Bymaster v. Bankers Nat. Life Ins. Co.

• Decision Date: 18 July 1985
• Docket Number: No. 1-884A196,1-884A196
• Citation: 480 N.E.2d 273
• Parties: Glen BYMASTER and Rosemary Bymaster, Plaintiff-Appellants, v. BANKERS NATIONAL LIFE INSURANCE COMPANY, Pat E. Mattmann and Continental National Corporation, Defendant-Appellees.
• Court: Indiana Appellate Court

Page 273

480 N.E.2d 273

Glen BYMASTER and Rosemary Bymaster, Plaintiff-Appellants, v. BANKERS NATIONAL LIFE INSURANCE COMPANY, Pat E. Mattmann and Continental National Corporation, Defendant-Appellees.

No. 1-884A196.

Court of Appeals of Indiana First District.

July 18, 1985.

Larry J. Wilson, Martha Grace Reese, Wilson, Hutchens & Reese, Greencastle, for plaintiff-appellants.

David A. Ault, James E. Ayers, Wernle, Ristine & Ayers, Crawfordsville, for Bankers Nat. Life Ins.

NEAL, Judge.

STATEMENT OF THE CASE

Plaintiffs-appellants, Glen and Rosemary Bymaster (Bymasters), appeal a judgment rendered in the Boone Superior Court after a verdict by a jury in their suit against Bankers National Life Insurance Company (Bankers), Pat E. Mattmann (Mattmann) and Continental National Corporation (CNC) concerning life insurance applications.

We affirm in part and remand with instructions.

STATEMENT OF THE FACTS

All of the evidence was presented by Bymasters in their case in chief and is undisputed. On July 1, 1977, Bankers entered into a General Agent's Agreement with CNC to sell Bankers' policies. Bankers retained no sales force of its own, but sold life insurance only through general agents. CNC is a marketing rather than an insurance company. By the agreement, Bankers appointed CNC as an agent and independent contractor, but not as an employee. In turn, CNC appointed Mattmann, an officer of CNC, as its agent. Mattmann was not an agent of Bankers at this point. Thereafter, on July 27, 1977, Bankers entered a licensing agreement with CNC as "General Agent" and Mattmann as "agent". CNC then appointed Mattmann as its agent to solicit sales of Bankers' policies. Mattmann was still an employee of CNC rather than of Bankers and was paid by CNC. The General Agency Agreement provided that all money received by CNC for premiums would be held in a premium trust account and be due and payable immediately to Bankers. Bankers also had a right to audit the account. CNC was obligated to deliver 10% of the premiums to Bankers immediately, but could retain 90%. Additionally, CNC's commission was not earned until the policy was delivered.

On February 6, 1979, Mattmann made a sales presentation to the Bymasters for a $100,000.00 life insurance policy upon each of their lives. While representing to them that he was Bankers' agent, he gave them literature about estate taxes and CNC. Mattmann also showed them what their annual premiums would be and recommended an estate plan after taking their financial histories. The Bymasters filled out and signed insurance applications which reflected that Rosemary had a history of cancer and Glen had a history of heart trouble. The issuance of policies was conditioned upon a number of things including the passing of medical examinations. Glen wrote his check to CNC for $4,279.00, and Rosemary wrote her check to CNC for $4,668.00. These amounts represented the first year premiums. Mattmann then gave each a conditional receipt signed by himself and countersigned by Steven R. Bolson, Bankers' secretary. Mattmann also issued the Bymasters a written guarantee on behalf of CNC for the return of the premiums if the policies were not issued. Pursuant to the agency agreement, 90% of the premiums was retained by CNC and 10% remitted to Bankers.

The Bymasters submitted to medical examinations, but Bankers' underwriters required more information from the Bymasters' physician because of the Bymasters' adverse health histories. When such information was not forthcoming, Bankers notified the Bymasters on May 25, 1979 that their applications had been "incompleted", that is declined, since the conditions had not been met. When the Bymasters had not received the return of their premiums by June 20, 1979, and CNC had not responded to phone inquiries, Rosemary wrote Bankers and demanded the return of their premiums. That letter crossed in the mail with a letter from Bankers containing a check to the Bymasters for $916.10. This amount represented the 10% remitted to Bankers by CNC. The letter instructed them: "If any additional monies are due you, please contact CNC for the balance of any refund. If payment is not received within 10 days of your request to CNC, please contact the Illinois State Insurance Department". Record at 545. Until that time, the Bymasters were unaware of the 90%--10% arrangement.

Meanwhile, Bankers had commenced an audit of the premium trust account in December 1978, which continued into the first quarter of 1979. On March 19, 1979, Bankers terminated the agency agreement with CNC, effective April 18, 1979, because CNC had been slow in responding to inquiries and in making refunds. On May 30, 1979, Bankers made a formal demand of $51,021.00 from CNC as a result of CNC's failure to remit premiums. Thereafter, on June 20, 1979, Bankers made a formal complaint against CNC with the Illinois Department of Insurance. This alleged that CNC had repeatedly misrepresented the terms of certain policies and had repeatedly violated regulations concerning the return of monies held in premium trust accounts.

It is significant that Bankers was unaware for eight months after their mailing of the $916.10 that CNC had not remitted the 90% of the premiums to the Bymasters.

On July 12, 1979, nearly three months after the termination of the agency contract, and after the Bymasters had demanded the return of their premiums, Mattmann again approached the Bymasters. He claimed he did not know why Bankers had refused to accept the applications, but purported that he now was an agent for Equitable Life Insurance Company. In spite of the fact that the Bymasters had intended to demand their premiums back from Mattmann and CNC, they now executed new applications to Equitable upon Mattmann's representations that premiums previously paid would be transferred to Equitable's account. Mattmann then took back the two Bankers' conditional receipts and executed new ones on behalf of Equitable. The Bymasters accepted them. On August 20, 1979, the Bymasters were told by CNC they would have to take additional medical exams for Equitable. They refused and demanded their premiums back.

Bankers learned of this new transaction on February 22, 1980. Because of this intervening transaction with Equitable and CNC, Bankers assumed that the refund obligation to the Bymasters had been satisfied. Bankers' officer testified that Bankers would have made the refund had not Equitable's transaction intervened. Bankers also does not presently dispute that it owes the Bymasters the premiums. Additionally, CNC is in bankruptcy, and Bankers has over $400,000.00 in unsatisfied claims against it arising out of the agency agreement with CNC.

On November 7, 1980, the Bymasters brought suit against Bankers, Mattmann, CNC and Equitable for actual and punitive damages. Equitable was dismissed from the suit due to the execution of a loan receipt agreement with the Bymasters for $10,000.00. Judgment on jury verdicts was rendered as follows: against Bankers, $28,353.00 for actual damages; against CNC, $200.00 for actual damages and $100,000.00 for punitive damages; against Mattmann, $2,200.00 for actual damages and $50,000.00 for punitive damages. The trial court entered a judgment on the evidence, pursuant to Ind. Rules of Procedure, Trial Rule 50, in favor of Bankers as to punitive damages.

ISSUES

Bymasters appeal raising the following issues, restated by us:

I. Whether the trial court erred in granting Bankers' T.R. 50 motion for judgment on the evidence as to punitive damages.

II. Whether the trial court erred in making the judgment against Bankers subject to a set-off by reason of the loan receipt agreement with Equitable.

Bankers has perfected a cross-appeal raising one issue:

III. Whether the award of compensatory damages against Bankers was supported by sufficient evidence.

DISCUSSION AND DECISION

Issue I: Punitive Damages.

At the close of Bymasters' evidence, the sole evidence given at trial, the court granted Bankers' T.R. 50 motion for judgment on the evidence concerning punitive damages. Claiming this ruling as error, the Bymasters' argument proceeds as follows.

CNC and Mattmann were Bankers' agents and were permitted to solicit the sale of policies, collect premiums, and issue conditional receipts on behalf of Bankers. In addition, they were to maintain a premium trust account. The acts of the agents, CNC and Mattmann, were the acts of the principal, Bankers. Further, if CNC and Mattmann were unfit and Bankers was reckless in employing them or retaining them, Bankers would be liable for punitive damages under the authority of Orkin Exterminating Co. v. Traina, (1984) Ind.App., 461 N.E.2d 693.

We agree with the Bymasters that the governing rule for granting a T.R. 50 motion was stated in Ortho Pharmaceutical Corp. v. Chapman, (1979) 180 Ind.App. 33, 388 N.E.2d 541.

"The rule in Indiana with respect to motions pursuant to T.R. 50, for judgment on the evidence, is that such a motion may properly be granted only if there is no substantial evidence or reasonable inference derived therefrom supporting an essential element of the claim: a complete failure of proof. When considering a motion for judgment on the evidence, the trial court must consider only the evidence and reasonable inferences favorable to the non-moving party. Huff v. Travelers Indem. Co., (1977) Ind. , 363 N.E.2d 985; American Turners of South Bend v. Rodefer, (1978) Ind.App. , 372 N.E.2d 516. The motion must be denied 'where there is any evidence or legitimate inference therefrom tending to support at least one of the allegations. Where the evidence is such that the minds of reasonable men might differ, a directed verdict is improper, and the resolution of conflictive evidence is for the jury.' (Original emphasis). Vernon Fire & Casualty Ins. Co. v. Sharp, (1976) 264 Ind. 599, 349 N.E.2d 173, 179.

Id., 388 N.E.2d at 544.

The Bymasters attempt to demonstrate the...