Ellis v. Smith-Broadhurst, Inc.

• Decision Date: 05 August 1980
• Docket Number: INC,No. 8018SC118,SMITH-BROADHURS,8018SC118
• Court: North Carolina Court of Appeals
• Parties: James N. ELLIS, Jr. v., and Jack Medlin.

Page 271

268 S.E.2d 271

48 N.C.App. 180

James N. ELLIS, Jr. v. SMITH-BROADHURST, INC., and Jack Medlin.

No. 8018SC118.

Court of Appeals of North Carolina.

Aug. 5, 1980.

J. Bruce Morton and R. Horace Swiggett, Jr., Greensboro, for plaintiff-appellant.

Nichols, Caffrey, Hill, Evans & Murelle by Charles E. Nichols and Robert D. Albergotti, Greensboro, for defendants-appellees.

ROBERT M. MARTIN, Judge.

Plaintiff assigns as error the entry of summary judgment for defendants. Summary judgment is proper only when there is no genuine issue as to any material fact and a party is entitled to summary judgment as a matter of law. G.S. 1A-1, Rule 56(c).

Plaintiff's action is based on the theory that plaintiff lost commissions as a result of defendant Medlin's making false comparisons to Industrial Air, the prospective purchaser, as to the respective earnings and net costs of the life insurance policies offered by plaintiff and defendant. Plaintiff contends that such misrepresentations are in violation of G.S. 58-54.4 which defines unfair methods of competition and unfair and deceptive acts or practices in the business of insurance. Plaintiff further contends that misconduct prohibited by G.S. 58-54.1 et seq. may be the basis of recovery pursuant to G.S. 75-1.1.

On 15 April 1977, at the time plaintiff filed his complaint in this action, G.S. 75-1.1 provided in pertinent part:

(a) Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.

(b) The purpose of the section is to declare, and to provide civil legal means to maintain ethical standards of dealings between persons engaged in business, and between persons engaged in business and the consuming public within this State, to the end that good faith and fair dealings between buyers and sellers at all levels of commerce be had in this State.

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(d) Any party claiming to be exempt from the provisions of this section shall have the burden of proof with respect to such claim.

G.S. 75-1.1(a) and (b) were subsequently rewritten, effective as to actions commenced on or after 27 June 1977. The amendment, effective after the present action was filed is not applicable here.

Defendants contend that plaintiff cannot recover damages under 75-1.1 because unfair and deceptive acts and practices in the insurance industry are regulated exclusively by the insurance statutes, G.S. 58-54.1 et seq., which do not contain a private right of action.

In Greenway v. Insurance Co., 35 N.C.App. 308, 314, 241 S.E.2d 339, 343 (1978), because this court found no misrepresentations had been made, it did not reach the issue of whether G.S. 75-1.1 "contemplates regulating the insurance industry . . ." In support of its holding that the business of selling services as a loan finder was regulated by Chapter 75, this court cited Ray v. Insurance Co., 430 F.Supp. 1353 (W.D.N.C. 1977) in which "a Federal court applying North Carolina substantive law . . . held that chapter 75, as this statute was worded prior to the 1977 amendments, was applicable to the sale of insurance." Johnson v. Insurance Co., 44 N.C.App. 210, 222, 261 S.E.2d 135, 144 (1979), rev'd on other grounds, N.C. , 266 S.E.2d 610 (1980). Although not bound by the decision in Ray, we find it persuasive in our construction of the scope of G.S. 75-1.1. We hold, therefore, that G.S. 75-1.1 provides a remedy for unfair trade practices in the insurance industry.

Upon the record in this case we find there are genuine issues of material fact in regard to whether defendants' comparison of the Home Life and National Life policies contained misrepresentations or false and misleading statements. Defendants vigorously contend that, assuming arguendo, there was some misrepresentation or misstatement as to the relative merits of the two policies, these alleged misrepresentations did not cause any damage to the plaintiff. Plaintiff's affidavit establishes that subsequent to the purchase by Industrial Air of the policies from defendant Medlin, plaintiff prepared another net cost comparison and presented it to Industrial Air. Plaintiff advised Industrial Air of the ten day period during which the insured has the right to cancel the sale and obtain a full refund of the premium. In the proposal submitted to Industrial Air during the ten day period, plaintiff pointed out the alleged errors and misrepresentations in defendants' proposal. Nevertheless, Industrial Air, on the same day, elected to retain defendants' policy. Defendants argue...