Hahn v. Kotten

• Decision Date: 23 July 1975
• Docket Number: No. 74-608,74-608
• Citation: 43 Ohio St.2d 237,331 N.E.2d 713,72 O.O.2d 134
• Parties: , 85 A.L.R.3d 1147, 72 O.O.2d 134 HAHN, Appellee, v. KOTTEN et al., Appellants.
• Court: Ohio Supreme Court

Page 237

43 Ohio St.2d 237

331 N.E.2d 713, 85 A.L.R.3d 1147, 72 O.O.2d 134

HAHN, Appellee, v. KOTTEN et al., Appellants.

No. 74-608.

Supreme Court of Ohio.

July 23, 1975.

[331 N.E.2d 715] Syllabus by the Court

1. Communications from an insurance company to some of its policyholders, informing them that it has terminated for cause the employment contract of an agent who had previously dealt with such policyholders and that it questioned the agent's qualifications to sell insurance, are qualifiedly privileged; and, in the absence of proof of falsity and actual malice, and, in an action for slander against the insurance company and its agents, based upon such communications, such agent does not have a right of recovery.

2. A qualified privilege protecting the making of defamatory statements is exceeded when the statements are made with 'actual malice,' that is, with knowledge that the statements are false or with reckless disregard of whether they were false or not. (New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686, followed.)

This action for damages, compensatory and punitive, was based upon slander. The complaint alleges that the oral statements ascribed to defendants were malicious and intended to injure the good name, reputation and business of plaintiff, and, further, that the statements were false. It also alleges that defendants gained or sought to Defendants' first defense denies these allegations. The second defense pleads the truth of the allegations, if made. The third defense goes to the fairness of such statements, if made. Fourthly, defendants assert that, if the utterances were made, they consisted of a report on matters of public interest and made in good faith in accordance with defendants' right and duty to inform the public on matters on which the public has a right to be informed. The fifth and sixth defenses relate to the issue of the privilege of such statements, if made, contending 'that they were communications without malice to the public concerning matters of public interest and concerning plaintiff who is a subject of public interest'; and that they 'were privileged in that they pertained to or were motivated by a special relationship between defendants and persons insured by defendant Woodmen Accident and Life Company.'

gain economic benefits from the publication of such utterances.

Plaintiff, J. Roland Hahn, was employed as a district manager in Findlay, Ohio, by defendant, Woodmen Accident and Life Company, hereinafter called Woodmen, from October 1959 until October 13, 1971. At the time of the termination of plaintiff's employment, defendant Cletus B. Kotten was agency manager of the Western Ohio Agency for Woodmen in Findlay, Ohio, and defendants William Scott and Ralph J. Stough were district managers for the company working out of the same office. District managers primarily sell insurance and serve insureds while agency managers have overall responsibility of hiring, training and supervising district managers together with administration of the agency and the handling of claims.

On October 8, 1971, Woodmen notified Hahn that his district manager's contract was cancelled and terminated for cause.

Following this termination of Hahn's employment, Woodmen instructed its agents in the Findlay office that when contacting those insureds of Woodmen who had been sold policies by Hahn or who had been serviced by Hahn '(c) Termination For Cause:

they simply should advise such insureds that Hahn's contract had been terminated for cause, but if pressed for information, the agent might show the insured a copy of the district manager's contract which describes the circumstances under which an agent may be terminated for cause. Paragraph[331 N.E.2d 716] 4(c) of the district manager's contract states, in part

'Upon termination of this contract for cause because of district manager's embezzlement, fraud, willful violation of any provision of the contract or willful violation of any insurance law or regulation * * *.'

Defendants Kotten, Stough and Scott carried out the above instructions of the company. These men did call on a number of insureds who previously had been sold or serviced by Hahn. The only people to testify at the trial concerning statements made to them by representatives of Woodmen were insureds of Woodmen who, immediately prior to Hahn's termination, had been serviced by Hahn and were contemplating doing business with Hahn through his new company after the termination. The only exception to this was David R. Barlow a business associate of Hahn's who also was a previous business associate and a personal friend of defendant Stough. According to Barlow, Stough came to him out of a concern for Barlow's business reputation and motivated by his personal friendship with Barlow in alerting Barlow to Hahn's termination and the reasons therefor. Except for Barlow, all other persons who testified as to what was told them by defendants, were Woodmen's insureds serviced by Hahn, and it is significant to note that each of these insureds who testified switched their group accounts to Hahn's new company from Woodmen, even in light of the allegedly defamatory statements made about Hahn.

The record demonstrates a number of instances of questionable counduct on Hahn's part, as a district manager for Woodmen, leading up to his separation from Woodmen's employment.

One such incident involved a claim check payable to Ernest Haynes, an assured of Woodmen. In September 1969, Hahn processed a claim for Haynes, and Woodmen sent Hahn the claim check payable to Haynes in the amount of $1,389.45. According to Hahn, he took the check to the president of Fostoria Concrete, the employer of Haynes, and the president of the company obtained the signature of Haynes on the check. The endorsed check was returned to Hahn and Hahn deposited the check in his business account. Simultaneously, Hahn wrote a check for $400 payable to the president of Fostoria Concrete, who was supposed to cash the check and give $400 in cash to Mr. Haynes. For two years Hahn kept the balance of $989.45 in his personal business account and never told the company that he was holding that money.

In the summer of 1971, Woodmen became suspicious of the Haynes incident when Stough, one of the individual defendants, responded to a routine inquiry from Haynes concerning his claim. Stough was advised by Haynes that he had not received the proceeds from the claim check, and instead had received a significantly smaller cash payment from his employer. On August 25, 1971, in response to an inquiry from the home office, Hahn for the first time advised the company that the $989.45 had not been paid to Haynes, and in response to a further inquiry from the company as to where the funds were being held, Hahn advised the company that the funds were being held by Arthur Miller, Jr., president of Fostoria Concrete. At the trial, Hahn admitted that he knowingly lied in his letter of September 7, 1971, to the company because he knew, in fact, that the funds were still held in his business account when he advised the company that Mr. Miller was holding the money in escrow. Hahn stated further at the trial that a check in the amount of $989.45 was, in fact, given by Hahn to Miller for the Haynes escrow account in the middle of September 1971, but was backdated by Hahn nearly two years to show a date on the check of October 21, 1969, one week after the date on which the amount had originally The uncontradicted testimony of Hahn concerning the Haynes matter reveals that he intentionally deceived the management of Woodmen concerning this matter and that he willfully withheld funds belonging to Woodmen or one of its insureds for a period of two years. He deliberately commingled those funds with his other personal business funds which were used for his own personal or business purposes. It was only after an inquiry from Woodmen to Hahn and Hahn took any action to remedy this misuse of funds.

been deposited in Hahn's personal[331 N.E.2d 717] business account. Hahn further admitted that a review of his business account records revealed that the account fell below the amount of $989.45, in April 1970 and for one week in September 1970, so that there would have been insufficient funds to pay the amount purportedly held by Hahn in trust for Haynes.

A second incident shown by the record, which occurred during the late summer and early fall immediately preceding Woodmen's decision to separate Hahn from its employment, involved the Milo Smith single premium annuity. Again there is uncontradicted testimony as to what occurred. Smith was purchasing a single premium annuity from Woodmen. Of the $18,727 premium, approximately $13,000 was to come from a profit-sharing disbursement from Smith's employer. Because of the size of the premium and because of some delays in receiving that premium, Messrs. Kotten and Wood met with Hahn in late September 1971. According to Hahn's testimony, Kotten and Wood specifically asked him at that meeting if he had received the $13,000 check from Smith's employer, and Hahn said that his reply was 'No.' Hahn, however, testified during the trial that he had received the check before the meeting with Kotten and Wood. He knew that he had received the check when he told them he had not. This is the second instance in the trial where Hahn admitted that he lied to Woodmen representatives as to the whereabouts of funds belonging either to Woodmen or to one of its insureds.

Another clearly established fact from the record is that Finally, the evidence in the record was uncontroverted that Hahn, in several instances, overcharged individual members of groups by sub-billing these individuals at a higher premium rate than charged by the home office on its billings. Hahn remitted the lower amounts to the home office, pocketing the difference between what he was billing and the amount billed by the home office....