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premium due according to the percentage established in table I of
the “Schedule of Payments Referred to in State Farm Agent’s
Agreement” (schedule of payments) attached to the agreement. For
many of the policies, commissions would be paid during the first,
second, third, fourth, and fifth policy year, depending upon the
type of policy and its length. Section VI of the schedule of
payments provides as follows:
Upon termination of this Agreement by death or
otherwise any unpaid compensation provided for under
this Schedule of Payments then due and payable shall be
paid as soon as ascertainable, and there shall be no
further liability on the part of the Company under the
terms of this Schedule of Payments.
During the operation of the agency and pursuant to the
agreement, petitioner operated a trust fund. When petitioner
terminated his relationship with State Farm, the trust account
was closed and audited by State Farm.
II. Petitioner’s Retirement
Petitioner retired and terminated his relationship with
State Farm on February 28, 1997. At that time, he held
approximately 4,000 existing policies generated from 1,800
households. Approximately 90 percent of the policies were
assigned to one successor agent. The successor agent received
reduced compensation (that is, a lower percentage) for the
assigned policies.
Petitioner returned State Farm’s property, such as policy
and policyholder descriptions, which he gathered in master
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Last modified: May 25, 2011