American Pioneer Life Ins. Co. v. Williamson

• Decision Date: 23 June 1995
• Citation: 681 So.2d 1040
• Parties: 130 Lab.Cas. P 57,990 AMERICAN PIONEER LIFE INSURANCE COMPANY and Jerry Curtis, a Vice President of American Pioneer v. Freddy J. WILLIAMSON. 1921796.
• Court: Alabama Supreme Court

Page 1040

681 So.2d 1040

130 Lab.Cas. P 57,990

AMERICAN PIONEER LIFE INSURANCE COMPANY and Jerry Curtis, a Vice President of American Pioneer v. Freddy J. WILLIAMSON.

1921796.

Supreme Court of Alabama.

June 23, 1995.

Rehearing Overruled Nov. 22, 1995.

Stanley A. Cash and Walter J. Price III of Huie, Fernambucq & Stewart, Birmingham, for Appellants.

W. Michael Atchison and Jeffrey E. Friedman of Starnes & Atchison, Birmingham, for Appellee.

Kenneth Wallis, Montgomery, for Amicus Curiae Association of Alabama Life Insurance Companies.

Jack Drake of Drake & Pierce, Tuscaloosa, and Bruce McKee of Hare, Wynn, Newell & Newton, Birmingham, for Amicus Curiae Alabama Trial Lawyers Association.

COOK, Justice.

The defendants appeal from a judgment based on a jury verdict awarding $250,000 in compensatory damages and $3,000,000 in punitive damages to Freddy J. Williamson on his breach of contract and fraud claims against American Pioneer Life Insurance Company and Jerry Curtis, a vice president of American Pioneer. We affirm conditionally.

Freddy Williamson contracted in 1984 with American Pioneer Life ("APL") to sell its life insurance products, and he did so until early 1988, when the managing general agent for Alabama, as well as Williamson, were terminated for "lack of production." Williamson contacted APL in April 1988, and began selling again for APL in May of that year. He was terminated on April 13, 1989, again for lack of production. On April 25, 1989, APL wrote Williamson a letter notifying him that APL was invoking the "forfeiture of commissions" provision of his contract and that, pursuant to that provision, Williamson would no longer be entitled to receive commissions on insurance policies already in place. APL stated in its letter to Williamson that it was invoking the forfeiture provision because Williamson had replaced a client's APL policy with an insurance product from another insurance carrier.

Williamson's contract with APL provided the following regarding vested commissions:

"If this Contract is terminated by the Company or the Managing Sales Representative, or should the Managing Sales Representative die or become totally disabled while this Contract is in force, he, or in the case of his death, his heirs or legal representatives shall, except as hereinafter provided in this Contract, receive commissions that occur under the provisions of this Contract, if any. Such renewal commissions shall terminate when the total renewal commissions so payable are less than $300.00 anually."

Plaintiff's Exhibit Number 3.

The insurance contract further provided for the forfeiture of commissions, as follows:

"Forfeiture of Commissions

"Should you at any time, withhold Company funds, create fraud, malfeasance, or induce or attempt to induce policyholders of the Company to lapse, replace, or otherwise terminate their policies, or if your license is terminated for cause by the Insurance Department of any state, the Company shall terminate your right to all commissions or other compensation thereafter payable under this Contract or under any prior contract, and shall terminate this Contract as well as any other contracts then in force."

The client whose policy was replaced was Michael Carroll. Upon notification that Carroll's policy had been replaced, and without investigating the replacement, Karen Klein of APL wrote Williamson the following letter:

"It has come to our attention that you are replacing policies and according to your contract under 'Forfeiture of Commissions', we are terminating your right to all commissions or other compensation payable under your contract.

"If you have any questions regarding this matter, please contact either Mr. Al Parent, Treasurer, or me."

R. 593.

Williamson sued APL and Curtis, alleging breach of contract and fraud. The jury found in favor of Williamson and awarded compensatory damages of $250,000 and punitive damages of $3,000,000. The court entered a judgment based on that verdict. APL and Curtis appealed, contending that the trial court had erred in submitting the fraud count to the jury and, in the alternative, arguing that the judge should have ordered a remittitur of the $3,000,000 punitive damages award. ¹

In Southern Farm Bureau Life Insurance Co. v. Mitchell, 435 So.2d 745 (Ala.Civ.App.1983), the Court of Civil Appeals stated:

"We note that as a general proposition, an insurance agent has no inherent right to receive renewal premium commissions. Any such right accruing to him depends solely and strictly on the terms of his contract with the company he represents. Southern States Life Insurance Co. v. Allan, 38 Ala.App. 467, 87 So.2d 439 (Ala.Ct.App.1956)."

435 So.2d at 747. This Court must look to the contract between Williamson and APL to determine under what conditions Williamson was entitled to receive renewal commissions and under what conditions those commissions would be forfeited.

"To prove fraud, a plaintiff must allege and prove each of the following elements: 1) a false representation of 2) a material fact, 3) which was relied upon by the plaintiff, 4) who was damaged 5) as a result of his reliance. Ala.Code 1975, § 6-5-101. When promissory fraud is alleged, two additional elements must be proved: 1) that the misrepresentation was made with a present intent to deceive and 2) that, at the time the misrepresentations were made, the defendant intended not to perform. Leisure American Resorts, Inc. v. Knutilla, 547 So.2d 424 (Ala.1989) (citing Selby v. Quartrol Corp., 514 So.2d 1294 (1987); and Coastal Concrete Co. v. Patterson, 503 So.2d 824 (Ala.1987))."

Standard Furniture Mfg. Co. v. Reed, 572 So.2d 389, 391 (Ala.1990). With regard to "promissory fraud" and the element of "present intent to deceive," we have written:

"[T]his Court has often recognized that intent to deceive is an issue 'peculiarly within the province of the trier of facts.' Hodges v. Pittman, 530 So.2d 817, 819 (Ala.1988). See, also Super Valu Stores, Inc. v. Peterson, 506 So.2d 317 (Ala.1987); and Southeastern Properties, Inc. v. Lee, 368 So.2d 288 (Ala.1979). Nonetheless, this Court has written:

" ' " 'unless the plaintiff puts forth some proof that there was something more than a failure to perform, something upon which a jury could infer that at the time the promise was made the defendant had no intention of performing, it is error to submit a fraud claim to the jury.' " '

Hodges v. Pittman, supra, at 819 (quoting Martin v. American Medical International, Inc., 516 So.2d 640, 642 (Ala.1987), quoting other cases)."

Standard Furniture Mfg. Co., 572 So.2d at 392.

The forfeiture provision in Williamson's contract stated that any attempt on Williamson's part to induce a policyholder to replace an existing APL policy would result in the forfeiture of commissions. In support of his fraud claim, Williamson offered evidence tending to show that Carroll had initiated the replacement of his policy and that Carroll's decision to replace it was not, in any way, influenced by Williamson. Williamson also offered the following testimony from Al Parent, APL's treasurer:

"Q. What does the term 'replace' mean to you?

"A. The term 'replace' to me, would mean to take one item and substitute another.

"Q. To American Pioneer, in the context of this forfeiture clause, the word 'induce' and the word 'replace' are synonymous, aren't they, Mr. Parent?

"A. Yes, sir.

"Q. Do you have a dictionary, sir?

"A. Not with me, no.

"Q. Do you understand that a 'synonym' means that two words mean the same thing?

"A. Yes, sir.

"Q. I've got here a definition of 'induce' from Webster's 9th edition; do you see that?

"A. Now that you're closer, yes.

"Q. Let me give you a copy of it so you can see it. Jeff, would you give him a copy?

"Mr. Friedman: Yes.

"Q. (By Mr. Atchison) Do you have it there, sir?

"A. Yes, sir.

"Q. Okay. 'Induce,' make sure I'm reading it right. 'Induce, inducing,' I'll skip the Latin there. I'll begin with '1. To move by persuasion or influence.' Did I read that right?

"A. Yes, sir.

"Q. Tell this jury what evidence American Pioneer had on April 25th, 1989, that Fred Williamson had moved by persuasion or influence to cause Michael Carroll to do something?

"A. We had a replacement notice.

"Q. Had a replacement notice. Did you have a single other thing?

"A. I am not sure that we did, but I believe that form stood on its own.

"Q. Okay.

"....

"Q. Did American Pioneer ever tell its agents, like Freddy Williamson, that it was going to use the term 'induce' as a synonym to the word 'replace'?

"A. No, sir.

"Q. So what you're telling us is, and you correct me if I'm wrong. What you really meant to say was, 'Should you at any time replace, then you're going to lose your premiums'?

"A. Yes, sir.

"Q. Did y'all have lawyers help you draw this up?

"A. I believe so.

"Q. Did you ever give any notice to any agent that what you really meant was 'replace' and not 'induce' or 'attempt to induce'?

"A. What do you mean by notice?

"Q. Writing, telephone calls, seminar, mailout, like we saw the mailout where you talked about AM Best, things like that.

"A. None that I can specifically refer to."

R.T. 412-17.

"A. [Parent:] The replacement form has to stand on its own. We cannot be present when the transaction is going on. The agent has a vested interest, if you will, in making sure that he gets a new first-year commission. There is a real tangible consideration in an agent replacing policies. That clause is in there to protect the company.

"Q. I thought it was in there to protect the policyholder. Is it to protect the company?

"A. Protect the company. That's a contract between the company and the agent.

"Q. So when American Pioneer decided to make 'induce' be 'replace,' it was doing that to protect itself?

"A. Yes, sir."

R.T. 472-73.

Williamson, therefore, offered evidence at trial tending to show that APL entered into a contract with Williamson knowing that if he replaced...