Mdm Group Associates v. Cx Reinsurance Co., 04CA2614.

• Decision Date: 22 February 2007
• Docket Number: No. 04CA2614.,04CA2614.
• Citation: 165 P.3d 882
• Parties: MDM GROUP ASSOCIATES, INC., Plaintiff-Appellee and Cross-Appellant, v. CX REINSURANCE COMPANY LTD., U.K. and Certain Underwriters at Lloyd's, London, Defendants-Appellants and Cross-Appellees.
• Court: Colorado Court of Appeals

165 P.3d 882

MDM GROUP ASSOCIATES, INC., Plaintiff-Appellee and Cross-Appellant, v. CX REINSURANCE COMPANY LTD., U.K. and Certain Underwriters at Lloyd's, London, Defendants-Appellants and Cross-Appellees.

No. 04CA2614.

Colorado Court of Appeals, Div. III.

February 22, 2007.

Holland & Hart LLP, Marcy G. Glenn, Christina F. Gomez, Denver, Colorado; Lind, Lawrence & Ottenhoff, LLP, Richard T. Li Puma, Windsor, Colorado, for Plaintiff-Appellee and Cross-Appellant.

Hall & Evans, L.L.C., Alan Epstein, Edward H. Widmann, Bruce A. Menk, Denver, Colorado; Lettunich & Vanderbloemen, L.L.C., John A. Vanderbloemen, Steamboat Springs, Colorado; Horvitz & Levy LLP, David M. Axelrad, Mitchell C. Tilner, Encino, California, for Defendants-Appellants and Cross-Appellees.

Opinion by Judge CASEBOLT.

This action involves claims for breach of fiduciary duty and intentional interference with prospective business relations asserted by an insurance broker against several insurance companies. Defendants, CX Reinsurance Company Ltd., U.K., and Certain Underwriters at Lloyd's, London (collectively, CX), appeal the judgment entered upon a jury verdict awarding $6,750,783 to plaintiff, MDM Group Associates, Inc. (MDM). CX also appeals the award of prejudgment interest. MDM cross-appeals the trial court's orders dismissing its punitive damages claim and excluding evidence of CX's conduct related to the punitive damages claim. We affirm in part, reverse in part, and remand.

MDM is an insurance broker. Joseph McNasby, its president, developed an insurance program for insuring ski resorts against the risk that the number of "paid skier days" during a ski season would fall below a specified minimum. CX and others agreed to write insurance policies covering the risk for a year, starting with the 1997-1998 ski season, and issued such policies to a number of ski resorts in exchange for premium payments.

During that initial year, the policies generated premiums of about $550,000. MDM received a commission of 12.5% of the premiums from AON, an intermediate broker who was the holder of a lineslip, the document committing various underwriters to write the coverage and setting the terms of payment. No claims were submitted under the policies during the first season.

The ski resorts and the underwriters renewed the policies for a second year, and the program had similar results during the 1998-1999 ski season, generating premiums of about $476,000, from which MDM received a commission. Once again, there were no claims submitted under the policies.

Before the 1999-2000 ski season, several underwriters declined to renew their involvement. However, CX issued policies for that year, which, because more ski resorts purchased the coverage, generated total premiums of approximately $3 million. MDM received commissions totaling approximately $378,000.

The 1999-2000 ski season was not a good one for the insured resorts. There was little snowfall in the United States until well after the Christmas and New Year's ski holidays, and vacation travel was reduced because of concerns related to the millennium change. All insured resorts, including Vail, Mammoth, and Booth Creek, submitted claims. CX negotiated, mediated, and litigated the claims, ultimately paying in excess of $23 million to completely settle them. As was its unqualified right, CX declined to renew the insurance policies after their one-year term expired in May 2000.

MDM initiated this action against CX asserting liability for intentional interference with prospective business relations, contending that CX had handled the ski resort claims improperly and in bad faith, thereby causing the resorts not to renew their policies and causing MDM to lose renewal commissions. MDM also asserted that potential new clients, including other North American and Japanese ski resorts, hotels, cruise lines, fairs, and expositions, did not purchase similar policies that MDM proposed to sell to protect against loss of revenue, and therefore MDM lost commissions that would have resulted from those prospective policies.

In addition, MDM asserted a breach of fiduciary duty claim, contending that CX, as the principal in an agency relationship with MDM, owed it a fiduciary duty, and breached its duty by improperly handling the ski resorts' claims.

The trial court denied CX's various motions for dismissal and directed verdict. The jury returned a verdict in favor of MDM for $6,750,783 in damages, and the trial court later awarded more than $1 million in prejudgment interest. This appeal followed.

I. Intentional Interference with Prospective Business Relations

CX contends that the judgment on the intentional interference with prospective business relations claim must be reversed for a number of reasons. It asserts that an insurer is answerable solely to its insureds for deficiencies in claims handling, not to any intermediate broker; that its conduct toward the resorts was not improper because it was entitled to investigate, challenge, negotiate, mediate, or litigate the claims, and the jury did not find that it acted in bad faith; that MDM would not have been a party to any prospective contracts and would not have received an economic benefit from the contracting parties; that MDM could not sell any lost paid skier day policies after the 1999-2000 ski season because CX opted not to renew and no other underwriter replaced it; and that the claim fails for lack of any causative relationship between the conduct of CX and the asserted damages. We agree that MDM would not have been a party to any prospective contracts, and therefore the judgment cannot stand.

CX moved for a directed verdict and judgment notwithstanding the verdict (JNOV) on the intentional interference claim. A motion for a directed verdict or JNOV should not be granted unless the evidence compels the conclusion that reasonable jurors could not disagree and that no evidence or inference has been received at trial upon which a verdict against the moving party could be sustained. The trial court must view the evidence in the light most favorable to the nonmoving party. We review a motion for directed verdict de novo. Fair v. Red Lion Inn, 943 P.2d 431 (Colo.1997); Brossia v. Rick Constr., L.T.D. Liab. Co., 81 P.3d 1126 (Colo.App.2003). If there is no evidence to support an element of a claim, a directed verdict is appropriate. Denver Dry Goods Co. v. Pender, 128 Colo. 281, 262 P.2d 257 (1953); Anson v. Trujillo, 56 P.3d 114 (Colo.App.2002).

Colorado recognizes the tort of intentional interference with prospective business relations. Amoco Oil Co. v. Ervin, 908 P.2d 493 (Colo.1995); Dolton v. Capitol Fed. Sav. & Loan Ass'n, 642 P.2d 21 (Colo.App.1981). As set forth in the Restatement (Second) of Torts § 766B (1979):

One who intentionally and improperly interferes with another's prospective contractual relation . . . is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of

(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or

(b) preventing the other from acquiring or continuing the prospective relation.

While the existence of an underlying contract is not required for this tort, there must be a showing of improper and intentional interference by the defendant that prevents the formation of a contract between the plaintiff and a third party. Omedelena v. Denver Options, Inc., 60 P.3d 717 (Colo.App.2002); Wasalco, Inc. v. El Paso County, 689 P.2d 730 (Colo.App.1984). Interference with "another's prospective contractual relation" is tortious only if there is a reasonable likelihood or reasonable probability that a contract would have resulted. Klein v. Grynberg, 44 F.3d 1497 (10th Cir. 1995); Plaza Esteban v. La Casa Nino, Inc., 738 P.2d 410 (Colo.App.1987) (lack of a firm offer of a contract defeated tortious interference claim), rev'd on other grounds, 762 P.2d 669 (Colo.1988).

However, a defendant cannot be liable for interference with its own contract:

It is impossible for one party to a contract to maintain against the other party to the contract a claim for tortious interference with the parties' own contract. Neither party is a stranger to the contract. Each party has agreed to be bound by the terms of the contract itself, and may not thereafter use a tort action to punish the other party for actions that are within its rights under the contract.

Shrewsbery v. Nat'l Grange Mut. Ins. Co., 183 W.Va. 322, 324, 395 S.E.2d 745, 747 (1990). To the extent, therefore, that MDM is asserting a claim against CX for tortiously interfering with a contract between itself and CX, such a claim may not be maintained. See CrossTalk Prods., Inc. v. Jacobson, 65 Cal.App.4th 631, 76 Cal.Rptr.2d 615 (1998); Travelers Indem. Co. v. Merling, 326 Md. 329, 605 A.2d 83 (1992); K & K Mgmt., Inc. v. Lee, 316 Md. 137, 557 A.2d 965 (1989); Shrewsbery v. Nat'l Grange Mut. Ins. Co., supra.

It logically follows, as well, that MDM cannot maintain an action against CX for tortious interference with any contract to which CX is a party. See Shrewsbery v. Nat'l Grange Mut. Ins. Co., supra (independent insurance agent could not maintain tortious interference action against insurer in which agent asserted that insurer sought to procure a breach of contract between agent and his insurance customers because insurer was a principal party to the insurance contracts and no one can be liable for tortious interference with his own contract); see also Cutter v. Lincoln Nat'l Life Ins. Co., 794 F.2d 352 (8th Cir.1986)(no tortious interference claim could be asserted as a matter of law by former life insurance agent against insurer because there was no business relationship — contractual or otherwise — that agent had with the insureds which was independent of agent's role as agent for insurer); Furr Mktg., Inc. v. Orval Kent Food Co., 682...