Alexander v. Cigna Corp.
| Decision Date | 05 January 1998 |
| Docket Number | No. Civ. 95-1661(JAG).,Civ. 95-1661(JAG). |
| Citation | 991 F.Supp. 427 |
| Court | U.S. District Court — District of New Jersey |
| Parties | Albert A. ALEXANDER, Alexander Agency, Inc., William J. Hourigan, Jr., Broome-Hourigan, Inc., Gene F. Stern, Lester G. Block, Thomas J. Fria, Kurmin Insurance Agency Inc., Jay S. Horn, Horn Insurance Services, Ltd., John Cecchettini, d/b/a/ John Cecchettini Insurance Agency, JJSG, Inc., t/a Holly Park Insurance Agency, Jonathan Klein, Professional Insurance Mangers, Inc., Robert J. McVeigh d/b/a/ McVeigh Insurance Agency, Robert J. McVeigh, John Cecchettini, David J. Carlough, Jr., David J. Carlough, Sr., and WMR. Troop Agency, Inc., Plaintiffs, v. CIGNA CORPORATION, CIGNA Fire Underwriters Insurance Company, CIGNA Property & Casualty Insurance Company, CIGNA Insurance Company, Bankers Standard Insurance Company, Bankers Standard Fire & Marine Insurance Company, Century Indemnity Company, Insurance Company of North America, Pacific Employers Insurance Company, Aetna Fire Underwriters Insurance Company and Aetna Insurance Company, Defendants. |
Jack Atkin, Hector Torres, Kasowitz, Hoff, Benson, Torres & Friedman, New York City, for plaintiffs.
Law Offices of Dana G. Kirk, Houston, TX, for plaintiffs.
Thomas A. Martin, John L. Amabile, Michael P. Collins, Putney, Twombly, Hall & Hirson, Iselin, NJ, Baker & Botts, L.L.P., Austin, TX, for defendants.
This matter comes before the Court on the motion for summary judgment of Putney, Twombly, Hall & Hirson and Baker & Botts, L.L.P, co-counsel for defendants, CIGNA Corporation ("CIGNA Corp."), CIGNA Fire Underwriters Insurance Company, CIGNA Property & Casualty Insurance Company, CIGNA Insurance Company, Bankers Standard Insurance Company, Bankers Standard Fire & Marine Insurance Company, Century Indemnity Company, Insurance Company of North America, Pacific Employers Insurance Company, Aetna Fire Underwriters Insurance Company and Aetna Insurance Company (collectively referred to as "CIGNA P & C").
Plaintiffs are nine independent insurance agencies, located in New Jersey, and their principals (collectively referred to as "COMPAR Agents").1 Defendant CIGNA Corp. is a Delaware corporation. The remaining defendants (collectively "CIGNA P & C") were, at all relevant times, subsidiaries of CIGNA Corp. and were engaged in the business of writing property and casualty insurance policies through independent insurance agencies.
In 1972, Insurance Company of North America (now a part of the CIGNA Property and Casualty Companies), started a program known as "COMPAR." Under COMPAR, an insurance agent agreed to write virtually all of his property and casualty business through CIGNA P & C; in exchange, CIGNA P & C paid the agent higher commissions and enhanced profit-sharing bonuses, among other benefits. Martin Cert.Ex. 64 at 33-36 & Ex. 65 at 17.2 According to the defendants, the idea behind COMPAR was that it would be beneficial for both agents — i.e., the agents would increase their commission and bonus income and lower their overhead expenses by having to deal with only one company, id., and the company would benefit by attracting a lower risk class of insurance business because only those insurance agencies who were successful at identifying profitable business would be invited to join the COMPAR program. Id. at Ex. 46 at 35-36. However, according to the plaintiffs, the fact that the COMPAR agents exclusively represented CIGNA, "made the COMPAR Agents totally dependent on CIGNA because it required them to sever and prevented them from developing relationships with, and selling products for, CIGNA's competitors and hinged the COMPAR Agents' success solely on CIGNA's performance." Plaintiff 12G at 3, ¶ 4.3
By 1990, COMPAR was a nationwide program. Hourigan joined COMPAR in 1972, Alexander in 1973, Troop in 1975, McVeigh in 1979, Professional Insurance in 1984, Horn in 1984, Block in 1988, Cecchettini in 1988 and Kurmin in 1988. Every few years, these COMPAR Agents signed new, virtually identical documents; they signed their last such document in late 1989, effective January 1990.4 Plaintiff 12G at 2, ¶ 2.
Because the program required an agency to give up its contracts with other standard carriers, the relevant COMPAR contracts that CIGNA P & C offered its agents contained a minimum period of five years before they could be canceled (an initial three year term, after which a two-year notice of termination could be given to either side) unless the contract was mutually amended or consensually terminated during its term. Each Full Service Agency Agreement also contained a merger or integration clause which explicitly nullified all prior oral and written agreements between the agency and CIGNA P & C. Supp.App.Ex. 2. The applicable merger clause in the 1990 Agreement, reads as follows:
11. This Agreement is a Full Service Agency Agreement between you and us. Any previous agency agreement, whether between you and us, whether oral or written, is now void. The Agreement may be amended only in writing and the amendment must be signed by you and us.5
The contract — including the 1990 Agreement — executed by each of the plaintiff agencies states: Supp.App.Ex. 2 ¶ 1(b). Plaintiffs' testimony confirms that COMPAR agents operated fully independent businesses and made their own business decisions. Martin Cert. Exs. 16-19.
In approximately February 1990, CIGNA P & C informed the COMPAR Agents that they were terminating the COMPAR program, effective January 1992. Plaintiffs claim this termination was abrupt and unilateral and that it left them unable to re-establish ties with other carriers in order to service their existing business, much less seek to obtain new business. As a result, the COMPAR Agents claim they were severely damaged, up to and including the complete destruction of the businesses of four of the plaintiffs.6
Defendants claim that the termination of the COMPAR program emanated from a change in the "organizational structure" of CIGNA P & C. According to Caleb Fowler, then President of CIGNA P & C, a task force was formed in mid-1989. The task force's work led him to conclude that CIGNA P & C's focus for the 1990's should be on "segmentation," whereby CIGNA P & C would concentrate on certain "core segments" in which insurance for particular types of business would be written. Martin Cert.Ex. 45 at 94-99, 102-05, 110, 116-18. As a result, Fowler decided that CIGNA P & C could not meet the broad underwriting needs of the COMPAR agents and that the COMPAR program should therefore be changed to a non-exclusive relationship. Id. at Ex. 47. According to the defendants, management learned of this decision on the same day as CIGNA P & C sent written notice to each plaintiff that the COMPAR program was to be phased out. Id. at Ex. 48. Indeed, Fowler testified that he had no intention to end COMPAR in the 1980's and never considered it until early 1990. Id. at Ex. 45 at 74-76, 99-100.
Moreover, simultaneous with informing the agents in or about February 1990 that the COMPAR program would be terminated, CIGNA P & C offered the agents an amendment to the 1990 Agreement — the so-called "transition agreement."7 The transition agreement continued the commission and profit sharing from the 1990 Agreement but allowed the agents to "sell insurance policies issued by insurers other than us and you may become licensed to represent such insurers." Martin Cert.Ex. 14. All nine agencies took advantage of and signed the transition agreement, which became effective January 1, 1992. The 1992 Agreement contained a merger clause with language virtually identical to that in the 1990 Agreement. Id. at Ex. 15 ¶ 10. Thus, each plaintiff expressly agreed that the 1990 Agreement was "now void."
However, plaintiffs claim they were forced into signing the transition agreement; specifically, they claim they were told that if they did not sign the new agreement that CIGNA P & C would enforce "exclusivity" — i.e., the COMPAR Agents would not be allowed to seek out other carriers — and simultaneously cut their commissions and other benefits and would not underwrite their business. Atkin Cert.Ex. 28 at 423-24, Ex. 30 at 247-48, Ex. 31 at 292-99, Ex. 32 at 339-344, Ex. 33 at 235-37, Ex. 34 at 191, Ex. 35 at 610-11, Ex. 43 at 138-39.8 As a result, plaintiffs claim they were financially harmed by, among other things, the fact that CIGNA: (a) immediately began refusing to underwrite the COMPAR Agents' new business; (b) immediately began refusing to provide competitive pricing for the COMPAR Agents' existing business; (c) forced the COMPAR Agents to spend most of their time seeking alternative carriers — which they could not find — for their existing business, precluding them from seeking new business; and (d) reduced the COMPAR Agents' commission rates after the so-called transition period.
In April 1995, more than five years after executing the transition agreement, plaintiffs filed a Complaint in this Court.9 On August 30, 1996, plaintiffs filed an Amended Complaint, alleging breach of fiduciary duty, negligent misrepresentation, fraudulent inducement, fraudulent concealment, breach of contract, promissory estoppel, equitable estoppel and reformation.10 Specifically, plaintiffs claim that:
CIGNA betrayed the trust and confidence plaintiffs placed in CIGNA by, among other things: (i) concealing the serious concerns CIGNA had about the program's profitability in late 1986 through 1988; (ii) concealing the fact that CIGNA was considering "abandoning" the COMPAR program as early as 1987; (iii) concealing CIGNA's lack of commitment to the COMPAR program as early as 1987; (iv) concealing CIGNA's plans to reduce COMPAR benefits...
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