Kansas Bankers Sur. Co. v. Bahr Consultants, Inc.

• Decision Date: 30 July 1999
• Docket Number: No. 3:97-CV-899.,3:97-CV-899.
• Citation: 69 F.Supp.2d 1004
• Parties: KANSAS BANKERS SURETY COMPANY, Plaintiff, v. BAHR CONSULTANTS, INC., and W. Hank Bahr, Individually, Defendants.
• Court: U.S. District Court — Eastern District of Tennessee

69 F.Supp.2d 1004

KANSAS BANKERS SURETY COMPANY, Plaintiff, v. BAHR CONSULTANTS, INC., and W. Hank Bahr, Individually, Defendants.

No. 3:97-CV-899.

United States District Court, E.D. Tennessee, at Knoxville.

July 30, 1999.

James G. O'Kane, Michael K. Atkins, Baker, McReynolds, Byrne, O'Kane, Shea & Townsend, Knoxville, Alan V. Johnson, Martha A. Peterson, Sloan, Listrom, Eisenbarth, Sloan & Glassman, LLC, Topeka, KS, for Plaintiff.

Dalton L. Townsend, Amy V. Hollars, Hodges, Doughty & Carson, Knoxville, TN, for Defendant.

MEMORANDUM OPINION

JARVIS, Chief Judge.

This is an action for damages for alleged violations of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and for alleged violations of the Insurance Trade Practices Act, Tennessee Code Annotated §§ 56-8-101, et seq. Plaintiff also seeks damages under state law for malicious disparagement and for tortious interference with prospective business advantage.¹ Essentially, plaintiff claims that defendant W. Hank Bahr (Bahr) made false and misleading statements concerning plaintiff's Employment Practices Liability (EPL) policy and its Directors and Officers Liability (D & O) policy to certain bank representatives.

This matter is presently before the court on defendants' motion for summary judgment [Doc. 16].² The issues raised have been exceptionally well briefed by the parties [see Docs. 17, 29, 31, 34, and 36]. For the reasons that follow, defendants' motion will be granted, and this case will be dismissed in its entirety.

I. Facts

The facts of this case will be viewed in a light most favorable to plaintiff. See Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Plaintiff Kansas Bankers Surety Company (KBS), a Kansas corporation, is an insurance company which specializes in selling various types of insurance policies to banks. In 1994, KBS was approved to sell to Tennessee banks certain policies of insurance, including its EPL policies and its D & O policies. Thereafter, KBS began selling those policies and continued to do so for the three years preceding this litigation.³

Unlike many insurance companies, KBS does not sell its insurance through independent agents because, according to KBS, independent agents may not correctly represent what coverage is provided by a policy. Instead, KBS utilizes salaried employees who may be terminated if they provide an insured with incorrect information. Furthermore, KBS provides quotations for insurance coverage directly to banks. In fact, KBS is the only insurance company that would not submit quotations to Bahr in response to his solicitations. Rather, KBS would only send the quotations directly to the banks at issue.

Bahr is the founder and president of Bahr Consultants, Inc., a Tennessee corporation, which is an independent risk management and insurance consulting firm. Bahr represents himself to be a risk management specialist with expertise in the area of bank insurance. Bahr provides two types of consultation services to a substantial number of banks in Tennessee. First, he provides an insurance audit service in which he examines the clients' insurance policies and analyzes the coverage afforded by those policies, after which he makes recommendations to his clients for improved coverage. Second, Bahr prepares specifications for insurance coverage and then sends those specifications to various companies to obtain bids, after which he analyzes the bids received. In conjunction with that service, Bahr makes recommendations as to the insurance companies from which his clients should seek those bids.

Although he has received licenses from the State of Tennessee as both an insurance consultant and as an insurance agent, Bahr is not an agent of any insurance company nor does he sell any insurance product. Instead, Bahr provides insurance consulting services to financial institutions and other businesses on a "fee-only" basis. Seventy to eighty percent of Bahr's clients are banks, with Bahr having provided consulting services to 54 banks since 1994.

Through discovery, KBS has identified five Tennessee banks to which Bahr allegedly made false and misleading statements in writing about KBS policies: (1) Bank of Ripley in Ripley, Tennessee; (2) First Citizens National Bank in Dyersburg, Tennessee; (3) Bank of Frankewing in Frankewing, Tennessee; (4) Lincoln County Bank in Fayetteville, Tennessee; and (5) First Trust and Savings Bank in Oneida, Tennessee. KBS also alleges that Bahr made written misrepresentations to bank representatives at an insurance seminar in October 1995. Bahr's allegedly erroneous representations to each of these financial institutions and to those in attendance at the seminar will be examined separately.

A. The Bank of Ripley.

KBS, through its president, Donald M. Towle, contends that Bahr disparaged its D & O policy on a spread sheet attached to Bahr's correspondence dated September 23, 1994, to Betty Henson, Vice-President of the Bank of Ripley [see Ex. 60 to Towle Deposition]. On that spread sheet, Bahr provided a comparison of coverages offered by various insurance companies. With respect to the KBS D & O policy, Bahr placed question marks in the spaces provided for "9 Day Cancellation," "Ins. vs. Ins. Excl. Removed," and "Regulatory Coverage." [See id.]. In his deposition, Towle testifies that the inclusion of these question marks on the spread sheet "disparages the [D & O] policy." [See Towle Deposition, p. 54]. Aside from the entry of the question marks on the spread sheet, Towle identifies no other purported false or misleading statements by Bahr to the Bank of Ripley. It must also be underscored that in his correspondence to Henson, Bahr recommended that the Bank of Ripley select the KBS fidelity bond from among the companies that submitted bids:

As you can see, the Kansas Bankers Surety Company has the lowest Bond premium. This company, while new to Tennessee, is certainly not new to the banking industry and enjoys an excellent reputation. They are a direct writer of insurance, so you will be dealing with the company representative ....

[See Ex. 60 to Towle Deposition].

B. The Bank of Frankewing.

KBS's sole complaint regarding the Bank of Frankewing is somewhat similar to its complaints regarding the Bank of Ripley. Again, Towle complains about the entry of a single question mark in the space provided for "EDP Included" on a spread sheet dated "11/94" in which Bahr compared the fidelity bond offered by KBS to those offered by several other insurance companies [see Towle Deposition, p. 30, and Ex. 59 thereto].

C. First Trust and Savings Bank of Oneida.

On July 30, 1996, Bahr sent correspondence to Charles Newport, Sr., Vice-President of First Trust and Savings Bank in Oneida, Tennessee, regarding his review of the KBS EPL policy [see Collective Ex. 56 to Towle Deposition]. In that correspondence, Bahr expressed his "disappoint[ment]" with the liability limit provided under this policy. Bahr noted that this EPL policy allowed the bank to choose a liability limit of $250,000, $500,000, or $1,000,000; however, Bahr was of the opinion that the language of the Insuring Agreement would require KBS to pay only one year's salary for the affected employee, as well as attorney fees and expenses, regardless of the liability limit selected [see id.]. To quote Bahr, "It would seem that if you fire a teller and he or she sues for wrongful termination for $100,000 or more that only an annual salary of $15,000 or so would be covered." [See id.]. Thus, Bahr concluded that the liability limit could actually be less than the liability limit which a financial institution thought it was obtaining [see id.].

On July 30, 1996, Bahr also sent correspondence to Bonnie Pinick, a Vice-President of KBS, requesting clarification on the liability limits provided under the KBS EPL policy [see id.]. In that correspondence, Bahr indicated that he had "assured [Newport] that The Kansas Bankers Surety Company is a fine company ... [and consequently that Bahr] was most surprised to find that the policy was not satisfactory." [See id.].

On August 6, 1996, Towle — not Pinick — sent a reply to Bahr regarding the KBS EPL policy [see Ex. 57 to Towle Deposition]. That correspondence did not specifically answer Bahr's question about the liability limits.⁴ Rather, Towle's letter accused Bahr of "bad-mouthing" the KBS EPL policy and concluded with the following statement:

If you make more money recommending other products, that is your business, but please don't give the bankers false or misleading information about our products.

[See id., p. 2]. The meat of Towle's letter consisted of, as aptly described by defense counsel, "a diatribe against our litigious society, the proliferation of governmental regulation, and the overabundance of lawyers." [See Doc. 17, p. 3]. Significantly, Towle testifies in his deposition that nothing in Bahr's July 30 letter regarding the liability limits under the EPL policy at issue was untrue [see Towle's Deposition, p. 46].

D. Lincoln County Bank.

On April 25, 1997, Bahr sent correspondence to Norman Spears, a Vice-President of Lincoln County Bank in Fayetteville, Tennessee, accompanied by a spread sheet comparing fidelity bonds and D & O policies offered by various companies which had provided bids [see Collective Ex. 58 to Towle Deposition]. In that letter, Bahr expressed the opinion that, "Kansas Bankers Surety's price is excellent, but the coverage provided is far inferior to the other bidders." [Id.]. On the spread sheet provided, Bahr indicated that the KBS D & O policy provided neither coverage for ERISA nor for IRA and Keoghs [see id.]. Nevertheless, Bahr "now believes that these coverages were afforded by the KBS D & O policy." [See Doc. 17, p. 4].⁵ Furthermore, the record reflects that Bahr was advised by Towle some two years earlier, on February 9, 1995, that there was coverage at that time under the KBS...