Prudential Ins. Co. of America v. Van Matre

• Court: Appellate Court of Illinois
• Writing for the Court: HARRISON
• Citation: Prudential Ins. Co. of America v. Van Matre, 511 N.E.2d 740, 158 Ill.App.3d 298, 110 Ill.Dec. 563 (Ill. App. 1987)
• Decision Date: 09 July 1987
• Docket Number: No. 5-85-0767,5-85-0767
• Parties: , 110 Ill.Dec. 563 The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellant, v. Michael D. VAN MATRE, Defendant-Appellee. Fifth District

Page 740

511 N.E.2d 740

158 Ill.App.3d 298, 110 Ill.Dec. 563

The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellant, v. Michael D. VAN MATRE, Defendant-Appellee.

No. 5-85-0767.

Appellate Court of Illinois,

Fifth District.

July 9, 1987.

Rehearing Denied Aug. 18, 1987.

Burke, Griffin, Chomicz & Wienke, P.C., Chicago, Michael P. Mullen and Francis M. Pawlak, of counsel, for plaintiff-appellant.

Q. Anthony Siemer, Parker, Siemer, Austin, Resch & Resch, Effingham, for defendant-appellee.

Justice HARRISON delivered the opinion of the court:

Plaintiff, Prudential Insurance Company of America (Prudential), filed an action in the circuit court of Effingham County seeking damages and an injunction to prevent defendant, Michael D. Van Matre, one of its former agents, from inducing Prudential whole-life insurance policyholders to terminate policies which Van Matre had sold or serviced while in Prudential's employ and to replace them with whole-life policies of a different company. Prudential's complaint contained three counts. Count I alleged tortious interference with contract, count II alleged breach of an implied covenant of good faith and fair dealing, and count III alleged breach of fiduciary duty. On Van Matre's motion, the circuit court dismissed all three counts pursuant to section 2-615 of our Code of Civil Procedure (Ill.Rev.Stat. 1985, ch. 110, par. 2-615) as being substantially insufficient in law. Although the circuit court granted Prudential leave to file an amended complaint, Prudential elected to stand on its original pleadings. This appeal followed. We affirm.

A motion to dismiss a complaint pursuant to section 2-615 (Ill.Rev.Stat.1985, ch. 110, par. 2-615) requires the appellate court, as well as the trial court, to accept all facts well pleaded as true and to draw all reasonable inferences therefrom in favor of the plaintiff. (Towne v. Cole (1985), 133 Ill.App.3d 380, 382, 88 Ill.Dec. 404, 406, 478 N.E.2d 895, 897.) Prudential, the plaintiff in this case, alleged that on or about April 7, 1975, Van Matre entered into an "Agent's Agreement" with it. According to the agreement, which was attached as an exhibit to plaintiff's complaint, Van Matre was obligated to "promote the success and welfare of [Prudential]; conform to and abide by its instructions, rules and requirements; and refrain from engaging in any other pursuit or calling from which [he would] receive financial remuneration while this Agreement is in force." Agreement § 1.

As part of this general obligation, Van Matre agreed to "canvas regularly for applications for insurance contracts of the kinds and upon the plans sold by [Prudential]," to "advocate the class of insurance most suitable to the applicant's position," to "not press for a larger amount of insurance than the applicant is able to maintain," to "endeavor to keep in force the existing insurance of [Prudential], to secure the reinstatement of insurance which is lapsed and to perform all the duties, incident to the care and conservation of [Prudential's] business, that may be assigned to [him] from time to time by [Prudential]." Agreement § 2.

The agreement provided that Van Matre's "appointment as Agent and this Agreement may be terminated either by [Van Matre] or [Prudential] at any time." (Agreement § 13.) Upon termination of the agreement, Van Matre was required:

1) to "immediately submit [books and records of accounts indicating money received by Van Matre on Prudential's behalf] for an inspection and accounting" (Agreement § 7(a));

2) to "hand over" to a proper representative of Prudential "all books, records, and supplies furnished" to Van Matre by Prudential (Agreement § 7(b));

3) to grant a "prior lien" to Prudential "upon any amounts due [Van Matre], [his] executors, administrators or assigns, by the terms of the Agreement, until the amount of such indebtedness is fully paid" (Agreement § 14); and

4) to authorize Prudential to release to third parties, upon inquiry, information regarding his record with the company, his "personal character, habits, ability, and cause for leaving the service" and to "release [Prudential] from all liability for damages in connection with the furnishing of such information," Agreement § 15.

This agreement thus appears to have been identical to one recently considered by the United States Court of Appeals for the Seventh Circuit in Prudential Insurance Company of America v. Sipula (7th Cir.1985), 776 F.2d 157. As in that case, no further post-termination obligations were expressly imposed, and "[n]o mention was made of the confidential nature of policyholder information." 776 F.2d 157, 159.

From approximately April, 1975, to June, 1983, Van Matre was employed by Prudential pursuant to the Agent's Agreement and was assigned to Prudential's Decatur District Office in Decatur, Illinois. During his employment, Van Matre sold several types of Prudential whole-life insurance policies to various customers throughout the central Illinois area. He also "serviced" those policyholders, as well as other policyholders assigned to him by Prudential.

A Prudential whole-life insurance policy is a contract between Prudential and a policyholder that is, in the words of the policy, "insurance for the whole of life." Under the policy, Prudential agrees to pay a specified sum to the policyholder or beneficiary upon the death of the insured, and to pay dividends and other benefits during the life of the policy. The policies are based on actuarial assumptions which contemplate a long-term contractual relationship. Prudential's premium rates, estimates of expected dividends, cash surrender value accumulations mortality assumptions and other economic terms of the policy are premised upon the policy remaining in force for a number of years. Prudential's experience has been that whole-life policies remain in effect for more than 15 years. Policyholders, however, have the right to cancel the policies at any time.

When he sold a whole-life policy, Van Matre received a first-year commission on the sale from Prudential equal to approximately 40 to 55% of the first-year premium paid by the policyholder. Van Matre also received commissions on policies he was assigned to service, but had not sold. The amount and rate of first-year commissions paid to Van Matre was predicated upon the expectation that the policies would remain in force for a long term. Nevertheless, Prudential did not expressly condition receipt of the commissions by Van Matre upon the policies remaining in force for any minimum period of time. Rather, the payment of commissions by Prudential was dependent only upon its receipt of corresponding premiums from the policyholders.

In the course of his employment with Prudential, Van Matre was given access to information on each of the policyholders with whom he dealt. Prudential alleges that the information was compiled by it "at considerable effort and expense and is not readily available from other industry sources." (Complaint p 17.) The information included, inter alia, "the identity of Prudential policyholders, policy amounts, premium rates, ages, condition of health, available life insurance premium ratings, policy anniversary dates, premium payment dates, beneficiary names, settlement options chosen, dividend options chosen, dividend accumulations, annual increases in cash surrender values." (Complaint p 17.) The complaint alleges that Van Matre was expressly and impliedly bound to treat such information "as the property of Prudential and not to disclose such information to third parties or use such information on his own account or on account of others." Complaint p 17.

On or about June 30, 1983, Van Matre's employment with Prudential terminated. He then became an agent for Transamerica Insurance Company in central Illinois and began competing with Prudential in the sale of whole-life insurance policies. According to Prudential, Van Matre succeeded in inducing several of its whole-life insurance policyholders to terminate the policies which he had sold to or serviced for them while he was employed by Prudential and to purchase instead whole-life policies issued by his new employer. Prudential further alleges that "Van Matre continues to engage in such unlawful conduct by contacting Prudential policyholders and inducing them to terminate their whole life policies." Complaint p 20.

In June of 1984, Prudential responded to Van Matre's activities by filing this action in the circuit court of Effingham County. In its complaint, Prudential does not challenge Van Matre's right to compete generally with it, nor does it seek to prevent him from selling additional insurance to his former Prudential clients. Rather, it asks that Van Matre be enjoined only from "causing or attempting to cause, directly or indirectly, by any means, the termination of any Prudential whole life insurance policy placed or sold by Van Matre or serviced by him at any time." The complaint also prays for $100,000 in damages to compensate Prudential for the terminations of whole-life policies already caused by Van Matre. We have been advised, however, that Van Matre has declared bankruptcy and that this damage claim has now been abandoned. The request for injunctive relief alone remains.

The right of former Prudential agents such as Van Matre to engage in the type of conduct at issue in this case has been the subject of considerable litigation in recent years. (See Prudential Insurance Company of America v. Baker (Ind.App.1986), 499 N.E.2d 1152; Prudential Insurance Company of America v. McCurry (1986), 143 Ill.App.3d 222, 97 Ill.Dec. 367, 492 N.E.2d 1026; Prudential Insurance Company of America v. Diemer (N.D. Ind.1986), 637 F.Supp. 313; Prudential Insurance Company of America v. Sipula (7th Cir.1985), 776 F.2d 157; Prudential Insurance Company of America v. Crouch (S.D. Ind.1985), 606 F.Supp. 464, aff'd mem. (7th Cir.1986), 796 F.2d 477; The...