American Bankers Life Assur. Co. of Florida v. Frederick, 2030
| Decision Date | 12 May 1993 |
| Docket Number | No. 2030,2030 |
| Citation | 315 S.C. 97,431 S.E.2d 636 |
| Parties | AMERICAN BANKERS LIFE ASSURANCE COMPANY OF FLORIDA, Respondent, v. L.C. FREDERICK and Frederick and Associates, Inc., Appellants. . Heard |
| Court | South Carolina Court of Appeals |
William T. Toal, Columbia, for appellants.
Charles R. Norris, Columbia, for respondent.
Respondent, American Bankers Life Assurance Company of Florida, hereinafter American Bankers, brought this action against appellants, L.C. Frederick and Frederick and Associates, Inc., hereinafter Frederick, seeking an accounting, an injunction and damages for breach of contract and breach of fiduciary duty. The case was referred to a master-in-equity who, with the concurrence of American Bankers, struck the causes of action for an accounting and an injunction. Following a hearing on the matter, the master found Frederick breached a contractual and fiduciary duty and awarded American Bankers damages in the sum of $55,131.60. Frederick appeals. We reverse.
Frederick, a licensed insurance agent and president of L.C. Frederick and Associates, entered an agreement with American Bankers whereby Frederick agreed to sell American Bankers' insurance products to state employees through a payroll deduction plan. The Comptroller General would deduct premiums of participating state employees through Frederick's state slot number and remit the premiums to Frederick who would then remit the premiums to American Bankers and, in turn, receive a commission on those premiums. Frederick had represented American Bankers for approximately 20 years before American Bankers terminated their agreement in May of 1990. At the time the contract was terminated, 95% to 98% of Frederick's business was with American Bankers. Consequently, Frederick and his 31 subagents had virtually no business left. 1
American Bankers filed suit against Frederick alleging, among other things, that Frederick breached contractual and fiduciary duties by encouraging American Bankers' policyholders to transfer coverage to other insurance companies. Following a hearing, the master found that Frederick and his subagents did encourage and induce a majority of American Bankers' policyholders to leave American Bankers for another insurer and that this action was a direct breach of § 13(E) of the contract, and also a breach of Frederick's fiduciary duty to American Bankers. He found American Bankers would have received premiums of $55,131.60 from policyholders had Frederick not encouraged these policyholders to switch insurance companies.
On appeal, Frederick contends the master erred in finding American Bankers was entitled to the damages awarded for breach of § 13(E) of the contract and in finding Frederick breached a fiduciary duty owed to American Bankers. He asserts the clear unambiguous language of the agreement, which was prepared by American Bankers, provided the only penalty for encouraging policyholders to switch to another insurer was forfeiture of any renewal commissions. 2 We agree.
§ 13(E) of the contract provides as follows:
Our liability to pay commissions under this Agreement is expressly conditional on your continuing cooperation with our objective to conserve our policies and Agency force. This Agreement will be automatically terminated and no further commissions will be payable if, at any time, you attempt to induce our Agents to leave the Company or our Policyholders to:
(i) Lapse or surrender our policies, or
(ii) Borrow against their cash values in order to purchase the product of another company.
You agree that this condition shall also apply to your activities after this Agreement is terminated.
Particularly noteworthy is that the contract contains no provision prohibiting Frederick or the subagents from selling any other insurance company's products to American Bankers' policyholders after termination of the agreement. The contract contains no noncompetition clause and there is no evidence of any separate noncompetition agreement. Had American Bankers wished Frederick to be bound by such a prohibition, it could have easily provided so in the contract by specifically stating that such action was a breach of the contract subjecting Frederick to damages. It could also have included a noncompetition clause or entered into a separate noncompetition agreement with Frederick. However, it only provided that Frederick faced the forfeiture of commissions if he attempted to persuade the policyholders to lapse or surrender their policies or borrow against their cash values in order to purchase the product of another company. Thus, not only did American Bankers fail to designate such action as a breach of contract, but also permitted the action giving Frederick the choice to either sell a competing product to the policyholders, and ...
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