A.G. Edwards & Sons, Inc. v. Drew

• Decision Date: 31 July 1998
• Docket Number: No. 72707,72707
• Citation: 978 S.W.2d 386
• Parties: A.G. EDWARDS & SONS, INC., Plaintiff/Respondent, v. John R. DREW and the Daniel and Henry Company, Defendants/Appellants.
• Court: Missouri Court of Appeals

Page 386

978 S.W.2d 386

A.G. EDWARDS & SONS, INC., Plaintiff/Respondent, v. John R. DREW and the Daniel and Henry Company, Defendants/Appellants.

No. 72707.

Missouri Court of Appeals,

Eastern District,

Division Two.

July 31, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Sept. 30, 1998.

Application for Transfer Denied Nov. 24, 1998.

Sanford Goffstein, Lori R. Koch, St. Louis, for appellant.

Richard J. Pautler, St. Louis, for respondent.

RHODES RUSSELL, Judge.

A.G. Edwards & Sons ("AGE") brought suit against its insurance brokers, John R. Drew and The Daniel and Henry Company ("D & H"), for breach of contract and breach of fiduciary duty. The jury found in favor of AGE and awarded $581,645.40. The trial court subsequently entered an order sustaining AGE's motion for prejudgment interest in the amount of $157,191.69 and sustaining D & H's motion for credit for payment received in the amount of $170,686.00. D & H and Drew now appeal, arguing that the trial court erred in: 1) submitting both claims; 2) refusing to allow it to introduce evidence of AGE's conduct and evidence of AGE's settlement with a third party; 3) allowing AGE to submit an incorrect measure of damages; and, 4) awarding prejudgment interest on AGE's claims. We affirm.

AGE is an investment banking firm with its principal office in St. Louis. It provides medical benefits to approximately 7,000 of its employees and their dependents. D & H is an insurance broker with its principal office in St. Louis. Drew worked as a broker with D & H. D & H had been AGE's insurance broker since 1982. D & H assisted AGE with the purchase of a variety of insurance, including a kind of policy known as a stop-loss medical policy. ¹

AGE had a stop-loss medical policy issued by General American which would expire on March 1, 1992. In late 1991 or early 1992, AGE asked D & H to provide AGE with quotes from other insurers to see if it could replace the General American policy with comparable insurance at less cost. D & H and AGE entered into an oral agreement in which D & H agreed to obtain proposals and price quotations from various insurance companies for a stop-loss medical policy and to present those proposals and quotations accurately to AGE. AGE agreed to pay D & H a commission of approximately $30,000 for its services.

D & H solicited a proposal from Boston Mutual Life Insurance Company ("Boston Mutual"). On February 7, 1992, D & H received a quote sheet from Boston Mutual. The quote sheet indicated that it was a proposal for AGE with a proposed effective date of March 1, 1992. The quote sheet reflected a specific deductible of $175,000; the number of AGE employees; the number of AGE employees with dependent coverage; and the amount of paid claims for the previous year. The quote sheet also contained six columns with premium rates. Three columns were entitled "active" and three were entitled "waive." Drew circled the rate of $3.21 in the 15/12 "active" column.

On February 20, 1992, Drew presented four proposals to AGE, including one from Boston Mutual. The policy offered by Boston Mutual would reimburse AGE for claims in excess of $175,000 that it paid during the policy year commencing March 1, 1992. The policy contained a 90-day run-in provision, under which claims incurred between December 1, 1991, and February 29, 1992, would be covered. D & H did not inform AGE that the proposed policy from Boston Mutual contained an "active-at work" provision. ²

A representative from Boston Mutual met with AGE and D & H, however, the question of whether or not the policy being discussed contained an "active-at-work" provision was not raised by anyone. The next day, AGE accepted Boston Mutual's bid to provide medical stop-loss coverage for the policy year commencing March 1, 1992.

Shortly after the inception date of the Boston Mutual policy, AGE submitted three large claims to Boston Mutual. Boston Mutual refused to pay on the grounds that the policy (which had not been formally issued yet) contained an active-at-work provision, and that the employees to whom the claims related had not been actively at work for AGE on March 1, 1992.

AGE subsequently filed this lawsuit against D & H and Drew alleging breach of contract and breach of fiduciary duty. In its breach of contract claim, AGE alleged that AGE and D & H had an oral contract wherein D & H would obtain and deliver to AGE accurate quotations for medical stop-loss insurance. AGE further alleged that D & H and Drew were aware that AGE would not accept any medical stop-loss policy which contained an active-at-work provision because of the risk associated with obtaining such a policy. AGE averred that Drew presented it a proposal from Boston Mutual which was for a policy that included an active-at-work provision. According to AGE, Drew did not advise AGE that the proposal was for a policy which contained an active-at-work provision. AGE alleged that Drew and D & H breached the agreement by giving the wrong or inaccurate quotation and by not telling AGE that the quotation it was delivering was for a policy containing an active-at-work provision. AGE would not have purchased the Boston Mutual policy had it known the proposal or quotation contained an active-at-work provision. Instead, AGE would have renewed its policy with General American, which did not contain such a provision.

In its breach of fiduciary duty claim, AGE alleged that it entrusted to D & H and Drew the responsibility for obtaining and communicating accurately and completely the quotations of insurers willing to issue medical stop-loss insurance. AGE alleged that D & H and Drew breached their fiduciary duties by giving the wrong or inaccurate quotation, by not allowing AGE to see the quotations from Boston Mutual, and by not telling AGE that the quotation D & H was delivering was for a policy containing an active-at-work clause.

The jury returned a verdict for AGE on both claims and assessed AGE's damages at $581,645.40. The trial court entered judgment for AGE in the amount of the jury's verdict.

Following entry of judgment, AGE filed a motion for prejudgment interest and D & H filed a motion for credit for payment received. The trial court granted both motions, adding $157,191.69 for prejudgment interest and allowing D & H credit for AGE's settlement with Boston Mutual in the amount of $170,686.00. The net judgment against D & H was $568,151.09. This appeal follows.

In its first point, D & H contends the trial court erred in refusing to permit it to submit evidence of AGE's conduct because its conduct was relevant to the issue of damages. Specifically, D & H was precluded from introducing evidence that: 1) employees of AGE had knowledge of the magnitude of the Gary Parrish claim in January 1992, but failed to act upon that knowledge; 2) AGE could have paid certain bills incurred by Parrish prior to the inception date of the Boston Mutual policy, submitted the bills to General American and been reimbursed by General American; 3) Drew had not been made aware of the magnitude of the Parrish claim, as otherwise he would have advised AGE not to change stop loss carriers. In essence, D & H argues that since AGE knew about the medical expenses of Gary Parrish before March 1, 1992, it should have submitted his claims to General American before that policy expired. Thus, AGE could have reduced the amount of its claims under the Boston Mutual policy and thereby reduced its damages. According to D & H, AGE was contributorily negligent for failing to submit the Parrish claims to General American before its policy expired.

D & H made an offer of proof informing the trial court what the evidence would show. D & H stated that Brenda Signaigo, a senior benefits specialist with AGE, would have testified that she received a phone call from Parrish's wife on January 20, 1992. Mrs. Parrish also stated that her husband had been in the hospital since October 1991. D & H stated that Signaigo would have testified that she was aware on January 20, 1992 that Parrish had a serious illness which would have exceeded the stop-loss deductible of $175,000.

D & H would have also introduced the testimony of Marla Klopmeyer, another senior benefits specialist with AGE. Klopmeyer was aware that AGE had a stop-loss policy in effect in 1992 with a $175,000 deductible. Klopmeyer would have testified that if she had known that Parrish had a lung transplant she would want to make certain his claim was processed because she knew how important it was to process claims since AGE was self-insured and had a stop-loss carrier.

In addition, D & H would have introduced the testimony of Peggy Carson, an AGE employee responsible for obtaining stop-loss insurance. If Carson had been permitted to testify, she would have stated that if Signaigo had told her about the telephone call she received from Mrs. Parrish, she would have checked to see if a claim had been filed. If a claim had not been filed, Carson would have obtained the bill from the hospital, paid it, and presented it to General American for reimbursement. Carson would have stated that AGE could have been reimbursed by General American for Parrish's outstanding bill (less the $175,000 deductible) through the end of February 1992.

Further, D & H would have introduced the testimony of Robert Richter, an insurance underwriter for General American. Richter would have testified that had AGE followed up on the information it received in January regarding the Parrish claim, AGE could have paid those bills prior to March 1, 1992, and AGE could have submitted the bills to General American for reimbursement.

Finally, Drew would have testified that it would have been important to know about Parrish's condition on January 20, 1992. Drew would have also testified that had he known of the magnitude of the Parrish claim, he would have advised AGE to remain with General American.

The trial court precluded D & H from...