FEDERAL DISTRICT COURT GRANTS SUMMARY JUDGMENT IN FAVOR OF INSURER AND ORDERS INSURANCE AGENT TO REPAY UNEARNED COMMISSIONS
Recently, Federal Judge Keith P. Ellison of the Houston Division of the Southern District of Texas granted summary judgment in favor of American General Life Insurance Company (“American General”) in American General Life Insurance Company v. Mickelson, C.A. No. H–11–3421, 2012 WL 6020339 (S.D. Tex. Dec. 3, 2012).
The dispute arose out of an agent contract between American General and insurance agent David Mickelson, in which Mickelson agreed to solicit applications for American General’s insurance plans. The contract required Mickelson to repay any “unearned commissions” he received from American General for obtaining policy applications if American General had to return the premiums or payments to a policy owner, obtained through Mickelson, for any reason.
Mickelson marketed American General life insurance to a customer named Adele Ciccati, who ultimately applied for and was issued a policy. American General paid Mickelson $83,329.20 in commissions when the policy was issued to Ciccati in 2007. Thereafter, in 2011, American General rescinded the Ciccati policy and returned all premiums to Ciccati. American General then demanded Michelson to return the commission of $83,329.20 because, under the agent contract, once American General returned the premiums to Ciccati, Mickelson’s commission became unearned. When Mickelson refused to return the commission amount requested, American General filed suit seeking return of the unearned commission.
Mickelson argued that the commission he received for selling life insurance to Ciccati was not “unearned” and therefore outside the scope of the agent contract. American General moved for partial summary judgment, arguing that there was no genuine issue of material fact that Mickelson breached the contract. After reviewing the agent contract, the Court agreed with American General that the term “unearned commissions” was not ambiguous and that there was only one reasonable interpretation of the term “unearned commissions”, that is, commissions that were paid to an agent in connection with premiums that were subsequently returned to the policyholder for any reason. Because no genuine issue of material fact remained as to the meaning of the agent contract or any of the elements of a breach of contract claim, the court granted American General’s motion for summary judgment as to its cause of action for breach of contract.