Farmers Ins. Exch. v. Morris

• Decision Date: 12 February 2016
• Docket Number: 1121091.
• Citation: 228 So.3d 971
• Parties: FARMERS INSURANCE EXCHANGE et al. v. Robert Kyle MORRIS
• Court: Alabama Supreme Court

228 So.3d 971

FARMERS INSURANCE EXCHANGE et al.

v.Robert Kyle MORRIS

1121091.

Supreme Court of Alabama.

February 12, 2016.

Bert S. Nettles and Brennan Ohme of Haskell Slaughter Young & Rediker, LLC, Birmingham, for appellants.

David G. Wirtes, Jr., George M. Dent III, J. Brian Duncan, Jr., and Lucy E. Tufts of Cunningham Bounds, LLC, Mobile, for appellee.

Matthew C. McDonald of Jones Walker, Mobile, for amicus curiae Alabama Civil Justice Reform Committee, in support of the appellants.

Drayton Nabers, Jr., and Scott S. Brown of Maynard, Cooper & Gale, P.C., Birmingham, for amicus curiae Business Council of Alabama, in support of the appellants.

PER CURIAM.

The remaining defendants below, Farmers Insurance Exchange; Fire Insurance Exchange; Truck Insurance Exchange; Mid–Century Insurance Company; Farmers New World Life Insurance Company; Farmers Group, Inc.; Farmers Financial Solutions, LLC; Bristol West Insurance Company; Foremost Insurance Company Grand Rapids, Michigan; Foremost Property & Casualty Insurance Company; and Foremost Signature Insurance Company (all legally distinct insurance entities hereinafter collectively referred to as "Farmers")¹ appeal from a judgment in favor of the plaintiff, Robert Kyle Morris.

Facts and Procedural History

In 2006, Morris, a licensed insurance agent, was working for his father's independent insurance agency, the Morris Insurance Agency ("Morris Insurance"). At some point, Morris contacted one of the Farmers entities about becoming a Farmers agent. Morris first met with Heather Lowry,² an employee of Michael A. Dewey Insurance Agency, Inc., which served as the district office for Farmers in Mobile and Baldwin Counties. Lowry testified that she showed Morris a presentation as an introduction to the opportunity to become a Farmers agent. She also testified that Morris told her that he worked for his father's insurance agency, and she admitted that she told Morris that being familiar with the insurance industry as a whole could possibly benefit him if he became a Farmers agent. Additionally, Lowry testified that, when she met with Morris, she was not aware that Farmers had a written policy that made Morris's relationship with his father's insurance agency unacceptable; that she did not have any documents available to her that would have made her aware that the relationship was unacceptable; that nothing in her training would have made her aware that a potential conflict of interest existed; and that the state office for Farmers did not ever tell her that she should not recruit Morris or that Morris was not a suitable candidate based on his relationship with his father's agency.

Lowry further testified that, after that initial meeting with Morris, she gave Morris's information to Michael Dewey, the district manager for Farmers, and to Steven Hunt, who was another of Dewey's employees. She testified that, in her discussion with Dewey, she would have mentioned the fact that Morris worked with his father's independent agency. Finally, she testified that, from that point, Dewey and Hunt took over Morris's recruiting.

Hunt testified that he worked in Farmers' district office and that he coached, managed, and helped train agents. He testified that, after Lowry met with Morris, Dewey wanted to meet with Morris and go over the reserve-agent package.³ Hunt testified that it was his understanding that Dewey said that it was okay to continue to recruit Morris.

Dewey testified that Hunt and Lowry both asked him if Morris's relationship with his father's agency was acceptable. He also testified that he talked to someone at the state office for Farmers; that he made the Farmers' state office aware of the proposed situation regarding Morris's relationship with his father's agency; and that the representative at Farmers' state office told him that the arrangement was acceptable. Dewey testified that he then told Hunt and Lowry that the arrangement was acceptable and that Hunt and Lowry then followed up with recruiting Morris to become a Farmers agent. Lowry, Hunt, and Dewey all testified that, at that time, they did not know that Morris's association with his father's agency constituted a conflict of interest and they did not know that Farmers had a written policy that provided that Morris's association with his father's agency after Morris becamea Farmers agent constituted a conflict of interest.

Morris testified that he initially became interested in working as a Farmers agent because Farmers had a policy whereby a Farmers agent could place insurance with a different company if a customer was not eligible for insurance issued by Farmers or if Farmers refused to underwrite a policy for the customer. He further testified that he had not been looking to disaffiliate himself from his father's insurance agency and that he had told Lowry that he did not want to cut off the working relationship he had with his father. During direct examination of Morris, the following occurred:

"[PLAINTIFF'S COUNSEL:] Did you specifically ask Farmers on multiple occasions before agreeing to become a Farmers agent if your association and continuing association with the Morris Insurance Agency was a problem in any way for Farmers?

"[MORRIS:] I asked them multiple times and always got the same answer.

"[PLAINTIFF'S COUNSEL:] And what was that answer?

"[MORRIS:] The answer was [it] is in no way a problem and is actually a benefit to you. That is the way I believed it to be.

"[PLAINTIFF'S COUNSEL:] All right. Did you rely on the representations made to you by Farmers ... before agreeing to become a Farmers agent?

"[MORRIS:] I relied on what they told me.

"[PLAINTIFF'S COUNSEL:] Would you under any circumstances have agreed to become a Farmers agent if Farmers would have told you the association with your father and the Morris Insurance Agency was a problem?

"[MORRIS:] Absolutely not."

Morris also testified that, when he agreed to become a Farmers agent, he signed several different agreements; that nothing in any of those agreements or documents indicated that his relationship with his father's agency constituted a conflict of interest; that the documents given to him did not say anything contrary to what he had been told by Dewey, Hunt, and Lowry; and that there was nothing in the agreements that made him think that the representations made to him by the agents of Farmers were false.

Morris submitted a "Reserve Agent Program Application," which was approved by Farmers' state office. That application showed that Morris was then working for his father's insurance agency. On January 15, 2007, Morris executed a "Reserve Agent Appointment Agreement" ("the reserve-agent agreement") and a "Horizontal Marketing Agent Relationship Agreement" ("the horizontal-marketing agreement"), both of which became effective on February 8, 2007. The reserve-agent agreement provided that it "may be terminated by either the Reserve Agent or the Companies on ninety (90) days written notice." After successfully completing the reserve-agent requirements, Morris became an agent with Farmers.

On May 22, 2007, Morris executed the "Agent Appointment Agreement" ("the agent agreement"), which was effective August 1, 2007. The agent agreement provided that it "may be terminated by either [Morris] or [Farmers] on three (3) months' written notice." At this time, Morris maintained an office at his father's insurance agency. Evidence was introduced indicating that Hunt had talked to Morris about the need for getting his own separate office. However, Hunt testified that he told Morris that Morris needed a separate office so he could put a Farmers sign out front and so that Morris and Farmers would have a presence in the community. He did not tell Morris that he needed to get a separate office because maintaining an office at his father's agency constituted a conflict of interest.

Edward Stansel is the division marketing manager for Farmers Insurance Inc.⁴ He testified that, based on various documents, which were introduced at trial, Farmers was aware of Morris's association with his father's insurance agency. On August 7, 2009, Stansel sent a memorandum to Keith Gockel, a senior marketing consultant for Farmers, requesting that the agent agreement be terminated and setting forth various issues he had with Morris. In the memorandum, Stansel pointed out that Morris's father owned an independent insurance agency in Mobile and stated that he had proof that Morris had placed insurance that was eligible to be written through Farmers with his father's agency. That allegation arose out of a situation where a customer of another Farmers agent canceled a Farmers policy and then obtained insurance through Morris's father's agency. The other Farmers agent complained to Farmers about the situation. Stansel admitted in his video deposition that was played at trial that he did not have any documentation to prove that Morris had caused the customer to cancel his Farmers policy and to place insurance with Morris's father's agency. Additionally, Stansel indicated that he had not interviewed anyone regarding the situation. Rather, Stansel testified that he believed that Morris had placed insurance that was eligible to be written through Farmers with his father's agency. There was also an allegation that Morris's telephone number appeared on a sign for Morris's father's insurance agency.

Additionally, Stansel testified that, in the memorandum he had sent to Gockel in which he recommended the termination of Morris's employment with Farmers, he had indicated that Farmers had had multiple issues with Morris in which agent counseling had taken place. Those issues included three instances in which Morris had not met minimum production standards; several instances when Morris had not appropriately applied cash he had collected to policies he had written; issues with Morris transferring policies from other agents without going through the proper procedure; an instance in which Morris provided a quote...