Marcus v. National Life Insurance Company

• Decision Date: 06 February 1970
• Docket Number: No. 17367.,17367.
• Citation: 422 F.2d 626
• Parties: Michael D. MARCUS, Plaintiff-Appellant, v. NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

422 F.2d 626 (1970)

Michael D. MARCUS, Plaintiff-Appellant, v. NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 17367.

United States Court of Appeals, Seventh Circuit.

February 6, 1970.

Gale L. Marcus, Chicago, Ill., for appellant.

Owen Rall, Joseph J. Hasman, Chicago, Ill., Peterson, Lowry, Rall, Barber & Ross, Chicago, Ill., of counsel, for appellee.

Before KNOCH, Senior Circuit Judge, and CUMMINGS and KERNER, Circuit Judges.

KNOCH, Senior Circuit Judge.

The District Court entered judgment for defendant-appellee, National Life Insurance Company, after hearing by the Court on Count I, trial by jury on Count I having been waived, and after the close of all evidence in a jury trial of Count II, on a directed verdict for defendant, from which plaintiff-appellant, Michael D. Marcus, has taken this appeal.

Count I, as amended, which was submitted to the Court on evidence adduced at the trial of Count II, excerpts from deposition testimony and memoranda, pursuant to agreement of the parties, sought accounting and payment of commissions allegedly due plaintiff from defendant.

Count II sought damages for alleged malicious interference with a contract between plaintiff and H. F. Johnson. When Count II was amended after the jury had been impaneled, defendant's answer to the amended complaint included the defense that the period of the applicable statute of limitations had run. The Trial Judge denied plaintiff's motion to strike this defense. He allowed plaintiff to withdraw the amended Count II which had elicited this defense but also allowed the defendant's answer to stand, and later, as indicated, allowed defendant's motion for a directed verdict on Count II.

Defendant, a Vermont corporation authorized to carry on life insurance business in Illinois, maintains an agency in Chicago which is operated by H. F. Johnson as General Agent. From the testimony of Morton Laird, defendant's senior vice president and chief actuary, and that of Mr. Johnson himself, it appears that Mr. Johnson's contract with defendant obligated him to employ and train agents (subject to defendant's rarely exercised right of approval) and to collect premiums. It further appears that on request of defendant, Mr. Johnson was obligated to exercise any right he might have to terminate his own contracts with agents.

In August 1956, Mr. Johnson and plaintiff entered into an insurance broker's contract which in April 1957 was replaced by a "Career Agent's Contract." Defendant was not a party to this contract but by endorsement thereon guaranteed compensation to plaintiff in the event of termination of Mr. Johnson's own contract with defendant by death or otherwise.

Plaintiff's contract with Mr. Johnson provides that any claims for compensation are personal claims against Mr. Johnson only and in no case against defendant for any services or acts performed under that contract, which also gave Mr. Johnson the right to terminate on 20 days' written notice, in which event, 8, 9 and 10 year renewal commissions and persistency fees would not be payable.

Mr. Johnson did terminate the contract effective June 1, 1961, by letter dated May 8, 1961. Mr. Johnson sent that letter in response to a request in a letter dated April 4, 1961 from defendant's assistant superintendent of agencies indicating that the request was made after extended consideration by defendant's committee on insurance because of long standing differences in philosophy between plaintiff and defendant.

These differences were explained in the testimony of David F. Hoxie, a member of the insurance committee from 1959 to 1961. In 1959, he stated he had discussed with plaintiff the latter's sales approach and plaintiff's statements that one should not accumulate cash values in a life insurance policy for purposes of investment. Mr. Hoxie said he told plaintiff this was completely contrary to the defendant's attitude with respect to "financed insurance". Mr. Hoxie testified further that when insurance is financed by outside borrowing, increases in outside interest rates above the insurer's policy loan rate cause a shift in the police holder's borrowing from outside sources to the insurance company. Thus, he said, the insurance company finds itself being forced under its policy contracts to make, for example, 5% loans to its policy holders instead of 6 to 8% loans in the investment market. Further, as the cash value of the policy increases with time, the indebtedness against it also has been increasing and an agent for another company or even the agent who initially sold the policy may suggest that a healthy policy holder terminate and start over to escape the interest burden. Meanwhile the policy holders with impaired health who have become greater risks tenaciously maintain their policies so that the insurance company is the victim of adverse selection both ways. He said that the defendant's philosophy contemplated that financed insurance would have a very minor place in the over-all merchandising of life insurance. He also explained the defendant's concern about possible conflicts of interest for dually licensed agents who would sell life insurance, motivated by commissions on the premiums, but who might also persuade the policy holder to borrow the cash value to invest in securities on the sale of which the agent would also receive a commission or a fee for advice. Plaintiff was licensed to sell insurance, to act as an investment advisor and to practice law, and had years of experience in banking concentrating on investments and loans. He was the only dually licensed agent in Mr. Johnson's office.

There was evidence of plaintiff's continued espousal, in print in articles composed by him, or by his public relations representative, of totally financed insurance and his sale of that type of insurance almost exclusively despite efforts beginning in 1959 to change his attitude. Plaintiff places no credence in this reasoning, pointing to defendant's vacillation from time to time down the years in holding strictly to this view and to plaintiff's excellent record of sales while under contract with Mr. Johnson.

Count II seeking damages for malicious interference with plaintiff's contract with Mr. Johnson was filed November 16, 1967, more than five years after the termination effective June 1, 1961. When in response to the amended Count II, defendant adopted its original defenses denying any malicious action and alleging lawful business reasons for its conduct, it also pleaded, as stated above, the Illinois Five-Year Statute of Limitations, Ill.Rev.Stat.1967, c. 83 "Limitations" ¶ 16.

Count I, as amended July 5, 1968, after the trial of Count II, alleged that defendant was plaintiff's employer and was unjustly enriched by plaintiff's loss of fees under his contract made with Mr. Johnson as agent for defendant. However, the contract itself provided that Mr. Johnson alone was obligated to pay commissions, all claims being personal claims against him and not against defendant, and that the commissions and persistency fees sought were not payable after termination.

Count I as amended also states that Mr. Johnson orally promised that he would not, and that defendant could not, terminate the contract absent mis- or mal-feasance by plaintiff and submission of at least one insurance policy in each 24-month period. It is a part of plaintiff's theory that the defendant was somehow bound by this oral statement of Mr. Johnson's and could not therefore request Mr. Johnson to terminate the contract. At the trial, plaintiff testified that in his discussion with Mr. Johnson when he entered into the contract, Mr. Johnson had not told him that defendant had any right to cancel the contract. He then went on to state that there was nothing in the contract to show that, and that in fact it was Mr. Johnson and not the defendant who had canceled the contract. Yet plaintiff brought this suit not against Mr. Johnson, as he at one time...