Vesta Fire Ins. Corp. v. LIBERTY NAT.
| Decision Date | 10 October 2003 |
| Citation | 893 So.2d 395 |
| Parties | VESTA FIRE INSURANCE CORPORATION and Vesta Insurance Corporation v. LIBERTY NATIONAL LIFE INSURANCE COMPANY. Ex parte Vesta Fire Insurance Corporation and Vesta Insurance Corporation. (In re Liberty National Life Insurance Company v. Vesta Fire Insurance Corporation and Vesta Insurance Corporation). |
| Court | Alabama Court of Civil Appeals |
Tom E. Ellis Birmingham, for appellants/petitioners Vesta Fire Insurance Corporation and Vesta Insurance Corporation.
Charles A. Dauphin of Baxley, Dillard, Dauphin & McKnight, Birmingham, for appellee/respondent Liberty National Life Insurance Company.
Alabama Supreme Court 1030808.
Vesta Fire Insurance Corporation and Vesta Insurance Corporation (hereinafter referred to collectively as "Vesta") appeal from the entry of a summary judgment against Vesta and in favor of Liberty National Life Insurance Company ("Liberty National") by the Jefferson Circuit Court on a contract dispute between the parties. Vesta also petitions for a writ of mandamus, requesting relief from an order of the circuit court granting Liberty National's postjudgment discovery motion on the sufficiency of the supersedeas bond.1 For expediency, the two actions have been consolidated.
In 1993, Liberty National began the process of spinning off its fire insurance company, formerly known as Liberty National Fire Insurance Company, renaming it Vesta Fire Insurance Corporation, and entered into negotiations with Vesta to establish a more arms-length relationship between the organizations. At the time, Liberty National was selling Vesta industrial fire insurance policies through its "agency force." Liberty National wanted to continue making Vesta industrial fire insurance policies available to its customers, while Vesta wanted to continue utilizing Liberty National's agency force and to retain its current industrial fire insurance business. To accomplish those ends, on September 13, 1993, Liberty National and Vesta entered into a "Marketing and Administrative Services Agreement" ("the Agreement"),2 whereby Liberty National agreed to allow Vesta to use its agency force to sell industrial fire insurance policies and agreed to provide to Vesta administrative services3 for the policies in return for Vesta's agreement to compensate Liberty National and its agency force. The Agreement contains the following provisions relevant to this case:
(Emphasis added.)
The parties performed their respective obligations under the Agreement without incident until March 28, 1995. On that date, Liberty National sent Vesta written notification that in 30 days it would cease taking applications for Vesta industrial fire insurance policies, but that it would continue to provide administrative services for policies already "in force" in accordance with the Agreement. Under §§ 6.01 and 6.02 of the Agreement, this notice set into motion the process of terminating the Agreement. Under § 6.03(a), termination by Liberty National gave Vesta the right to assume the administration of the business in force, and, on August 27, 1996, Vesta sent Liberty National written notification of its intent to assume control of the administrative functions associated with its policies.
The parties admit that the conversion process was cumbersome and slow, and, as a result, Vesta's assumption of control of the administration of the policies was not completed until September 1998. From April 1995 through September 1998, Liberty National continued to receive 7.5% of the premiums collected each month, plus one-twelfth of 5% of the in-force annualized premiums at the end of each month, and the commissions on in-force policies for its agency force, in accordance with § 2.03(a)(2) of the Agreement. In October 1998, after Vesta assumed all administrative duties concerning the Vesta industrial fire insurance policies in force, Vesta ceased paying Liberty National 7.5% of the premiums collected each month. Vesta continued to pay Liberty National agents their commissions until April 1999, after which it ceased that remuneration as well.
On March 5, 1997, Jim Hattaway, an examiner with the Alabama Department of Insurance ("the Department"), wrote Vesta a letter indicating concerns that the Department had regarding Vesta's payment of fees and commissions to Liberty National pursuant to the Agreement. The Department's concerns were based on § 27-7-4, Ala.Code 1975, which provides that no agent is permitted to accept insurance payments for policies that the agent is not licensed to sell and the fact that Liberty National did not have a license to sell property and casualty insurance. Vesta claimed before the trial court that the Department had threatened it with massive fines if it did not cease paying Liberty National agents commissions under the Agreement.
On June 23, 1999, Liberty National sued Vesta, alleging breach of the terms of the Agreement, requesting compensatory damages for Vesta's failure to continue paying Liberty National 7.5% of the premiums Vesta had collected on in-force policies since it had assumed administrative duties over those policies, and seeking $24,000 in expenses incurred by Liberty National in assisting Vesta in the transition of the administration of the policies from Liberty National to Vesta. Vesta answered the complaint, denying all material allegations and requesting a jury trial.
On June 29, 2001,...
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