Guarantee Trust Life Ins. Co. v. Platinum Supplemental Ins., Inc.

• Decision Date: 09 December 2016
• Docket Number: Nos. 1-16-1612,1-16-1631,s. 1-16-1612
• Citation: 2016 IL App (1st) 161612,68 N.E.3d 481
• Parties: GUARANTEE TRUST LIFE INSURANCE COMPANY, an Illinois Mutual Reserve Company,Plaintiff-Appellant, v. PLATINUM SUPPLEMENTAL INSURANCE, INC., f/k/a Platinum Services, Inc., an Iowa Corporation, and Wayne A. Briggs, an Individual, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

2016 IL App (1st) 161612
68 N.E.3d 481

GUARANTEE TRUST LIFE INSURANCE COMPANY, an Illinois Mutual Reserve Company,Plaintiff-Appellant,
v.
PLATINUM SUPPLEMENTAL INSURANCE, INC., f/k/a Platinum Services, Inc., an Iowa Corporation, and Wayne A. Briggs, an Individual, Defendants-Appellees.

Nos. 1-16-1612
1-16-1631

Appellate Court of Illinois, First District, Sixth Division.

December 9, 2016

Reed Smith LLP, of Chicago (John S. Vishneski III, Paul Walker-Bright, Michael D. Richman, and Emily E. Garrison, of counsel), for appellant.

Kirkland & Ellis LLP, of Chicago (Andrew R. Running, Frank G. Dylewski, and Jeffrey L. Lula, of counsel), for appellees.

OPINION

JUSTICE ROCHFORD delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, Guarantee Trust Life Insurance Company (GTL), appeals an order (1) granting defendant Platinum Supplemental Insurance Inc.'s (Platinum's) motion to compel arbitration of plaintiff's complaint against Platinum for breach of contract, rescission, fraud, and breach of fiduciary duty; and (2) staying plaintiff's litigation against defendant Wayne A. Briggs (Platinum's president) for fraud, breach of fiduciary duty, and tortious interference with contract, pending the arbitration between GTL and Platinum. Mr. Briggs appeals the order denying his motion to compel arbitration of plaintiff's claims against him for fraud, breach of fiduciary duty, and tortious interference with contract. We affirm.

¶ 2 GTL provides a portfolio of health, accident, life, and special risk insurance products. Platinum markets and sells insurance products on behalf of insurance companies. Defendant Wayne Briggs is the founder of Platinum, served as its chief executive officer, and currently serves as its president and chairman of the board of directors.

¶ 3 On December 11, 2015, GTL filed this suit against Platinum and Mr. Briggs raising claims that stem from an April 4, 2002, marketing agreement between GTL and Platinum. Mr. Briggs signed the marketing agreement on behalf of Platinum as its president and CEO. The complaint sets forth the following factual background.

¶ 4 Pursuant to the marketing agreement, Platinum and GTL agreed to jointly develop a long-term care insurance product that would be marketed and sold exclusively by Platinum and underwritten by GTL. Platinum, on behalf of GTL, had the exclusive authority, personally or through "[i]ndependent [s]olicitors," to solicit and procure applications for the product, deliver issued policies, collect initial premiums, and service the business. Additionally, Platinum had the responsibility for supervising and managing its employees and independent solicitors as to the marketing of the product on GTL's behalf and for "compliance with all applicable local, state and federal laws and regulations" and with GTL's rules concerning advertising and marketing conduct. GTL's advertising policy required that, prior to use, all sales materials be approved, in writing, by its compliance department. As president and CEO of Platinum, Mr. Briggs was responsible for all aspects of Platinum's performance under the marketing agreement and had authority over Platinum's supervision, management, and training of its employees and independent solicitors in connection with soliciting and procuring insurance applications on GTL's behalf.

¶ 5 Platinum marketed and sold the product from April 4, 2002, through July 17, 2015. During that time period, through

68 N.E.3d 485

applications solicited and procured by Platinum, GTL issued 186,129 insurance policies and paid Platinum in excess of $226 million in commissions and other compensation.

¶ 6 The marketing agreement included a dispute resolution provision. Section 17 provided, in relevant part:

"17. Mandatory Binding Arbitration. Except as otherwise provided in this Agreement, all claims, disputes and other controversies arising out of or in any manner relating to this Agreement, or any other agreement executed in connection with this Agreement, or to the performance, interpretation, application or enforcement hereof, including, but not limited to, breach hereof (in each case, ‘Dispute’), shall be submitted to binding, non-appealable arbitration, and such arbitration shall be governed by the Rules of the American Arbitration Association (‘AAA’).

Either party may within one year from the date of the alleged breach or occurrence resulting in the Dispute, make a demand for arbitration by filing a demand in writing with the other party and serving the same by depositing it in the U.S. Mail, certified mail return receipt requested. GTL and Platinum shall each choose, within sixty (60) days after demand arbitration is made, a person from the panel of the AAA as its arbitrator and the two appointed arbitrators shall choose a third arbitrator."

Section 12(f) of the marketing agreement, which covered the effects of the termination of the marketing agreement, provided that, "[n]otwithstanding section 17," a nonbreaching party was entitled to seek injunctive relief against the party who breached a covenant in section 12. Additionally, section 13, which protected confidential and proprietary information, allowed injunctive relief and money damages for violations of section 13.

¶ 7 The marketing agreement also contained a choice of law provision. Section 16(f) stated that the marketing agreement was to be "construed and enforced in accordance with the law of the state of Illinois."

¶ 8 In December 2012, Michael Casper brought an action in Colorado state court (Casper v. Guarantee Trust Life Insurance Co., No 12 CV 740) (Pueblo County Dist. Ct. Colo.) (the Casper lawsuit) against GTL, Platinum, and an independent solicitor. GTL had issued an insurance policy to Mr. Casper in 2010 pursuant to an application solicited and procured by the independent solicitor (the Casper policy). The Casper lawsuit included claims against GTL for breach of contract and bad faith for GTL's denial of coverage under the Casper policy, claims against Platinum and the independent solicitor for negligently misrepresenting the scope of coverage during the sale of the Casper policy, and a claim against Platinum for failure to properly train its agents.

¶ 9 During the proceedings in the Casper lawsuit, GTL learned that Platinum, in violation of the marketing agreement, had failed to supervise, manage, or train its employees and independent solicitors to comply with all applicable local, state, and federal laws when soliciting and procuring applications on behalf of GTL and, during training, had used materials that had not been approved by GTL's compliance department. Platinum's breaches occurred over a period of years—from April 4, 2002, to at least December 5, 2012—and involved "thousands of applications."

¶ 10 Mr. Casper settled his claims against Platinum and the independent solicitor. However, the claims against GTL proceeded to trial. On July 15, 2014, the jury found in favor of Mr. Casper and

68 N.E.3d 486

against GTL. The judgment on the verdict included an award of approximately $1.9 million in damages against GTL, and GTL has appealed that judgment.

¶ 11 GTL's seven-count complaint in this case included four actions directed against Platinum: (1) rescission of the marketing agreement as a result of Platinum's alleged fraud and material breaches of that agreement, (2) common-law fraud in connection with its conduct that led to the Casper lawsuit, (3) breach of fiduciary duty for failure to ensure that its employees and independent solicitors solicited and procured insurance applications in a manner that did not expose GTL to the type of claims made in the Casper lawsuit, and (4) breach of the marketing agreement. The remaining three counts were directed against Mr. Briggs, in his capacity as Platinum's president and CEO: (1) common-law fraud due to his knowing or reckless disregard of Platinum's supervision, management, and training of its employees and independent solicitors with regard to soliciting and procuring insurance policies on behalf of GTL; (2) breach of fiduciary duty based on his knowing or reckless disregard of Platinum's conduct in wrongfully soliciting and procuring insurance applications that exposed GTL to claims similar to those set forth in the Casper lawsuit; and (3) tortious interference with contract. GTL sought to recover damages relating to the commission and compensation it had paid Platinum under the marketing agreement, except the commission and compensation, which was covered by a July 9, 2015, agreement between GTL and Platinum, and indemnification as to the Casper lawsuit.

¶ 12 Meanwhile, on November 21, 2014, GTL demanded that Platinum indemnify it for the legal fees and the judgment in the Casper lawsuit pursuant to section 15(b) of the marketing agreement. That section provided that "Platinum shall hold GTL * * * harmless" against any claim or action arising from any act of Platinum relating to the marketing agreement. Platinum, by letter dated December 12, 2014, denied GTL's indemnification demand. GTL provided written notice to Platinum of its termination of the marketing agreement effective July 17, 2015.

¶ 13 On July 9, 2015, GTL and Platinum entered into an agreement that resolved a number of issues between them arising out of the termination of the marketing agreement (settlement...