Medical Mut. Liability Ins. Soc. of Maryland v. B. Dixon Evander & Associates, Inc.

Citation92 Md.App. 551,609 A.2d 353
Decision Date01 September 1991
Docket NumberNo. 1752,1752
CourtCourt of Special Appeals of Maryland

David M. Funk (Bryan D. Bolton, Stewart P. Hoover, Shapiro and Olander, Nell B. Strachan, Venable, Baetjer and Howard, Baltimore, and Stephen P. Carney of Hunt Valley, on the brief), for appellants.

Robert J. Mathias (Francis B. Burch, Jr., Brian L. Wallace, Ray L. Earnest and Piper & Marbury, on the brief), Baltimore, for appellees.

Argued before BISHOP, ROSALYN B. BELL and MOTZ, JJ.

MOTZ, Judge.

The principal issues raised in this appeal involve claims of failure to exhaust administrative remedies, inconsistent jury verdicts, insufficient evidence of tortious conduct and improper awards of compensatory and punitive damages. There was no error with regard to most of these questions and so we affirm the Circuit Court for Baltimore City in most respects. The punitive damage awards, however, must be vacated. The size of those awards; the fact that they were based on a commercial dispute and behavior, which although malicious and wrongful, was not wanton or highly reprehensible; the failure of the trial court to explicate on the record its findings as to the propriety of those awards; and the novel legal question which may have led the lower court to believe that the new trial motion and remittitur request were untimely, require us to vacate them and remand this case for further proceedings consistent with this opinion.


As in other recent litigation instituted by appellees, B. Dixon Evander ("Mr. Evander") and B. Dixon Evander & Associates, Inc. ("Evander"), this case was tried before a jury and "[m]uch was in dispute." Alexander & Alexander v. Evander, 88 Md.App. 672, 596 A.2d 687 (1991), cert. denied, 326 Md. 435, 605 A.2d 137 (1992). Evander brought suit against appellants, Medical Mutual Liability Insurance Society of Maryland ("Medical Mutual") and its chairman and chief executive officer, Raymond M. Yow. The evidence viewed in the light most favorable to Evander, the prevailing party, reveals the following facts.

Evander is a Maryland insurance agency, owned by Mr. Evander, that specializes in medical malpractice insurance and has been in business for many years. Evander is an independent insurance broker; it has no agreement with any insurance company to be its exclusive agent. Rather, Evander's principals are physicians and hospitals for whom it obtains malpractice insurance from insurance companies. Beginning in 1986, Evander brokered insurance for client physicians with Medical Mutual Liability Insurance Society of Maryland ("Medical Mutual"). 1 During the next two years, Evander became a significant broker of Medical Mutual policy holders, representing over 600 physicians carrying insurance with Medical Mutual, and earning commissions from Medical Mutual of over $250,000 in 1987 alone. By 1988, Evander had become one of the most successful insurance brokers in Maryland and the largest individually owned malpractice insurance agency in the State.

Medical Mutual enjoyed a virtual monopoly on the medical malpractice insurance market in Maryland from 1985 through 1988. By 1988, Medical Mutual underwrote insurance for over 90% of the physicians in Maryland. Its premiums escalated over the years and, in some specialties, ballooned 400% in three years. Mr. Evander testified that Maryland doctors were disturbed by this development and many urged him to try to restore competition. He responded by soliciting PIE Mutual Insurance Company ("PIE") to enter the Maryland market.

During 1988, Evander informed Medical Mutual of its intention to bring PIE to Maryland and, as Medical Mutual officials conceded, they voiced no objection to this. In November 1988, PIE received its certificate of authority to operate in Maryland and Evander signed a formal written contract with PIE, naming it PIE's sole Master Agent in Maryland. As master agent for PIE, Evander had primary responsibility for marketing PIE medical malpractice insurance to Maryland physicians, collecting premiums on behalf of PIE, recruiting associate agents for PIE, all in direct competition with Medical Mutual. Because it was PIE's master agent, Evander received more lucrative commissions from PIE than from other companies; for example, from PIE Evander received a 10% commission for business it produced directly, and 3% to 5% on premiums produced by associate agents, as compared to a 2.5% commission from Medical Mutual. Even as PIE's master agent, however, Evander had no obligation to recommend PIE to any doctor.

Between November 1988 and May 1989, Evander and others aggressively promoted PIE and engaged in numerous activities designed to encourage physicians to switch to PIE, including advertisements, brochures, meetings, and letters. For a number of the higher priced specialties such as surgery, obstetrics/gynecology and neurology, Evander believed PIE offered a better choice than Medical Mutual and so recommended to those doctors that they switch their coverage; Mr. Evander testified he advised other doctors to stay with Medical Mutual. There was no evidence that Mr. Evander recommended that a doctor switch coverage for any reason other than more attractive terms for the individual client. By May 1989, approximately 350 Maryland physicians, including 50 of Evander's clients (this represented 9% of its doctor clients) moved from Medical Mutual to PIE. The yearly premiums paid to PIE by these doctors was close to $10,000,000; Evander earned commissions from PIE of $655,000 in 1989 and $662,000 in 1990.

By the spring of 1989, Medical Mutual officials were concerned about the impact of PIE and "upset" that Evander, the broker for approximately 600 doctors insured by Medical Mutual, was recommending a competing insurance company to some of its clients. Medical Mutual was particularly unhappy with a brochure Evander prepared comparing PIE and Medical Mutual, that Medical Mutual believed contained a number of material misrepresentations concerning its premiums and coverage. Medical Mutual, in the words of its appellate brief, "concluded that it was in the best interest of its physician policy holders and owners to end the broker relationship with Evander." At trial, witnesses, including present and former Medical Mutual employees, testified that they were going to "shoot" Mr. Evander; that a Medical Mutual officer said that Evander "ought to just get out of the business," and that Medical Mutual's strategy in terminating Evander was to "send the message to other brokers in the State that Medical Mutual was not going to look kindly upon representing more than one company--namely, Medical Mutual." Further, there was testimony that after terminating Evander, a Medical Mutual employee told a former Evander employee that "[w]e hope Dixon Evander does sue us because Dixon Evander, he's got some money. He's got about this much money, but we have this much money and we'll bury him in legal costs. He would be very stupid to take us on."

On May 22, 1989, two of Medical Mutual's officers made an unprecedented and unannounced personal visit to Mr. Evander to deliver three documents to him. The first was a letter to him, informing him of Medical Mutual's decision not to accept further business from his agency. The second was a copy of a complaint Medical Mutual had filed that day with the Maryland Insurance Division seeking appropriate administrative remedies, including revocation of Evander's license, for unfair trade practices in connection with alleged misstatements contained in the objected to brochure. The third was a copy of a letter (the "Dear Colleague Letter") Medical Mutual had also sent that day to the 600 Medical Mutual physician policy holders brokered by Evander. The entire Dear Colleague Letter, which was signed by appellee, Dr. Raymond M. Yow, Medical Mutual's chairman, states:

Dear Colleague:

As one of the physicians who guide Medical Mutual, I have listened to members over the past months, and it has become apparent that a few brokers are no longer representing Medical Mutual in a way that many of you feel to be adequate. I regret that we will no longer accept any new physician business from your present broker effective this date and that we will no longer accept renewal physician business from your present broker as of August 25, 1989.

Medical Mutual's termination of its relationship with your broker will in no way affect your relationship with us. Your Medical Mutual policy will, of course, remain in force through its current expiration date. We will also process your renewal in accordance with our underwriting standards, as we do all others renewals. I very much hope that you will want to continue as a member of Medical Mutual.

Please contact your broker for advice on renewing your Medical Mutual policy. Please be advised that you may at any time come to Medical Mutual directly, without using any broker. Our own staff will help you with every aspect of your policy, including questions, quotes, applications, renewals, "tails," special coverages or situations, and all other services normally handled by a broker.

We want you to have the best possible service from our employees and from the brokers who sell our product. We will continue to listen to our members and do whatever we can to help.

(emphasis in original.) 2

Dr. Yow testified at trial that he did not state in his letter that the true reason Evander was terminated was its heavy marketing of PIE because:

I think if we said we did it, we wrote that letter because he was selling another product, it would sound like we are not able to fight the competition, if you will. In other words, it's not a good business practice to say, well, I don't want to be a cry baby about it, so we didn't mention...

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