Travelers Indem. Co. v. Merling

• Decision Date: 01 September 1990
• Docket Number: No. 30,30
• Citation: 605 A.2d 83,326 Md. 329
• Parties: , RICO Bus.Disp.Guide 8003 The TRAVELERS INDEMNITY COMPANY, Charter Oak Fire Insurance Company, and Phoenix Insurance Company v. Bernard W. MERLING. ,
• Court: Maryland Court of Appeals

Page 329

326 Md. 329

605 A.2d 83, RICO Bus.Disp.Guide 8003

The TRAVELERS INDEMNITY COMPANY, Charter Oak Fire Insurance Company, and Phoenix Insurance Company v. Bernard W. MERLING.

No. 30, Sept. Term, 1990.

Court of Appeals of Maryland.

April 24, 1992.

Motion for Reconsideration Denied June 5, 1992.

Lee H. Ogburn, argued and on brief (Kathleen A. Birrane, Kramon & Graham, P.A., on brief), Baltimore, for petitioners/cross respondents.

Thomas Waxter, Jr., Semmes, Bowen & Semmes, Baltimore, for Aetna Cas. & Surety Co. et al., amicus curiae.

David M. Buffington, H. Thomas Howell, and Janet M. Truhe, Semmes, Bowen & Semmes, Baltimore, for Maryland Cas. Co., amicus curiae.

Thomas J. Schetelich and Samuel C.P. Baldwin, argued and on brief (Thieblot, Ryan, Martin & Ferguson, on brief), Baltimore, for respondent/cross petitioner.

Argued before MURPHY, C.J., ELDRIDGE, RODOWSKY, McAULIFFE and CHASANOW, JJ., and CHARLES E. ORTH, Jr., Judge of the Court of Appeals of Maryland (retired) Specially Assigned.

ELDRIDGE, Judge.

This case concerns the rights of an independent insurance agent, whose agency was lawfully terminated by the insurer, with respect to insurance policies which the agent had originally produced but which were renewed by the insurer after the termination of the agency.

The plaintiff Bernard W. Merling is an independent insurance agent, and, as such he may place his clients with one of several insurance companies, depending upon the best interests of those clients. Merling had entered into an agency agreement with the defendant insurance companies, who are the Travelers Indemnity Company, the Charter Oak Fire Insurance Company, and the Phoenix Insurance company (hereinafter collectively referred to as "Travelers"). ¹ The agency agreement authorized Merling to solicit, bind and issue Travelers' insurance policies for certain types of risks. In exchange for selling Travelers' insurance policies, Merling was entitled to receive as commissions a percentage of the premiums paid on all policies originated or renewed through Merling. The agency agreement also provided for termination of the agency relationship upon 120 days notice by either party.

On September 19, 1986, Travelers notified Merling by letter that he was to be terminated effective January 30, 1987. A subsequent letter extended this date to February 20, 1987. The reason for his termination, as stated in the original letter, was Merling's inability to produce any quantity of certain types of business. Although Merling complained to Maryland's Insurance Commissioner, the Commissioner concluded that his termination was lawful under the Insurance Code, Maryland Code (1957, 1991 Repl.Vol.), Art. 48A, § 234B. Merling did not seek judicial review of the Commissioner's decision pursuant to Art. 48A, §§ 40 and 234C. Merling has not, and indeed could not, collaterally challenge that administrative determination by the Insurance Commissioner in the present action.

Travelers' termination letter advised Merling that, "in line with contract provisions [of the agency agreement] we will offer to renew all existing business which meets our current underwriting standards for one year after the effective date of this termination." Travelers, in accordance with that agreement, paid Merling the renewal commissions for the one year from February 20, 1987, to February 20, 1988. During that one year period, Merling was able to place some of his clients with other insurance companies, either directly or through another agent. Nevertheless many of Merling's clients chose to remain with Travelers. ² Merling wrote a letter to these clients stating that Travelers "has discontinued its business relationship with" Merling, that Merling had originally placed the clients with Travelers as it was in their best interests, and that it was in their best interests to stay with Travelers.

After February 20, 1988, Travelers notified Merling's clients directly that the business relationship between Travelers and Merling had ended. The letter also stated that, as required by law, their policies would continue to be renewed. The letter, however, informed the insureds that Merling was "in the best position to handle your insurance needs, including placing your insurance with another company." The letter further stated that "[w]e urge you to contact your insurance agent for counseling ... or if you wish to continue insuring with The Travelers, a bill will be sent to you shortly."

Those insureds deciding to remain with Travelers had their policies recoded to a house account, with no agent listed on the policy. The policies were renewed directly through Travelers. No renewal commissions on these policies were paid to Merling or to any other agent after February 20, 1988.

On December 13, 1988, Merling instituted in the Circuit Court for Baltimore City the present action against Travelers, alleging that Travelers had committed various torts with regard to Merling's property rights and contract rights. The complaint initially set forth in detail the facts as summarized above. Thereafter, count one of the complaint, labeled "Conversion," asserted that the defendants had converted Merling's "personal property by appropriating to their own exclusive use and ownership the expirations entrusted to them by Plaintiff." ³ Count three, labeled "Intentional Interference With Property Rights," asserted that Merling "was the sole and exclusive owner of his work product, called 'expirations,' " and that the "[d]efendants interfered with and deprived Plaintiff of his property right to his expirations." The substance of both count one and count three was the same, namely that Merling's expirations were "converted" or "interfered with" by Travelers' action in sending renewal policies and premium invoices to Merling's former clients in such a manner that the business was not renewed through Merling and was renewed as house accounts. ⁴

The second count of Merling's complaint asserted that Travelers had intentionally interfered with the contractual or economic relations between Merling and his clients, and the fourth count alleged that Travelers had violated the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"). Merling sought both compensatory and punitive damages.

Travelers filed a motion to dismiss, and Merling filed a motion for summary judgment with regard to liability. The circuit court granted Merling's motion for summary judgment on the first three counts, concluding that Merling was "entitled to his commissions ad infinitum ... [a]s long as that customer continues the business with that company...." The circuit court conditioned Merling's entitlement to damages upon Merling's continued servicing of those policies. The circuit court granted Travelers' motion to dismiss with respect to the RICO count and the request for punitive damages.

A separate trial was then held before a different judge on Merling's damages. At the conclusion of the trial on damages, the circuit court entered judgment against Travelers in the amount of $59,892.02 plus interest. Both parties appealed to the Court of Special Appeals, and, prior to oral argument in the Court of Special Appeals, both sides petitioned this Court for a writ of certiorari. We granted both petitions.

I.

In the circuit court and in this Court, Merling argued that common law principles gave him exclusive ownership of his expirations. He contended that Travelers' use of those expirations to contact his insureds tortiously violated his property rights and amounted to a conversion of his property. In this Court, Merling insists that "[t]he claims below were not predicated upon a right to renewal commissions based on contract. Rather, the claims below were in tort, for the conversion of an independent agent's expirations, for intentional interference with his contractual relations with his clients (the insureds), and for the intentional interference with his property rights." ⁵ (Merling's brief, pp. 1-2). Consequently, as Merling's counsel conceded at oral argument, the case primarily turns on the nature of Merling's expirations as a property right.

The term "expirations" has a definite meaning and, as stated in V.L. Phillips & Co. v. Pennsylvania Threshermen, Etc., 199 F.2d 244, 246 (4th Cir.1952), cert. denied, 345 U.S. 906, 73 S.Ct. 645, 97 L.Ed. 1342 (1953), includes

"the records of an insurance agency by which the agent has available a copy of the policy issued to the insured or records containing the date of the insurance policy, the name of the insured, the date of its expiration, the amount of insurance premiums, property covered and terms of insurance."

See also, e.g., Fred Miller Co. v. Empire Fire & Marine Insurance Co., 503 F.2d 751, 752 n. 1 (8th Cir.1974); Woodruff v. Auto Owners Ins. Co., 300 Mich. 54, 59-60, 1 N.W.2d 450, 453 (1942); Kerr & Elliott v. Green Mountain Mut. Fire Ins. Co., 111 Vt. 502, 510, 18 A.2d 164, 168 (1941); Shrewsbery v. National Grange Mut. Ins., 183 W.Va. 322, 395 S.E.2d 745, 749 (1990); Blume v. Curson, 447 S.W.2d 727, 730 (Tex.App.1969); Garrett v. American Family Mutual Insurance Co., 520 S.W.2d 102, 108 n. 1 (Mo.App.1974); Matter of Estate of Corning, 108 A.D.2d 96, 99, 488 N.Y.S.2d 477, 480 (1985); Calley v. United States, 220 F.Supp. 111, 113-114 (S.D.W.Va.1963).

This bundle of information is recognized in the insurance field as a "valuable asset in the nature of good will." V.L. Phillips & Co. v. Pennsylvania Threshermen, Etc., supra, 199 F.2d at 246. See also Fred Miller Co. v. Empire Fire & Marine Insurance Co., supra, 503 F.2d at 752 n. 1; Shrewsbery v. National Grange Mut. Ins., supra, 395 S.E.2d at 750; Calley v. United States, supra, 220 F.Supp. at 114. It provides the insurance agency with the opportunity to contact the insured prior to termination of a policy and either renew the policy or secure another policy with a different insurance...