Ins. Benefit Grp., Inc. v. Guarantee Trust Life Ins. Co.

• Decision Date: 07 December 2017
• Docket Number: No. 1–16–2808,1–16–2808
• Citation: 2017 IL App (1st) 162808,91 N.E.3d 950
• Parties: INSURANCE BENEFIT GROUP, INC., Plaintiff–Appellee and Cross–Appellant, v. GUARANTEE TRUST LIFE INSURANCE COMPANY, Defendant–Appellant and Cross–Appellee.
• Court: United States Appellate Court of Illinois

2017 IL App (1st) 162808

91 N.E.3d 950

INSURANCE BENEFIT GROUP, INC., Plaintiff–Appellee and Cross–Appellant,

v.GUARANTEE TRUST LIFE INSURANCE COMPANY, Defendant–Appellant and Cross–Appellee.

No. 1–16–2808

Appellate Court of Illinois, First District, Fourth Division.

December 7, 2017

Cornelius E. McKnight, Kevin Q. Butler, and Nathan P. Karlsgodt, of McKnight, Kitzinger & Pravdic, LLC, of Chicago, for appellant.

William D. Kelly and James J. Karras, of Kelly & Karras, Ltd., of Oak Brook, for appellee.

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

¶ 1 Plaintiff Insurance Benefit Group, Inc., filed suit against defendant Guarantee Trust Life Insurance Company for violation of a marketing agreement. The matter proceeded to a bench trial on counts III and V of the complaint, and the trial court entered judgment in plaintiff's favor on one part of count III; it entered judgment in defendant's favor on the remainder of count III and on count V. Defendant appeals, arguing that the trial court should have found in defendant's favor on the entirety of count III. Plaintiff cross-appeals, arguing that the trial court should have found in its favor on the entirety of count III and that the trial court erred in finding in defendant's favor on count V and in denying plaintiff leave to file a second amended complaint. For the reasons that follow, we affirm.

¶ 2 BACKGROUND

¶ 3 I. Complaint

¶ 4 A. Allegations of Complaint

¶ 5 On August 10, 2011, plaintiff filed a five-count complaint against defendant; the complaint was subsequently amended, and it is the first amended complaint that proceeded to trial. Counts III and V of the first amended complaint were the only counts at issue at trial, and plaintiff does not raise any arguments concerning any other counts.¹ Accordingly, we discuss only the two relevant counts of the first amended complaint.

¶ 6 Count III of the first amended complaint was for breach of a written contract and alleged that defendant sold various insurance products, including health insurance products, within the state of Illinois. In the course of this business, defendant had entered into a reinsurance agreement with Munich Reinsurance America, Inc. (Munich). In October or November 2007, Montgomery Edson, on behalf of defendant, approached Richard Hayes, plaintiff's president and chief executive officer, to determine whether plaintiff would be interested in developing and marketing certain of defendant's health insurance programs. After discussions between Edson and Hayes, on December 1, 2007, plaintiff and defendant executed a marketing agreement under which plaintiff agreed, among other things, to become the exclusive marketer of certain of defendant's insurance products. In January 2008, based on plaintiff's agreement to become defendant's exclusive marketer under the marketing agreement, Munich extended its reinsurance agreement with defendant for one year.

¶ 7 Under the terms of the marketing agreement, defendant authorized and appointed plaintiff as defendant's exclusive marketer for various insurance programs offering health insurance policies within the territories listed in the marketing agreement, including 40 states within the United States. The size of the territory set forth in the marketing agreement "was a material consideration" for plaintiff entering into the marketing agreement.

¶ 8 Additionally, under the terms of the marketing agreement, "[defendant] agreed to pay [plaintiff] certain commissions," consisting of:

"(a) Three percent (3%) of all premiums collected regardless of who sold the product;

(b) The allowable producer commission * * * as set forth in the reinsurance treaty * * *."

On August 1, 2009, plaintiff and defendant entered into an amendment of the marketing agreement which, among other things, amended the calculation of the producer commission, which had previously been calculated by reference to the reinsurance agreement with Munich. According to the complaint, "[t]he payment of commissions on both the original sale of a health insurance policy as well as the renewal thereof was a material consideration" for plaintiff entering into the marketing agreement.

¶ 9 The complaint alleged that sometime in July 2009, defendant began to discontinue certain health insurance programs that fell within the terms of the marketing agreement and replace them with others that defendant claimed did not fall within the terms of the marketing agreement. Hayes advised Edson that plaintiff objected to the replacement of these policies. On January 1, 2010, defendant terminated the marketing agreement. The complaint alleged that the purpose for terminating the marketing agreement "was to avoid paying [plaintiff] the three percent (3%) commission and Producer Commissions rightfully due" plaintiff.

¶ 10 Count III alleged that defendant breached the express terms of the marketing agreement by (1) failing to maintain authority to sell certain insurance products in states that were part of plaintiff's territory, (2) discontinuing insurance policies that fell within the terms of the marketing agreement and replacing them with policies that defendant claimed did not fall within the terms of the marketing agreement, (3) failing to pay plaintiff the 3% commissions due to plaintiff on policies already sold, (4) failing to pay plaintiff all of the producer commissions due to plaintiff, and (5) terminating the marketing agreement in violation of the terms of the marketing agreement. At trial, the focus was solely on the payment of two fees allegedly owed to plaintiff.

¶ 11 Count V of the first amended complaint was for breach of an oral agreement and alleged that in spring 2008, plaintiff determined that defendant was selling products in states in which defendant had not received approval to sell. According to the complaint, "[t]he products that were being sold without having been approved for such sale did not fall within the terms of the Marketing Agreement and [plaintiff] was not receiving any commissions for their sale." When Hayes discovered that defendant was not approved to sell products in certain states, he advised Edson that defendant needed to obtain approvals in the states in which defendant was not in compliance. According to the complaint, "[w]ithout Richard Hayes' original knowledge, Al Heindal, [defendant's] Compliance and Licensing Officer, asked Karen Marcozzi, an employee of [plaintiff],^{[2 ]} to assist [defendant] in obtaining such approvals."

¶ 12 When Hayes discovered that Marcozzi "was performing tasks which were not [plaintiff's] responsibility under the Marketing Agreement," Hayes advised Edson "that because it was not [plaintiff's] responsibility under the Marketing Agreement to perform compliance work on products which were not governed under the terms of the Marketing Agreement and for which [plaintiff] was not being paid commissions, [plaintiff] would not allow Karen Marcozzi to continue to work with [defendant] on those efforts." In response, Edson offered to Hayes "that if [plaintiff] would continue to allow Karen Marcozzi to assist [defendant] in seeking compliance for insurance products that were not governed by the terms of the Marketing Agreement and for which [plaintiff] was not being paid commissions, [defendant] would pay [plaintiff] for Karen Marcozzi's services at Karen Marcozzi's billing rate of $50.00 per hour." Hayes accepted this offer on behalf of plaintiff, and Marcozzi continued to assist defendant in obtaining state approval for sale of the products. However, in breach of the oral agreement, defendant refused to pay plaintiff for the time and expenses incurred by Marcozzi.

¶ 13 B. Marketing Agreement

¶ 14 Attached to the complaint was a copy of the marketing agreement. Article III of the marketing agreement was entitled "Marketer's Compensation" and provided, in relevant part:

"A. [Defendant] will pay Marketer, as full compensation for all duties and responsibilities under this Agreement, the amounts set forth in Exhibit A. Compensation will be paid to you based on Policies produced by you and your Producers. Any commission payable will be made on at least a monthly basis and only after the receipt of premium by [defendant] for such Policy. Marketer shall refund to [defendant] any compensation received on cancellations, refunds and return premiums for such Policies.

B. Unless this Agreement is terminated for ‘cause’ as described below, your first year and renewal year commission are vested."

¶ 15 The marketing agreement also contained an integration clause, which provided:

"Entire Agreement . This Agreement supersedes all previous agreements, whether written or oral, between [defendant] and Marketer, or their predecessors with respect to the Business to be written under this Agreement.

1. This Agreement may be amended, altered or modified only in writing signed by both parties.

2. Manuals, rules, regulations, guidelines, instructions and directions issued in writing by [defendant] from time to time as provided in this Agreement, shall bind the Marketer as though a part of this Agreement."

¶ 16 Exhibit A to the marketing agreement, as amended,³ provided, in relevant part:

"Compensation:

Marketer's Fee: For all Policies/certificates issued on or after 12/1/07, Marketer will receive 3% of all premiums collected by [defendant's] third party administrator for such Policies/certificates, less any returns or refunded premium amounts.

Commissions:^[4] For the GTL Forms identified below, [plaintiff] will receive a commission on all base premium collected (no underwriting rate-up and no rate increase premium) by [defendant's] third party administrator for all Policies/Certificates issues, less any returns or refunded premium amounts. The commission rate shall be: 32% for policy/cert year 1; 10% for policy/cert year 2; and 8% thereafter as long as the policy/cert remains in force. These commission amounts do not apply to any replacement policies issued within 12 months of the

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