Garrett v. American Family Mut. Ins. Co.

• Decision Date: 02 December 1974
• Docket Number: No. KCD,KCD
• Citation: 520 S.W.2d 102
• Parties: Ted E. GARRETT, Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant. 26246.
• Court: Missouri Court of Appeals

Page 102

520 S.W.2d 102

88 A.L.R.3d 1115

Ted E. GARRETT, Respondent, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant.

No. KCD 26246.

Missouri Court of Appeals, Kansas City District.

Dec. 2, 1974.

Motion for Rehearing and/or Transfer Denied Jan. 28, 1975.

Application to Transfer Denied April 14, 1975.

Watson, Ess, Marshall & Enggas, Douglas Stripp, Paul R. Lamoree, Kansas City, for appellant.

Phillip L. Waisblum, Lem T. Jones, Jr., Jeremiah D. Finnegan, Kansas City, for respondent.

Before DIXON, C.J., and SHANGLER and WASSERSTROM, JJ.

SHANGLER, Judge.

The plaintiff Ted E. Garrett had judgment for $91,507 compensatory and $25,000 punitive damages for the breach of an oral contract of insurance agency and for tortious interference with his property rights under the contract.

The metamorphosis of this litigation bears upon the issues of limitations and damages, so we relate that progression: The action was commenced on January 30, 1958, in the Circuit Court of Jackson County, Missouri, against Farmers Mutual Automobile Insurance Company, Farmers Mutual Services and J. E. Caskey as defendants, by a petition in two counts. Count I alleged breach by defendant Farmers Insurance Company of the agency contract with plaintiff, and Count II alleged that defendants conspired to and tortiously interfered with the property rights of plaintiff in his insurance business. The suit was removed to the Federal Court and, on January 26, 1959, the action was dismissed by the court without prejudice. The action, this time stated in one count but otherwise intact, was refiled on April 17, 1959, in the state court from whence it had been removed designation Jack O. A. Nelson, assignee of Garrett, as plaintiff. Thereafter, Garrett was resubstituted as plaintiff and American Family Mutual Insurance Company (successor to Farmers Mutual Automobile Insurance Company) and Webb, Incorporated (successor to Farmers Mutual Services) were substituted as parties defendant with J. E. Caskey. (We refer to the defendant insurance company throughout as 'Farmers' because all the significant transaction with the plaintiff were concluded under that appellation.) In this posture, the action came on for trial without a jury. At the close of plaintiff's case the action against defendants Caskey and Webb, Incorporated were dismissed with prejudice. No error is assigned to this ruling. The final judgment for plaintiff was accompanied by findings of fact and conclusions of law.

The Evidence

The plaintiff Garrett established a general insurance agency in Johnson County, Kansas in May of 1948 to which he devoted full time. He represented, up to the time of trial, several casualty, fire and life insurance companies, and always for compensation on a commission basis. In the summer of 1949, Garrett was invited by Clint Grantier, Farmers State Director for Kansas, to represent Farmers in Johnson County and environs. On July 8, 1949, Garrett submitted written application for appointment as an agent for Farmers, and within days, he received written appointment from the company, and thereafter was licensed and received the company rate book and agent manual.

As to the terms of the agency agreement, Garrett testified that at the time of his recruitment Grantier represented to him that it would be Garrett's obligation to promote Farmers at his own expense, and in turn, he would receive an eight percent commission of insurance business written that once Garrett had forwarded to Farmers the written applications for insurance, the company would process the paper work at the home office in Madison, Wisconsin; that Garrett could write insurance for Farmers for as long as the company operated in the territory, but that the agreement was terminable, without more, by either party. Garrett was assured that his right to represent other insurers was unimpaired; that he was, in effect, building his own business so that in the event of termination of agency, Garrett would own his expirations and renewals ¹ and Farmers would not interfere with them. Grantier could not recall the exact account of the conversation, but acknowledged that his responses would have been as related by Garrett. Grantier did confirm, however, that he informed Garrett that Farmers did not deal through captive agents but through those who owned their own businesses.

Thereafter, Garrett began soliciting and selling automobile insurance for Farmers. In 1951, Lyman Spray became District Manager for Farmers and summoned Garrett to his office. Spray, who received overwrites on the commissions earned by the agents in his district, exhorted Garrett to greater effort. Garrett then mentioned Grantier's representations, which Spray confirmed. Spray assured him that his arrangement with Grantier was valid and that no written contract with Farmers was necessary.

Garrett soon became one of Farmers most productive agents. For the year 1953, Garrett was the top producer of casualty business in Kansas and was third in rank for the production of new casualty business in Kansas and was third in rank for the production of new casualty business company-wide. In that year he wrote 751 new casualty policies and 68 fire policies and received a bonus for his premium production. Garrett also received top underwriting bonuses for years 1953 and 1954 based upon favorable loss ratios on policies written by him for the previous three years.

The incidence of unfavorable loss ratios in the large population areas prompted Farmers to announce the Metropolitan Area Plan at the Kansas state convention in April of 1954. The plan designed to supplant the independent agency system then extant by a system of captive agents. Under this plan, agents in the areas affected would be required to represent Farmers exclusively or face termination of their contracts. This proposal caused immediate consternation to Garrett and other agents. Garrett promptly got in touch with Spray, the district director, and Grantier, the state director, for fuller information and was told the announced policy would be adopted: the only alternatives were to divest all other business and represent Farmers only or to be terminated. Shortly thereafter, a three-agent committee, including Garrett, met with the chief executive officer of the company and with the agency director in Madison, Wisconsin. They confirmed the plan would be given effect; that the alternatives open to the agents were acquiescence or cancellation. Garrett at no time agreed to the new policy.

After he returned home, Garrett received a letter from Kinnamon, agency director dated April 23, 1954, which acknowledged the meeting and established January 1, 1955 as the date the plan would be put into effect in Garrett's area.

Farmers experienced major personnel changes as it tried to convince its agents to accept the plan. (Only about six of forty-two agents in the district acceded to the new arrangement.) Spray resigned from Farmers in July of 1954 because the new plan was directly contradictory to the advisements he had made to his agents in the past that they owned their own businesses. Grantier was reduced from state director to district director to fill the position vacated by Spray. Grantier had tried unsuccessfully to get Garrett to agree to the plan, but because he was also opposed to the plan, he, too, left the company within a few months.

Garrett and retained counsel met with the district supervisor and state supervisor for Farmers on December 13, 1954 and Garrett was then shown a memorandum on 'Agent-Company Relations' which embodied the provisions of the Metropolitan Area Plan to be effective January 1, 1955. Garrett was asked to subscribe an acceptance of this plan, but refused. The provisions to which Garrett objected were the new requirements (1) that he represent Farmers exclusively and not represent other companies (2) that agents meet certain minimum production standards (3) that if terminated, his business would be assigned to another agent who would remit to him as terminated agent renewal commissions for twelve months (4) that successor agents would be furnished all new information and data on file concerning his clients and (5) that the company reserved the right to continue to mail premium notices, renewal certificates and cancellations to policyholders after termination of an agency.

Then on December 21, 1954, Garrett received a letter of cancellation of agency from Kinnamon, to be effective February 1, 1955. Garrett was informed by letter of February 10, 1955 that his Farmers license had been cancelled.

In contemplation of the approaching termination Garrett had begun to write new business and place policies which had expired in companies other than Farmers. In the last six months of 1954 Garrett sold only 24 casualty policies in Farmers compared to 192 such policies sold in the first six months of the preceding year.

On January 14, 1955, Garrett's attorney advised Farmers by letter that Garrett had a property interest in his expirations and renewals and that any effort by Farmers to transfer his business to a successor agent would be a breach of contract and invasion of these property rights, and further requested that Farmers not send renewal notices upon termination of the agency. Farmers responded by letter of January 19, 1955 that the company would continue its customary policy of sending out renewal notices and certificates, even after termination of Garrett's agency, and that the company would name a new agent to service its policyholders. (Grantier, on the other hand, testified that the procedure whereby renewal notices, and especially termination notices, were sent to the policyholders of terminated agents, was new to him.)

Garrett's agency terminated on February 1, 1955 and Farmers appointed Dwayne Marsden as his successor agent beginning March 1, 1955. Farmers furnished Marsden with information concerning Garrett's policyholders. Then on March 9...