Joe Cooper & Associates, Inc. v. Central Life Assur. Co.

Citation614 So.2d 982
PartiesJOE COOPER & ASSOCIATES, INC., et al. v. CENTRAL LIFE ASSURANCE COMPANY. 1910683.
Decision Date18 December 1992
CourtSupreme Court of Alabama

James C. Barton, David P. Whiteside, Jr. and David W. Proctor of Johnston, Barton, Proctor, Swedlaw & Naff, Birmingham, for all appellants except Larry W. Morris.

J. Michael Cooper of Tippins, Strickland & Cooper, Birmingham, for appellant Larry W. Morris.

Lewis W. Page, Jr. and Timothy A. Palmer of Lange, Simpson, Robinson & Somerville, Birmingham, for appellee.

HORNSBY, Chief Justice.

The plaintiffs filed this action against Central Life Assurance Company ("Central"), alleging breach of contract, fraud, intentional interference with business relations, tortious damage to reputation, and Central moved for a summary judgment on all counts. The trial court entered a summary judgment for Central on all claims except the fraud claims and JCIM's breach of contract claim. JCIM alleged that Central had breached two provisions of the parties' agency agreement entered on April 1, 1986: (1) provision 2.1(b), which prohibited Central from "solicit[ing] business from brokers and agents of, or acquired by, [JCIM] during the term of [the] Agreement and ... for a period of one (1) year following termination of [the] Agreement"; and (2) provision 8.5, which required Central to compensate JCIM, even if the parties terminated the April 1, 1986, agency agreement, "so long as [JCIM] continued to perform normal marketing functions and to service in-force business" on Central's behalf.

breach of fiduciary duty. The plaintiffs are Joe Cooper & Associates, Inc., an Alabama corporation; Joe Cooper Insurance Management, Inc., an Alabama corporation ("JCIM"); Middleton/Vaughan Plans Insurance Agency, Inc., a Texas corporation; Midwest Health Systems, Inc., an Illinois corporation; William Morse Associates, Inc., a Florida corporation; Joseph A. Cooper; Marlene Middleton; Terry Vaughan; William Morse; Edwin J. Becker; James E. Fox, individually and as successor to the American Medical Administration Group, Inc. ("AMAG"); and Larry W. Morris.

The trial court permitted all of the plaintiffs to present to the jury evidence that Central had fraudulently induced them not to move their Policy Employers Trust ("PET") business to another insurance carrier. In addition, the trial court allowed JCIM to present evidence that Central had breached the parties' agency agreement by soliciting four of JCIM's agents. Even though Central proved that JCIM received all the commissions due for insurance written by these agents, the trial court determined that JCIM had demonstrated sufficient evidence to establish that it was entitled to nominal damages for this breach.

At the close of the plaintiffs' case, Central moved for a directed verdict. The trial court directed a verdict for Central on Larry W. Morris's fraud claim, but allowed the other plaintiffs' claims to proceed. At the conclusion of all the evidence, Central again moved for a directed verdict. The trial court directed a verdict for Central on the fraud claims asserted by Joseph A. Cooper, Marlene Middleton, Terry Vaughan, William Morse, Edwin J. Becker, and James E. Fox, individually and as successor to AMAG. The trial court denied Central's motion for a directed verdict as to the corporate plaintiffs' fraud claims and as to JCIM's breach of contract claim, and submitted those claims to the jury. The jury found for the plaintiffs, awarding a total of $1,668,328 in compensatory damages for commissions lost as a result of the termination of PET, and $2,000,000 in punitive damages. The trial court entered a judgment accordingly, but, pursuant to Central's motion for a new trial or, in the alternative, a remittitur, the trial court reduced the punitive damages award to $300,000.

The judgment based on the jury's verdict is not in issue on this appeal. Instead, all the plaintiffs, except Fox and Morris, appeal the summary judgment for Central as to their claims alleging intentional interference with business relations. All the plaintiffs, except Morris, appeal the summary judgment for Central as to their claims alleging breach of contract. (The trial court permitted JCIM to present two breach of contract questions to the jury; it appeals the summary judgment as to the other questions.) Fox appeals as to the directed verdict for Central on his fraud claim. Morris appeals the summary judgment for Central as to his claim alleging breach of fiduciary duty, and he appeals as to the directed verdict for Central on his fraud claim. We affirm the summary judgment for Central as to the breach of contract claims and Morris's breach of fiduciary duty claim. We also affirm as to Central's directed verdict on Morris's fraud claim. However, we reverse the summary judgment for Central as to the claims alleging intentional interference with business relations and remand this cause so that the plaintiffs may present to the jury evidence of intentional interference. We also reverse

as to Central's directed verdict on Fox's claim alleging fraud, brought in his individual capacity, and remand this cause, authorizing Fox, on remand, to present appropriate evidence as to his individual fraud claim to the trier of fact. The jury's awards and judgments with respect to all other claims are not affected by this decision.

FACTS

This dispute concerns a group health and life insurance product called "Policy Employers Trust" ("PET"). Marketing Management, Inc. ("MMI"), created PET in 1971 to "receiv[e] contributions from ... [e]mployers for [the purpose of] purchasing and maintaining [group] insurance" for their employees. Maxine Griffith and Lomax Johnson were the original trustees of PET. MMI, as settlor of PET, expressly reserved the power to remove the trustees upon 30 days' notice and to appoint successor trustees. When the events giving rise to this action occurred, AmSouth Bank was the PET trustee. Beginning in 1984, United Pacific Life Insurance Company ("UPL") provided the group insurance policy covering PET insureds.

PET prescribed that a trust administrator be authorized to determine the eligibility of employers and employees to participate in PET and to decide on the allowance of claims and payment of benefits. MMI designated its wholly owned subsidiary, M.M. Administrators, Inc. ("MMA"), as the trust administrator. The corporate plaintiffs are insurance companies whose clients were employer-members in PET. The individual plaintiffs, with the exception of Morris, are licensed insurance agents. Morris is an individual insured under PET. From 1978 to April 1, 1986, the corporate plaintiffs were agents of MMA.

On December 1, 1985, Central purchased the insurance policy on PET members from UPL and assumed the right to be the insurer for PET. On April 1, 1986, Central acquired from MMI and MMA the right to become the settlor and the trust administrator of PET. According to the plaintiffs, Central assumed the role of settlor and insurer of PET to "cherry pick" the plaintiffs' best PET clients for Central's insurance portfolio. The plaintiffs use the term "cherry picking" to mean singling out those insureds that are least likely to file health claims. The plaintiffs argue that Central acquired complete control of PET in order to gain information necessary to categorize PET members according to the health risk that each posed. The plaintiffs further argue that, after completing the categorization process, Central planned to terminate PET and obtain the low-risk PET clients for its portfolio by offering to insure them under Central's product "CLIENT."

At the same time Central acquired the right to be the settlor and the trust administrator of PET, Central entered into an agency agreement with MMA, pursuant to which MMA agreed to sell group insurance issued by Central. This agreement provided that the corporate plaintiffs would no longer be agents of MMA; instead, Central could deal directly with the corporate plaintiffs. The agreement also provided that MMA could not assign its rights and responsibilities under the agreement without prior written approval from Central.

Also on April 1, 1986, Central entered a separate agency agreement with JCIM, a corporate plaintiff. The agreement covered several details of the relationship between the plaintiffs and Central that are pertinent to this case. The agreement referred to the plaintiffs Joe Cooper & Associates, Inc.; Middleton/Vaughan Plans Insurance Agency, Inc.; Midwest Health Systems, Inc.; and William Morse Associates, Inc., as JCIM's "wholesalers." Central promised to pay commissions on employers' premiums directly to the wholesalers. JCIM promised "not to roll the bulk of PET [b]usiness" to another insurer, so long as Central offered a competitively priced product. Central granted JCIM the exclusive right to market a Central product called "GROUP CLIENT" and agreed not to solicit business from JCIM's brokers and agents during the term of the agreement and for one year following termination of the agreement. Either party could terminate On November 21, 1986, MMA assigned its rights and responsibilities under its contract with Central to American Medical Administration Group, Inc. ("AMAG"). The parties agreed that the assignment would be effective from November 1, 1986. Central approved the assignment in writing on February 11, 1987. James E. Fox was president of AMAG at the time of the assignment and negotiated on AMAG's behalf. Fox's claims alleging fraud and breach of contract rested on promises allegedly made to him by officers of Central during negotiation of the November 1, 1986, assignment agreement. Additional facts pertaining to Fox's fraud claim will be discussed in connection with our analysis of his right to bring that claim.

the relationship on 90 days' written notice. With the exception of Fox's claims, the plaintiffs' claims alleging fraud and...

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