Opinion
No. 2-819 / 02-0113.
Filed April 30, 2003.
Appeal from the Iowa District Court for Scott County, JAMES R. HAVERCAMP, Judge.
United Fire Casualty Company appeals the district court order denying various post-trial motions following a jury verdict in favor of the Lorenzen-Steffen Insurance Agency. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED WITH INSTRUCTIONS.
Craig Levien and Jean Feeney of Betty, Neuman McMahon, L.L.P., Davenport, for appellant.
Earl Payson, Davenport, for appellee.
Heard by VOGEL, P.J., and ZIMMER and HECHT, JJ.
United Fire Casualty Company appeals the district court order denying its motion for judgment notwithstanding the verdict following a jury verdict in favor of the Lorenzen-Steffen insurance Agency. We affirm in part, reverse in part, and remand.
I. Background Facts and Proceedings.
Mark Steffen is an independent insurance agent and the president of the Lorenzen-Steffen Agency. On January 1, 1991, Lorenzen-Steffen signed an agency agreement with United Fire Insurance Company, giving the agency authority to solicit applications for the sale of United Fire insurance policies. On January 20, 1998, Steffen sent a letter to the chief executive officer of United Fire, Scott McIntyre, in which he wrote critically of United Fire's "loss carry forward system" in its profit sharing agreement. McIntyre responded in a letter, expressing concern that Steffen's letter implied a "threat to conscientiously discriminate against United in the writing of business." He then set up a meeting with himself, Steffen, Stan Wiebold, United Fire's head of underwriting, Scott DeSousa, United Fire's marketing representative, John Rife, United Fire's president, and Mark Broghammer, a marketing manager. This meeting was generally described as cordial.
In a subsequent November 19, 1998, meeting, Wiebold, DeSousa and Broghammer met with Steffen to inform him of the decision to terminate Lorenzen-Steffen's agency agreement. They followed up with a letter informing Steffen the agency agreement would remain in effect until June 30, 1999. Had United Fire strictly enforced the ninety-day notice provision in the agency agreement, it could have terminated the agreement on February 19, 1999.
Following that November meeting, DeSousa, Broghammer, and Wiebold met with Ruhl Ruhl and Trissel, Graham Toole, both independent insurance agencies, selling United Fire policies. They informed the agencies of United Fire's termination of its contract with the Lorenzen-Steffen Agency. After a subsequent meeting in the early fall of 1999 in which United Fire discussed how to retain a Roofing Technology account, then represented by Lorenzen-Steffen, DeSousa met with an individual at Ruhl Ruhl and informed him of the large roofing account it wished to retain. A representative of Ruhl Ruhl then called on Roofing Technology, which agreed to allow Ruhl Ruhl to takeover its account with United Fire.
Also, in August 1999, De Sousa met with Mark Schwab of Trissel, Graham Toole in order to inform them United Fire was no longer in business with Lorenzen-Steffen and that Trissel, Graham Toole may be able to secure an account with Rock River Roofing, another account then held by Lorenzen-Steffen. Rock River later changed its agent to Trissel, Graham Toole.
On May 24, 2000, Lorenzen-Steffen filed a petition alleging United Fire breached the terms of their agreement by contacting its competitors after the termination of the agreement, that United Fire intentionally interfered with its existing contractual relationship with Roofing Technology and Rock River Roofing, and that United Fire tortiously interfered with its prospective business relationships. Following a trial, the jury returned a verdict finding United Fire had breached its contract with Lorenzen-Steffen, United Fire intentionally interfered with the contractual relationships, and United Fire intentionally interfered with the prospective business relationships. It awarded Lorenzen-Steffen damages up to and including June 30, 1999, in the amount of $3,018 and future damages of $89,308. United Fire appeals the district court's ruling denying its motion for judgment notwithstanding the verdict, motion for new trial, and motion for remittitur.
II. Standard of review.
A district court's denial of a motion for judgment notwithstanding the verdict is reviewed for correction of errors at law. Iowa R.App.P. 6.4; Gibson v. ITT Hartford, 621 N.W.2d 388, 391 (Iowa 2001). The motion should be denied if the evidence is substantial. Revere Transducers, Inc. v. Deere Co., 595 N.W.2d 751, 759 (Iowa 1999). "Evidence is substantial when a reasonable mind would accept it as adequate to reach a conclusion." Johnson v. Dodgen, 451 N.W.2d 168, 171 Iowa 1990). In addition, we view the evidence in the light most favorable to the party against whom the motion was directed. Faught v. Budlong, 540 N.W.2d 33, 35 (Iowa 1995).
III. Breach of Contract.
The jury found United Fire breached a contract with Lorenzen-Steffen by its conduct adverse to Lorenzen-Steffen's exclusive contractual right to use policy expiration and renewal information. On appeal, United Fire asserts there is no substantial evidence to support this finding. In a breach-of-contract claim, the complaining party must prove: (1) the existence of a contract; (2) the terms and conditions of the contract; (3) that it has performed all the terms and conditions required under the contract; (4) the defendant's breach of the contract in some particular way; and (5) that plaintiff has suffered damages as a result of the breach. Iowa-Illinois Gas Elec. Co. v. Black Veatch, 497 N.W.2d 821, 825 (Iowa 1993). A party breaches a contract when, without legal excuse, it fails to perform any promise which forms a whole or a part of the contract. Magnusson Agency v. Public Entity Nat'l Co., 560 N.W.2d 20, 27 (Iowa 1997).
We look first to the terms of the contract. Lorenzen-Steffen's contractual claim is based on language in the agency agreement stating it "has the exclusive right to the use of the expirations and renewals of policies produced through his agency." In addition, the agency agreement between Lorenzen-Steffen and United Fire states "[t]his Agreement may be terminated [b]y either party at any time by notice in writing." The contract thus allows either party to terminate the contract at will. See Preferred Marketing Associates Co. v. Hawkeye National Life Ins. Co., 452 N.W.2d 389, 396 (Iowa 1990) (addressing a similar insurance at will agency contract).
Lorenzen-Steffen does not dispute the at-will nature of the contract, nor does it claim there was any breach prior to termination. Rather, it maintains there was a breach of contract after termination because, according to its position, certain terms of the contract survive termination.
Again, we look to the terms of the contract. See Community Sch. Dist. of Postville v. Gordon N. Peterson, Inc., 176 N.W.2d 169, 175 (Iowa 1970) (intent must be determined by the terms of the contract). Under the heading "Rights to Expirations and Renewals," the contract conditions that right to the use of expirations and renewals. In pertinent part, it states:
That the Agent has the exclusive right to the use of the expirations and renewals of policies produced through his agency, provided, however, (i) that the exclusive right to use said renewals and expirations will automatically pass to the Company if the Agent fails to punctually remit premiums to the Company in the manner hereinafter described, even if in the event of the failure to punctually remit, the Company does not terminate or suspend the Agency relationship, and (ii) in the event of termination of the Agency relationship, all premiums due the Company by the Agent are due and payable immediately. If said premiums are not then paid, the exclusive right to renewals and expirations relating to the business written through the Company by Agent, shall pass to the Company and the Agent shall have no claim therefor.
. . .
In the event there is a reasonable dispute as to the existence or extent of the Agent's liability to the Company per items (i) and (ii) above, such dispute shall not prevent application of the ownership of the records and the ownership of the right of use and control of the expirations to be in the Agent's favor, provided the Agent promptly furnishes collateral security acceptable to the Company in an amount equal to that in dispute. . . .
In addition, under the heading "Continuing Duties," the contract provides:
Following the termination of the Agreement, the Agent will still be required to fulfill his/her duties relating to the policies produced by the Agent. In addition, many of the Agent's other obligations under this Agreement will continue. If the Company chooses, the Company may relieve you of some of all of those duties and obligations, and we will instruct you accordingly in writing.
We first note there is no evidence Lorenzen-Steffen "fail[ed] to punctually remit premiums" to United Fire. Thus according to the first paragraph above, the "exclusive right to use said renewals and expirations [does not] automatically pass to" United Fire. If the rights do not pass to United Fire, it must be assumed they are retained by Lorenzen-Steffen. Further, there is no evidence that following termination Lorenzen-Steffen failed to immediately pay all premiums. Pursuant to clause (ii) above, only when such premiums are not paid following termination does "the exclusive right to renewals and expirations relating to the business written through" United Fire pass to United Fire. Thus, the implication is Lorenzen-Steffen retains the exclusive right following termination unless it fails to pay all premiums then due, which is not the case here.
Accordingly, we conclude the contract provides that Lorenzen-Steffen's exclusive right to the use of expirations and renewals survived United Fire's termination of the contract. We further conclude substantial evidence supports the jury's finding that contractual right was breached. In August of 1999 Krabbenhoft and DeSousa met personally with individuals from Ruhl Ruhl and Trissel, Graham Toole to inform them of the Roofing Technology and Rock River Roofing accounts, both of which had been issued through Lorenzen-Steffen. A reasonable juror could have found this induced a solicitation of Lorenzen-Steffen's customers, and thus in violation of its exclusive right to use their expiration and renewal dates. We conclude substantial evidence supports the jury's verdict finding of breach of contract.
We distinguish this situation from that posed in Burke v. Hawkeye Nat. Life Inc. Co., 474 N.W.2d 110 (Iowa 1991), a breach of contract action against an insurance company by one of its former independent agents. There, our supreme court noted the "weak link" in the agent's breach of contract claim was "the lack of any binding agreement between the parties, written or oral, concerning `ownership' of" the agent's customers. Id. at 113. Here, as noted above, the contract does speak to the ownership of the right to the use of expirations and renewals.
IV. Intentional Interference with Business Relationships.
The jury also found for Lorenzen-Steffen on its claim United Fire's wrongful conduct interfered with its contractual business relationships with two of its largest clients, Roofing Technology and Rock River Roofing, causing it to lose those accounts. On appeal, United Fire maintains the evidence did not establish it intentionally and improperly interfered with any business relationships.
The elements of a claim for intentional interference with a contract are:
(1) plaintiff had a contract with a third-party; (2) defendant knew of the contract; (3) defendant intentionally and improperly interfered with the contract; (4) the interference caused the third-party not to perform, or made performance more burdensome or expensive; and (5) damage to the plaintiff resulted.Nesler v. Fisher Co., 452 N.W.2d 191, 198 (Iowa 1990). In determining whether the defendants' conduct is improper, the following factors are relevant:
(a) the nature of the act or conduct, (b) the actor's motive, (c) the interests of the other with which the actor's conduct interferes, (d) the interest sought to be advanced by the actor, (e) the social interests in protecting the freedom of action of the actor and the contractual interest of the other, (f) the proximity or remoteness of the actor's conduct to the interference, and (g) the relations between the parties.Hunter v. Board of Trustees, 481 N.W.2d 510, 517 (Iowa 1992). The basic focus of the analysis is "whether the actor's conduct was fair and reasonable under the circumstances." Toney v. Casey's Gen. Stores, Inc., 460 N.W.2d 849, 853 (Iowa 1990).
With this focus in mind, we conclude substantial evidence supports the jury's finding United Fire tortiously interfered with Lorenzen-Steffen's existing contractual relations with Roofing Technology and Rock River Roofing. The agency agreement, as noted, provided Lorenzen-Steffen "has the exclusive right to the use of the expirations and renewals of policies produced through his agency." Pursuant to the agreement, in the absence of evidence that Lorenzen-Steffen failed to punctually remit premiums, Lorenzen-Steffen does not lose that "exclusive right." We believe the contract provides evidence of both United Fire's and Lorenzen-Steffen's expectation as to the agency's exclusive right to renewals.
Moreover, the record contains evidence of the "industry practice or customs" indicating United Fire's actions were unusual, unfair, or unreasonable. See Financial Marketing Services, Inc. v. Hawkeye Bank Trust of Des Moines, 588 N.W.2d 450 (Iowa 1999) (citing Restatement (Second) of Torts§ 767 cmt. j, at 37). An expert witness called by Lorenzen-Steffen testified that the insurance business is very competitive, and that the "book of business" of an independent agent belongs to that independent agent. Mark Steffen also testified to the general understanding an independent insurance agency owns its book of business and protects it as its livelihood. A reasonable juror could have found United Fire's actions informing Ruhl and Ruhl of the Roofing Technology account it wished to retain, informing Trissel, Graham Toole of the Rock River Roofing account it wished to retain, and by informing Roofing Technology, Inc. and Rock River Roofing of United Fire's severed relationship with Lorenzen-Steffen constituted improper interference. The evidence thus supports the jury's finding in this regard, and we affirm. See Burke, 474 N.W.2d at 115 (concluding the record contained substantial evidence supporting insurance agent's claim the distribution of his customer list by an insurance company was improper by industry standards).
V. Intentional Interference with Prospective Business Relationships.
United Fire similarly contends Lorenzen-Steffen did not establish substantial evidence in support of its claim for intentional interference with prospective business relations. We must first address the following provision in the agency agreement:
In the event of termination of this contract, neither party shall have claim upon the other for loss of prospective profit or damage or reputation by reason of termination.
United-Fire maintains this clause is enforceable and precludes any recovery by Lorenzen-Steffen for interference with prospective business relationships. However, we conclude this provision does not cover post-contractual tortious conduct. Lorenzen-Steffen's claim here is based on actions occurring after the termination of the contract, and it does not seek recovery "by reason of termination."
Interference with a prospective business contract is an intentional tort which requires a showing that the sole or predominant purpose of the actor's conduct was to financially injure or destroy the plaintiff. Economy Roofing Insulating Co. v. Zumaris, 538 N.W.2d 641, 651-52 (Iowa 1995). This factor distinguishes it from the tort of interference with existing business relationships. See Nesler v. Fisher and Co., Inc., 452 N.W.2d 191, 198-99 (Iowa 1990). The elements of this tort are as follows:
1. a prospective contractual or business relationship;
2. the defendant knew of the prospective relationship;
3. the defendant intentionally and improperly interfered with the relationship;
4. the defendant's interference caused the relationship to fail to materialize; and
5. the amount of resulting damages.
Blumenthal Investment Trusts v. City of West Des Moines, 636 N.W.2d 255, 269 (Iowa 2001).
We do not find substantial evidence to support that United Fire's actions were predominantly aimed at financially injuring or destroying Lorenzen-Steffen. Economy Roofing, 538 N.W.2d at 652. At worst, the evidence shows United Fire sought to maintain the Roofing Technology Inc., and Rock River Roofing accounts, both of which it had held for several years, by informing two competing insurance agencies of the two specific accounts and that it had severed ties with Lorenzen-Steffen. We conclude the financial motivation of United Fire to keep longstanding accounts does not constitute "aiming to financially injure or destroy" Lorenzen-Steffen. See Financial Marketing Services, Inc. v. Hawkeye Bank Trust of Des Moines, 588 N.W.2d 450 (Iowa 1999) (finding nothing improper about defendant's actions to improve its own financial position).
Although United Fire's actions may have adversely impacted Lorenzen-Steffen's economic interests, such actions were undertaken to protect United Fire's own interests. See Farmers Cooperative Elevator, Inc. v. State Bank, 236 N.W.2d 674, 679-82 (Iowa 1975) (finding a bank not liable for damage to plaintiff's business resulting from bank's actions, where bank acted to protect its own position, not to destroy plaintiff's business). The record does not support that United Fire's actions rose to the level necessary to constitute interference with prospective business relations. The district court thus erred in denying United Fire's motion for judgment notwithstanding the verdict on this ground. We reverse on this issue.
VI. Damages.
United Fire contends Lorenzen-Steffen did not establish substantial evidence in support of the jury's award of damages. The jury was asked to assess damages "to and including June 30, 1999," which was the date of termination of the agency agreement. It awarded $3,018 on this question. The breach of contract claim, which we now affirm on appeal however, is based on actions which occurred following termination of the agreement. Even Lorenzen-Steffen admits it sought recovery solely on post-termination actions, and therefore there could have been no damages sustained prior to June 30, 1999. The jury's award of damages on this claim is thus inconsistent and not supported by the evidence. We remand for a new trial on the issue of damages based on the breach of contract claim, but only for such damages occurring following the June 30 termination of the agency agreement.
In addition, with regard to the $89,308 award for "thereafter and for the future damages", the verdict form does not specify the portion attributable to its finding of intentional interference with existing business relationships and the portion attributable to its finding of intentional interference with prospective business relationships. Thus, because it is impossible to segregate the damages award, we must also remand for a new trial on the issues of damages sustained by Lorenzen-Steffen occasioned by United Fire's interference with its existing contractual relationships with Rock River Roofing and Roofing Technology Inc. See Powell v. Khodari-Intergreen Co., 334 N.W.2d 127, 132 (Iowa 1983) (noting remand for a new trial may properly be limited to the issues affected by the error).
Accordingly, we remand for a new trial solely on the issues of damages consistent with this opinion.