Farmers Ins. Exchange v. Schirado

• Decision Date: 29 June 2006
• Docket Number: No. 20050221.,20050221.
• Citation: 2006 ND 141,717 N.W.2d 576
• Parties: FARMERS INSURANCE EXCHANGE, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance Company, and Farmers New World Life Insurance Company, Plaintiffs and Appellants v. Allen SCHIRADO, Defendant and Appellee.
• Court: North Dakota Supreme Court

Page 576

717 N.W.2d 576

2006 ND 141

FARMERS INSURANCE EXCHANGE, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance Company, and Farmers New World Life Insurance Company, Plaintiffs and Appellants v. Allen SCHIRADO, Defendant and Appellee.

No. 20050221.

Supreme Court of North Dakota.

June 29, 2006.

Jerry W. Evenson, Zuger Kirmis & Smith, Bismarck, N.D., for plaintiffs and appellants.

Charles "Casey" L. Chapman, Chapman and Chapman, Bismarck, N.D., for defendant and appellee.

CROTHERS, Justice.

[¶ 1] Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance Company, and Farmers New World Life Insurance Company (collectively "Farmers") appealed from a summary judgment dismissing their action against Allen Schirado for breach of contract, misappropriation of trade secrets, tortious interference with contract, conversion, unjust enrichment, and breach of fiduciary duty and awarding Schirado damages on his counterclaim. We reverse and remand, concluding there are genuine issues of material fact which preclude entry of summary judgment.

I

[¶ 2] In 1988, Farmers and Schirado entered into an "Agent Appointment Agreement." Under terms of the agreement, Schirado, as an independent contractor, agreed to act as an agent for Farmers to sell the various lines of insurance provided by Farmers. The agreement required Schirado to submit to Farmers all requests or applications for insurance for the classes underwritten by Farmers and eligible in accordance with Farmers' rules and manuals. The agreement further provided that all manuals, lists, and records, including information pertaining to policyholders, were the confidential property of Farmers and were to be returned to Farmers upon termination of the agreement. The agreement also contained provisions governing termination of the agreement by Farmers or Schirado.

[¶ 3] Schirado claims that on December 18, 2001, in compliance with a three-month notice provision in the agreement, he faxed a letter indicating his intent to resign effective March 31, 2002, to Betsy Nealon, Farmers' Executive Director for North Dakota and South Dakota. Nealon testified she never received the letter.

[¶ 4] In late March 2002, Schirado sent a letter to his clients notifying them he had terminated his contract with Farmers, stating:

This was not an easy decision to make after representing the company for over 14 years. The reasons for this decision are varied, but deal with ethics and the treatment of my clients.

Schirado then explained he would be continuing as an independent insurance agent with a new agency, and stated:

As you may have noted on the letterhead, my agency address and phone number are different. There is a clause in the Farmers contract which may allow them to take over my office and old phone number. I do not intend to allow that to happen without a fight but, like the man said, pray for the best but prepare for the worst.

Schirado concluded the letter by noting he would not be able to solicit the client on insurance matters for a period of one year, but "you on the other hand are free to contact whomever you desire." Farmers learned of Schirado's letter to his clients and, believing that the letter violated the terms of the parties' agreement, Nealon on March 28, 2002, faxed a letter to Schirado notifying him that Farmers was terminating the parties' agreement immediately.

[¶ 5] Under terms of the parties' agreement, Schirado was to be paid "Contract Value" payments upon termination of the agreement. Farmers was allowed to make Contract Value payments in installments. Schirado requested his Contract Value payments and Farmers sought return of all policyholder information and documents. There were disputes between the parties in attempting to resolve these matters. Schirado eventually received two Contract Value installment payments and he eventually transferred documents and records to Farmers. Farmers claims the documents were not in usable form and were returned too late to use in servicing existing policies.

[¶ 6] In August 2002, Farmers sued Schirado, alleging breach of contract, misappropriation of trade secrets, tortious interference with contract, conversion, unjust enrichment, and breach of fiduciary duty. Farmers claimed that, prior to termination of the parties' agreement, Schirado had sold policies to clients through other insurance companies which could have been provided by Farmers. Farmers also claimed that Schirado improperly attempted to induce clients to leave Farmers and take policies through Schirado with new companies, and that Schirado's retention of policyholder records and documents hampered Farmers servicing of existing policies and resulted in monetary damages to Farmers. Schirado answered, denying all of Farmers' claims, and filed a counterclaim seeking payment of the balance of his Contract Value payments.

[¶ 7] Schirado moved for summary judgment dismissing Farmers' complaint and awarding him judgment on his counterclaim. The district court determined there were no genuine issues of material fact on any of Farmers' claims and ordered summary judgment dismissing the complaint. The court also determined there were no genuine issues of material fact on Schirado's counterclaim and ordered judgment in favor of Schirado for $6,690 plus interest. Farmers appealed, contending the district court erred in determining there were no genuine issues of material fact on any of the claims raised in Farmers' complaint and in awarding the Contract Value payments to Schirado on his counterclaim.

II

[¶ 8] "Summary judgment is a procedural device for the prompt resolution of a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law." MBNA America Bank, N.A. v. Hart, 2006 ND 33, ¶ 6, 710 N.W.2d 125. A party moving for summary judgment has the burden of showing there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ballensky v. Flattum-Riemers, 2006 ND 127, ¶ 7; Anderson v. Selby, 2005 ND 126, ¶ 7, 700 N.W.2d 696. In considering a motion for summary judgment, the court may examine the pleadings, depositions, admissions, affidavits, interrogatories, and inferences to be drawn therefrom to determine whether summary judgment is appropriate. Anderson, at ¶ 7.

[¶ 9] Whether the district court properly granted summary judgment is a question of law that we review de novo on the entire record. MBNA, 2006 ND 33, ¶ 6, 710 N.W.2d 125. On appeal, this Court decides whether the information available to the district court precluded the existence of a genuine issue of material fact and entitled the moving party to judgment as a matter of law. Miller v. Diamond Res., Inc., 2005 ND 150, ¶ 8, 703 N.W.2d 316. "In determining whether summary judgment was appropriately granted, we view the evidence in the light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences that can reasonably be drawn from the evidence." Id.

III

[¶ 10] The gravamen of Farmers' claims against Schirado is its allegation that Schirado's actions, both before and after termination, caused potential clients to purchase insurance with other companies and caused Farmers' existing clients to discontinue their coverage with Farmers. Farmers claims Schirado's wrongful conduct caused significant damages to Farmers in the form of lost premiums.

[¶ 11] In granting Schirado's motion for summary judgment, the district court focused exclusively upon the issue of causation. The court concluded that all of Farmers' claims were precluded because Farmers had failed to present direct evidence through testimony of individual policyholders explicitly stating that they left Farmers due to Schirado's conduct. The court stated its rationale in its order granting the motion for summary judgment:

To show Schirado is the cause of Farmers damages in the amount of lost business would require the actual policyholders to state they left Farmers due to Schirado. Through discovery, Farmers has not been able to show this type of loss due to Schirado's actions. In this regard there are no questions of material fact and the Court grants Schirado's motion for summary judgment . . . .

[¶ 12] The district court's decision held Farmers to too high of an evidentiary standard. The trial court cited no cases or other supporting authority for its conclusion that causation could only be proven by direct testimony of actual policyholders stating that they left Farmers because of Schirado's actions. The determination whether certain conduct caused injury depends on the facts and circumstances of each case and generally is a question of fact for the trier of fact. See Miller, 2005 ND 150, ¶ 10, 703 N.W.2d 316; Rued Ins., Inc. v. Blackburn, Nickels & Smith, Inc., 543 N.W.2d 770, 773 (N.D. 1996). Any issue may be proven by circumstantial evidence or by a combination of direct and circumstantial evidence. Lovas v. St. Paul Ins. Cos., 240 N.W.2d 53, 61 (N.D.1976). Accordingly, a plaintiff may establish the elements of its claim by circumstantial evidence. See Forster v. West Dakota Veterinary Clinic, Inc., 2004 ND 207, ¶ 20, 689 N.W.2d 366; Heng v. Rotech Med. Corp., 2004 ND 204, ¶ 28, 688 N.W.2d 389. This Court expressly noted in Heng, at ¶ 28, that "circumstantial evidence may provide an inference of causation."

[¶ 13] This Court's holding in Forster in an analogous situation is particularly instructive. Forster was a veterinarian who claimed she was defamed when her prior employer, Brummond, told law enforcement officials and other veterinarians that Forster had poisoned Brummond's horse, had mistreated another horse, and had broken into Brummond's clinic and stolen drugs. Forster claimed Brummond's actions...