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

• Decision Date: 01 September 1994
• Docket Number: No. 32,32
• Citation: 660 A.2d 433,339 Md. 41
• Parties: MEDICAL MUTUAL LIABILITY SOCIETY OF MARYLAND et al. v. B. DIXON EVANDER AND ASSOCIATES, INC. et al. ,
• Court: Maryland Court of Appeals

Page 41

339 Md. 41

660 A.2d 433

MEDICAL MUTUAL LIABILITY SOCIETY OF MARYLAND et al. v. B. DIXON EVANDER AND ASSOCIATES, INC. et al.

No. 32, Sept. Term, 1994.

Court of Appeals of Maryland.

June 28, 1995.

Reconsideration Denied Aug. 17, 1995.

David M. Funk (Charles S. Fax; Bryan D. Bolton, Shapiro and Olander, all on brief), Nell B. Strachan (Douglas D. Connah, Jr., Mitchell Y. Mirviss, Venable, Baetjer and Howard, all on brief), Baltimore, for appellants.

Robert J. Mathias (Francis B. Burch, Jr., William L. Reynolds, Glen K. Allen, Piper & Marbury, all on brief), Baltimore, for appellees.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY, CHASANOW, BELL and RAKER, JJ., and JOHN F. McAULIFFE, Judge (retired), Specially Assigned.

PER CURIAM.

This case concerns challenges to awards of compensatory and punitive damages in a suit alleging wrongful interference with business relationships.

I.

The present litigation arose out of a dispute between an insurance agency, Evander, Inc., owned by B. Dixon Evander, and an insurer, Medical Mutual Liability Society of Maryland. In 1989, Medical Mutual insured approximately six hundred doctors through Evander, Inc. During the 1980s, Medical Mutual had achieved a near monopoly in the Maryland medical malpractice insurance market, principally because other providers of such insurance had withdrawn from the state. ¹ In 1988, however, two new carriers, Princeton Insurance Co. and PIE Mutual Insurance Co., were approved to sell medical malpractice liability insurance in Maryland.

Evander, Inc. became the "master agent" for PIE Mutual and aggressively promoted PIE's products. Under its agreement with PIE Mutual, Evander, Inc. received substantially higher commissions on PIE policies than on policies issued by Medical Mutual. ² Nevertheless, Mr. Evander testified that he was not motivated to transfer clients from Medical Mutual to PIE in order to receive a higher income from their business. Instead, Mr. Evander said that he believed that PIE Mutual offered better terms than Medical Mutual to physicians practicing in certain specialties. Evander, Inc. sent out a brochure comparing PIE's coverage and rates to Medical Mutual's, and Mr. Evander spoke at physicians' meetings as a representative of PIE Mutual. Mr. Evander achieved considerable success in securing business for PIE. Approximately 50 of the 600 doctors represented by Evander, Inc. switched their coverage from Medical Mutual to PIE. In addition, some 275 physicians became new clients of Evander, Inc. and were insured by PIE. Because almost all Maryland physicians had been insured by Medical Mutual before PIE entered the market in 1988, a client secured by Evander, Inc. for PIE was ordinarily a client lost to Medical Mutual.

On the basis of Evander, Inc.'s promotion of a competing insurer, Medical Mutual decided to terminate its relationship with Evander, Inc. It is undisputed that Medical Mutual was entitled to end the business relationship, and that Medical Mutual properly followed the procedures for terminating agents and brokers set forth in Maryland Code (1957, 1994 Repl.Vol.), Art. 48A, § 234B. Under circumstances described more fully below, on May 22, 1989, Medical Mutual delivered to Mr. Evander a termination letter, a copy of a letter sent to each of the doctors whom Medical Mutual insured through Evander, Inc., explaining the consequences of the termination, and a copy of a complaint that Medical Mutual had filed with the Insurance Commissioner against Mr. Evander and Evander, Inc. After the termination, physicians insured with Medical Mutual through Evander, Inc. could no longer use Evander, Inc. as their broker for Medical Mutual insurance. While Mr. Evander was able to retain some Medical Mutual clients by placing their insurance through another broker, William Flynn, approximately 480 of Evander, Inc.'s former Medical Mutual clients either selected a different broker or insured directly with Medical Mutual.

In May 1990, Evander, Inc. and Mr. Evander filed a four count tort suit in the Circuit Court for Baltimore City against Medical Mutual and two of its senior officers, Dr. Raymond Yow and Richard A. Walker. ³ The plaintiffs claimed damages for defamation (Count I), wrongful interference with business relationships (Count II), tortious "interference with prospective advantage" (Count III), and "injurious falsehood" (Count IV). The case eventually proceeded to trial, with only Count I (defamation) and Count II (wrongful interference with business relationships) being submitted to the jury.

The plaintiffs' basic contention at trial was that Medical Mutual had defamed Mr. Evander and Evander, Inc. ⁴ As mentioned earlier, when Medical Mutual terminated its relationship with the plaintiffs, it wrote a letter to each doctor then insured by Medical Mutual whose insurance had been placed through the plaintiffs. ⁵ The letter provided in relevant part as follows:

"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 correct expiration date. We will also process your renewal in accordance with our underwriting standards, as we do all other renewals. I very much hope that you will want to continue as a member of Medical Mutual.

* * * * * *

"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."

The letter was signed by Dr. Raymond Yow, the Chief Executive Officer of Medical Mutual. According to the plaintiffs, the opening sentence of the "Dear Colleague" letter was susceptible to at least three defamatory interpretations: that Mr. Evander was inadequate as a broker, that Mr. Evander was not representing Medical Mutual in a way that many physicians believed to be adequate, and that Medical Mutual was terminating Evander because many doctors had complained of his inadequacy. Moreover, the plaintiffs contended that the "Dear Colleague" letter damaged the plaintiffs' business reputation, and that Medical Mutual had intended, by inflicting such damage, to interfere with the plaintiffs' business relationships with their Medical Mutual insureds.

Medical Mutual's principal defense to the defamation argument was that, since Mr. Evander and Evander, Inc. were aggressively marketing PIE's products, it followed that the plaintiffs were not adequately representing Medical Mutual. Furthermore, Medical Mutual argued that even if the "Dear Colleague" letter were defamatory, the plaintiffs had failed to establish that the alleged defamatory language of the "Dear Colleague" letter, and not the termination of the brokerage relationship, caused the plaintiffs' economic losses.

At trial, Mr. Evander and several of his former employees testified generally that they had received many calls from physicians insured with Medical Mutual, asking what they had "done wrong." When asked to name one of these physicians who had called and asked about wrongdoing, however, neither Mr. Evander nor the former employees could remember any specific physician who had called. As evidence intended to show the defamatory character of the "Dear Colleague" letter, the plaintiffs secured testimony from Dr. Yow that no physician had, in fact, complained to Medical Mutual about the plaintiffs' "adequacy." Moreover, several officers of Medical Mutual testified that the reason for Mr. Evander's termination was his association with PIE Mutual, Medical Mutual's competitor.

The plaintiffs sought to establish the amount of their damages through the expert testimony of Evander, Inc.'s long-time accountant, Charles Solomon. The plaintiffs showed that approximately 480 of 600 Medical Mutual insureds left Evander, Inc. after Medical Mutual had terminated the brokerage relationship and sent out the "Dear Colleague" letter, and also that PIE Mutual terminated its master agency with Mr. Evander because Mr. Evander was no longer able to bring in business for PIE Mutual. Mr. Solomon estimated that the sum of $1,763,000.00 would compensate the plaintiffs for their economic losses.

The plaintiffs also introduced evidence designed to establish "malice" on the part of Medical Mutual. Howard Friedman, a former officer of Medical Mutual, testified that Eric Hempleman, a Medical Mutual Vice President, stated that Medical Mutual should "shoot" Mr. Evander, apparently as a graphic way of saying that it should terminate Mr. Evander as a broker. On redirect, when Medical Mutual's attorney asked Mr. Hempleman to tell the jury whether he thought Mr. Evander deserved to be "shot," Mr. Hempleman answered "yes."

At the close of the plaintiffs' case, Medical Mutual moved for judgment on a number of grounds. With respect to the plaintiffs' count charging wrongful interference with business relations, Medical Mutual argued that it was entitled to judgment because Medical Mutual and Dr. Yow "were parties to the business relationship allegedly interfered with." Consequently, according to Medical Mutual, the tort of interference with business relationships did not lie. In addition, Medical Mutual argued that the plaintiffs had failed to establish a causal connection between any allegedly tortious conduct by the defendants and the plaintiffs' economic losses. Medical Mutual contended that the plaintiffs had failed to prove causation because they had failed to...