Knox v. Taylor
| Citation | 992 S.W.2d 40 |
| Decision Date | 11 February 1999 |
| Docket Number | No. 14-96-00993-CV,14-96-00993-CV |
| Parties | John KNOX, Jr. and Universal Surety of America, Appellants, v. Stacy TAYLOR and Standard Managing General Agency, Inc., Appellees. (14th Dist.) |
| Court | Texas Court of Appeals |
Cynthia L. Jones, Houston, John P. Cahill, Jr., Houston, for appellants.
David L. Monroe, Houston, Levert J. Able, Houston, H. Paul Pressler, Houston, for appellees.
Panel consists of Justices YATES, FOWLER, and DRAUGHN. *
Appellants, John Knox, Jr. and Universal Surety of America, appeal from a judgment in favor of appellees, Stacy Taylor and Standard Managing General Agency, Inc., for libel and tortious interference with a contract. In this appeal, appellants challenge the sufficiency of the evidence, the failure of the trial court to submit their requested jury question, the admission of evidence and the calculation of prejudgment interest. We affirm.
Stacy Taylor is president and owner of Standard Managing General Agency (SMGA), which was formed in January 1993. On January 15, 1993, SMGA entered into an agreement with Titan Indemnity Company (Titan), becoming managing general agent (MGA) for Titan. As MGA, SMGA would act as Titan's exclusive contract bond manager. 1 The agreement enabled SMGA to write bonds in all states in which Titan is authorized to do business.
Taylor is also president and owner of Standard Group, Inc. (SGI), which he formed in 1988. Taylor also formed Underwriters Risk Management (URM) in 1988, as a consulting firm. URM developed a computer system, called "Bond Ready," to manage surety contract business. In 1992, Mark Watson, CEO of Titan, expressed an interest in purchasing URM's computer system. Taylor, however, was not interested in selling. Titan then retained SGI to perform an audit of its nationwide surety business. According to Taylor, it was from this business relationship that Taylor entered into an MGA arrangement with Titan.
On November 30, 1993, Watson informed Taylor that he had received a package sent to him anonymously, containing a three-page memorandum and copies of two lawsuits filed against Taylor and his companies, SGI, URM, and Standard Fidelity Corp. After entering into the MGA contract with Titan in 1993, Taylor was sued by Eagle Insurance Company (Eagle) in two separate suits (the Kaiser lawsuit and the Formosa lawsuit). In the Kaiser and Formosa suits, Eagle alleged Taylor, as an agent for Eagle in 1990 and 1992, obtained consulting fees by fraud, representing that the consulting fees were bond premiums required by Eagle. 2 According to Taylor, SGI purchased bonds from Eagle on behalf of U.S. Modular (Kaiser suit) and Gallagher Engineering (Formosa suit). URM provided consulting services to U.S. Modular and Gallagher. Taylor had signed agreements with U.S. Modular and Gallagher which provided that the fees to URM were not premiums and URM was not an insurance company.
Taylor notified Watson of the Eagle lawsuits immediately after they were filed. Taylor explained to Watson that the lawsuits were frivolous and the suits were a defensive tactic because Eagle was in financial trouble and was unable to pay its claims. According to Taylor, Watson acted like the lawsuits were "not that big of a deal at the time."
As noted, Watson also received a three-page memorandum (the memo), which reads as follows:
[Page 1]
In 1990 Keith Fogg convinced Ocean Marine that the surety business was the place to be. "A highly profitable line of business, where we can make a lot of money," Fogg said. Ocean Marine had excellent reinsurance and reinsurance relations. These relationships developed because of their expertise in the ocean marine business. With Fogg acting as the MGA for Ocean Marine they could not buy reinsurance for their surety business from any of the professional surety reinsurers ... that should have given them a strong signal that something was wrong.
Surely these professionals in the surety business understood that this was a very profitable line where they could make a lot of money. The MGA had no prior company experience. Basically, he was just an aggressive, hard driving agent with good intention[s]. According to Keith, he and Dieter Hugel were "very close" and Keith would never intentionally do anything to hurt Hugel's company.
In 1991 the company had over $12 million in statutory surplus, a combined ratio under 100, and an A- AM Best rating. Two of its largest reinsurers, General Reinsurance Corporation and North American, have professional surety reinsurance departments. It is our understanding that the reinsurance never actually covered surety.
Surety production in 1990 was $975,000; in 1991 $2,173,000; in 1992 $5,038,00 [sic]. It does not take a lot of premium to go through a lot of surplus. In May of 1993 Keith Fogg stated "... The three largest losses totaled just over $20 million ... however if Ocean Marine wins one of the lawsuits the three may be down to around $15 million ... regardless they exceeded Ocean Marine's capital." There did not seem to be any reason to discuss the smaller losses.
Several companies have attempted to use general agents in the surety business. With few exceptions, companies that have appointed MGA's for surety have either become insolvent or discontinued writing surety (many times after AM Best has lowered or eliminated their rating).
Mr. Taylor claims to be the exclusive managing general agent for Titan Indemnity. It has been rumored that he has both underwriting and claims authority. It will be interesting to see their 1994 surety results on March 1, 1995[.]
Stacy say's [sic], "If I charge enough, I can write anything."
Joint Control Fees 3%
Engineering Fees 1%
Inspection Fees 1%
Take Off Evaluation 1%
Premium 1-2%
----
Cost 7-8%
Note: The above "quotes" of Mr. Taylor are not direct quotes as the writer of this memorandum has only heard these second hand. When you hear something over and over, it tends to make one believe it may be true.
[Page 3]
TEXAS ... A Surety Friendly State
Eagle Insurance Company - Receivership 1993
Eastern Indemnity - Receivership
Allied Fidelity - Receivership
Industrial Indemnity - Crum & Forrester with reinsurance and capital
kept it solvent after the disasters.
In Texas during the last 10 years the following companies have discontinued surety as a line of business.
1. Travelers
2. Trinity
3. Transamerica
4. Commercial Union
5. Commercial Credit
6. Armco (American Druggist)
7. Baldwin United
8. Eagle
9. Allied
10. Eastern
Per Taylor's request, Watson sent Taylor the memo, the lawsuits, and the envelope in which they were mailed. Taylor hired a private investigation firm to trace the package's sender through the postage meter stamp contained on the envelope.
Two days later, on December 2, 1993, Taylor received a fax from Thomas Mangold executive vice president of Titan, informing him that Titan wanted to exit the surety business by December 31, 1993. Although Mangold cited several reasons for wanting to exit the contract surety business, no reference was made to the three-page memo or the Kaiser and Formosa suits. 3 Taylor claims that prior to December 2, 1993, Titan never discussed with him any of the stated reasons for canceling the contract.
On December 6, 1993, Taylor met with Watson to discuss Titan's desire to leave the contract surety business. Taylor claims Watson started off the meeting by stating the anonymous package had no bearing on the cancellation of the Titan/SMGA contract. Taylor also claims Watson, later in the meeting, admitted the package affected his decision to cancel the contract with SMGA.
The Titan/SMGA contract provided that it would continue in force until terminated by either party with 180 days (six months) notice prior to any anniversary date. The contract further allowed Titan to cancel the SMGA contract with thirty days notice on the basis that SMGA either failed to pay balances when due or for fraud by SMGA. Watson testified Titan did not follow the six-month notice clause because Titan wanted out of the SMGA agreement.
After this meeting, Taylor found out from the investigators that John Knox, president of Universal Surety of America (Universal), had sent the package to Watson. 4 Subsequently, Taylor learned Knox had also anonymously sent copies of the lawsuits, but not the memo, to Steve Smith, executive vice president of Munich American Reinsurance Company (Munich), and Dick Skewes, vice president of General Reinsurance Company (General). Munich and General are two of Titan's largest reinsurers. Smith and Skewes received the lawsuits on November 29, 1993. Bob Van Tassel of Munich called Mike Bodale at Titan and asked whether he knew of the lawsuits. Tom Carney of General contacted Watson about the lawsuits.
On December 7, 1993, Knox wrote to Watson asking if he had heard of the lawsuits, but not acknowledging that he had sent the memo and copies of the lawsuits. 5 Taylor next received a letter dated December 10, 1993, from J. Martin Huber, executive vice president of the National Association of Surety Bond Producers (NASBP), informing Taylor that an executive meeting was scheduled for February 12, 1994. The purpose of the meeting was to discuss the Kaiser and Formosa lawsuits. Huber indicated that Taylor could submit any information he wanted regarding the lawsuits to the committee prior to the meeting.
Prior to its December 2, 1993 notice of cancellation, Titan had provisionally canceled its contract with SMGA. On July 15, 1993, Titan sent a provisional notice of cancellation to Taylor. On August 19, 1993, however, Titan rescinded the notice and stated it was "pleased" to continue doing business with SMGA for another year.
In October 1993, Titan notified...
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