Elwert v. Pilot Life Ins. Co.

• Decision Date: 02 October 1991
• Docket Number: No. C-900473,C-900473
• Parties: ELWERT et al., Appellants, v. PILOT LIFE INSURANCE COMPANY et al., Appellees. *
• Court: Ohio Court of Appeals

Page 529

77 Ohio App.3d 529

602 N.E.2d 1219

ELWERT et al., Appellants, v. PILOT LIFE INSURANCE COMPANY et al., Appellees. ^*

No. C-900473.

Court of Appeals of Ohio, First District, Hamilton County.

Decided Oct. 2, 1991.

H. Fred Hoefle and Kenneth J. Koenig, Cincinnati, for appellants.

Porter, Wright, Morris & Arthur and Mark E. Elsener, Cincinnati, Fisher & Phillips, Mairen C. Kelly and Richard Stange, Atlanta, Ga., for appellees.

PER CURIAM.

This cause came on to be heard upon the appeal, the transcript of the docket, journal entries and original papers from the Hamilton County Court of Common Pleas, the assignments of error, the briefs and the arguments of counsel.

Plaintiffs Otto and Janet Elwert appeal from the trial court's grant of summary judgment to defendant Pilot Life Life Insurance Company ("Pilot Life"), which employed Otto Elwert first as a life insurance agent and later as a broker, and to defendants Billy Luttrell, Donald Ferris and Michael Aiken, who were also employed as agents by Pilot Life. The Elwerts ¹ raise five assignments of error, all of which concern the entry of summary judgment. The assignments are premised on separate theories that genuine issues of material fact precluded summary judgment on their claims for (1) tortious interference with Otto Elwert's business relationships, (2) libel per se, (3) slander per se, (4) violation of statutes governing unfair trade practices, and (5) punitive damages and attorney fees based on their first three claims. Because we hold that genuine issues of material fact should have precluded the entry of judgment as a matter of law with respect to the first and fifth claims asserted against Pilot Life, we reverse the judgment of the trial court in part and remand the cause for further proceedings.

Otto Elwert began selling life insurance in 1963 under a career agent's contract with Pilot Life. The contract required Elwert to submit all insurance applications he received to Pilot Life. Elwert earned commissions on sales of Pilot Life insurance policies based on a percentage of the initial first-year premium paid by the policy holder ("first-year commissions"), subsequent renewals of the policy ("renewal commissions") and service fees. The contract specifically provided for termination as follows:

"SECTION IV. TERMINATION OF CONTRACT

"A. This Contract may be terminated by either party at any time upon written notice to the other.

"B. In event of such termination, all further right to life commissions and service fees, other than deferred first year life commissions shall cease if:

"1. This Contract is terminated within three years from its date, or

"2. The Company terminates this Contract at any time on account of the withholding by the Agent of money belonging to the Company, or on account of rebating, twisting, or any fraudulent or dishonest act.

"C. Termination of this Contract after three full years continuous service hereunder, (except for violation of his obligations) vests the earned life renewal commissions in the Agent, less a collection fee of 1% of each premium, except that:

"1. If the Agent within twelve months from the termination of this Contract for any cause whatsoever enters the service of any other life insurance company to work in any territory where he had solicited under this Contract, the renewal commissions otherwise payable after the date of such connection shall be reduced one-half, or

"2. If this Contract is terminated for any reason and the Agent then or later endeavors to persuade any Agent to terminate his service with the Company, or to solicit business for another company, or shall attempt to induce a policy-holder to relinquish a policy or policies in the Company, the Agent shall forfeit any interest in renewal or other commissions he might otherwise be entitled to under this or previous contracts."

In August 1982, Elwert's agency contract with Pilot Life was terminated, and on September 1, 1982, the parties entered into a broker's contract that authorized Elwert to solicit applications not only for Pilot Life but also for other insurers. Elwert earned first-year and renewal commissions in the same manner provided by the agency contract. The broker's contract also contained similar provisions requiring written notice of termination and the forfeiture of renewal commissions in the event of termination for fraudulent or dishonest acts.

Shortly after the termination of Elwert's agency contract, Pilot Life closed its Cincinnati agency. Pilot Life opened a new office in Cincinnati one year later and hired defendant Billy Luttrell as a general agent in charge of the office and defendants Michael Aiken and Donald Ferris as sales agents. As part of its effort to establish the new agency, Pilot Life's regional vice president for the area, Howell DeBerry, told Aiken and Ferris either that Elwert was "no longer affiliated with" Pilot Life or "no longer with" Pilot Life and instructed them to contact a list of policyholders previously enrolled by Elwert while he was an agent. Aiken and Ferris sent form letters to approximately one hundred policyholders informing them of the new Pilot Life office address and stating, in one version dated March 28, 1984, that "[t]he agent from whom you purchased your contract is no longer affiliated with Pilot Life and I have been assigned to service your account." An alternative version of the letter dated April 10, 1984, stated that "[o]ur Agency is presently in the process of auditing and updating our files on policyholders who bought policies from agents not associated with this Agency." The letters then solicited a response from the policyholder either to review the policy with the agent or to update the agency's file.

As a result of the mailing, Aiken and Ferris directly contacted at least two policyholders enrolled by Elwert. During these meetings, the policyholders inquired about Elwert and were told by the agents either that, to their knowledge, he was no longer with Pilot Life and that his whereabouts were unknown, or that they did not know whether Elwert was still selling insurance. New policies were sold to the two clients, although one client cancelled the new policy after contacting Elwert and learning that Elwert was still selling insurance and acting as a broker for Pilot Life. It appears that Elwert lost renewal commissions on both policies, although the amount of the commissions is not stated in the record.

Upon learning of the communications between the new Pilot Life agency and the clients he had enrolled, Elwert filed his lawsuit on May 21, 1984, and obtained a temporary restraining order against Pilot Life. Although DeBerry may have intended to terminate Elwert at the time he instructed Aiken and Ferris to send the letters to Elwert's clients, Elwert was not given written notice of termination of the broker's contract until May 18, 1984.

The five counts of the complaint at issue in this appeal ² were resolved by the trial court's entry of summary judgment in all the defendants' favor. The court held that the first count of the complaint, which alleged tortious interference with Elwert's business relationships, was barred because, in the trial court's view, Elwert lacked a business relationship with the policyholders independent of his role as an agent for Pilot Life. We do not agree with the trial court's assessment of the law in the context of this case.

Tortious interference with business relationships has been defined by Ohio courts to occur when a person without privilege induces or otherwise purposely causes a third party not to enter into or continue a business relationship or perform a contract with another. Juhasz v. Quick Shops, Inc. (1977), 55 Ohio App.2d 51, 9 O.O.3d 216, 379 N.E.2d 235; Pearse v. McDonald's Systems (1975), 47 Ohio App.2d 20, 1 O.O.3d 164, 351 N.E.2d 788; Reichman v. Drake (1951), 89 Ohio App. 222, 45 O.O. 444, 100 N.E.2d 533. In support of its determination that Elwert, as a broker for Pilot Life, lacked a recognizable interest in the customers or their accounts, the trial court cited two cases, Cutter v. Lincoln National Life Ins. Co. (C.A.8, 1986), 794 F.2d 352, and Furr Marketing, Inc. v. Orval Kent Food Co., Inc. (S.D.Miss.1988), 682 F.Supp. 884, each involving a claim of tortious interference lodged by a broker against the broker's suppliers.

Cutter involved an action by a former life insurance agent who had become a broker, brought against the companies whose life insurance she sold. After she became a broker, defendants' agents contacted one of her clients and informed him that she had been terminated. One other client contacted the defendants' agent and allowed the agent to rewrite a policy written by the plaintiff. The court in Cutter held that "[t]here was no tortious interference here as a matter of law because there was no business relationship--contract or otherwise--which plaintiff had with the insureds which was independent of plaintiff's role as an agent for the defendant companies." Cutter, supra, at 356. The Cutter decision indicates, however, that when the plaintiff ceased being an agent and became a broker for the insurers, she "did not maintain the one-for-one vesting rights" to guaranteed renewal commissions she enjoyed as the companies' agent. She had also been paid all vested renewal commissions at the time her agency contract terminated.

In Furr Marketing, a broker of defendant's products sued when the defendant assigned other brokers to the plaintiff's customer accounts. The accounts were listed in the parties' nonexclusive brokerage contract. The court in Furr Marketing held that the broker was an agent employed by the defendant principal to make contracts on its behalf for a commission or fee, and thus the sales of the defendant's products by the broker were transactions between the customer and the defendant. The broker therefore was unable to establish any existing or prospective...