for debts and liabilities incurred by Sovereign pursuant to its agency agreement with Western Heritage. The guaranty agreement subjected the Sullivans to personal liability for Sovereign's indebtedness.

The agency agreement between Sovereign and Western Heritage ended on June 28, 2004.

Western Heritage sued Sovereign and the Sullivans alleging breach of contract and breach of fiduciary duty. Sovereign counter-sued Western Heritage for breach of contract and alleged lost profits.

PLAINTIFF'S CONTENTIONS:
The plaintiffs contended defendants failed to properly account for and remit premiums.

Injuries

$715,113 for unpaid premiums.

Result

Jury found in favor of plaintiff, awarding $715,113. Sovereign's claims against Western Heritage were dismissed on summary judgment.

Other Information

The case has been appealed by Sovereign. Sovereign's appellate counsel is Dominic G. Flamiano (The Law Offices of Dominic G. Flamiano, Oakland). According to defense's appellate counsel, Sovereign is a wholesale insurance broker that acted as a surplus lines broker for Western Heritage and other companies related to Scottsdale Insurance Company. Initially, Sovereign filed suit in California state court to recover $1.9 million in unpaid contingent commissions due from Western Heritage and Scottsdale Insurance Company under the agency agreement. The agency agreement was terminated after Sovereign had prevailed in a coverage action against another Scottsdale Company, National Casualty Company. At that time there was a dispute as to remaining unpaid premiums on the existing policies after termination. Sovereign contends on appeal as follows: Western Heritage removed the case to federal court and the district court granted summary judgment in favor of Western Heritage, finding not only that some amount of premium was due, but that this alone caused a forfeiture of the contingent commissions. This was clearly erroneous, because under the agency agreement, when premiums are fully paid, the contingent commission is due and payable. Thus, even if there is a dispute as to premium payments, the contingent commissions are due when the premium payment is resolved. The pending appeal is yet to be briefed but involved the issue of due and owing contingent commission, which, at $1,900,000, far off-set the amount of premium found due.