DOWELL v. EMPLOYERS MODERN LIFE CO., 665 N.W.2d 440 (Iowa App. 2003)

No. 2-786 / 00-2014Court of Appeals of Iowa.
Filed March 26, 2003

Appeal from the Iowa District Court for Polk County, Richard G. Blane, II, Judge.

Agents appeal adverse rulings and verdicts in their suit against insurance company. AFFIRMED.

John R. Hearn, Des Moines, for appellants.

Denny M. Dennis and Todd A. Strother of Bradshaw, Fowler, Proctor Fairgrave, Des Moines, for appellee.

Heard by Vogel, P.J., and Zimmer and Hecht, JJ.

VOGEL, P.J.

Jim Vandekamp and American Equitable Insurance Agency of Iowa, Inc.Dudley Dowell, Jr. and Dowell Financial Group, Inc. and RichardSchlindwein (the plaintiffs) appeal from the entry of directed verdictson their fraud claims against Employers Modern Life Company (EML), aswell the district court’s submission of a jury instruction on theirbreach of contract claim, and the court’s refusal to submit punitivedamages. We affirm.
Background Facts and Proceedings. In 1990 the plaintiffs [1]
contracted with EML to market and sell life insurance. Concerned about taking on an undeveloped territory and being able to maintain their positions as managing general agents long enough to make contracting with EML financially worthwhile, they sought pre-agreement assurances. On October 29, 1990, EML’s president, Alan Huisinga, provided a letter declaring EML’s intentions. The letter stated, in pertinent part:

The purpose of this letter is to reaffirm to you that we are committed to the Managing General Agent system. No one is really sure what the future has in store, but I will give you my assurance as President of Employers Modern Life we will back you as Managing General Agent as long as it is mutually profitable, for each of us. It would not be to the advantage of the company to watch you build a region, based upon obtaining mutual production objectives and then change the direction of the company.

Also, the future may be such that you are not interested in maintaining a Managing General Agent contract. Should this occur, we would not want to stand in the way of progress. In summary, no one is sure what tomorrow will hold. As long as we have an open means of communication and are working towards helping our P/C agents produce life business, I can see no reason why we will not have a successful business relationship.

On November 1, 1990, the plaintiffs signed agency agreements, which contained a mutual no-cause, thirty-day written notice termination provision, and which expressly terminated and replaced all prior negotiations and agreements. That same day the plaintiffs signed Managing General Agent Bonus Agreements, which referred to the November 1 agency agreements as Managing General Agent Agreements, and which by their owns terms were addendums to those agency agreements. In 1995, the parties entered into Regional General Agent (RGA) Supplemental and Bonus Plan Agreements. By their own terms these agreements were incorporated into and made part of the original 1990 agency agreements.[2]

New agency agreements were entered in 1997. These agreements still provided for a mutual no-cause, written termination, but extended the notice period to ninety days. Even though the 1997 agreements expressly terminated and replaced “all prior negotiations, agreements, and their addenda,” the parties continued to operate as if the 1995 RGA Supplemental Agreements remained in force. Then, in 1998, EML reconsidered the efficacy of its external RGA system, and on October 26, 1998, provided ninety-day written notice it was terminating the contract marketing of its life insurance plans.

The plaintiffs sued EML on fraud and breach of contract theories,[3] and sought punitive damages. EML obtained directed verdicts as to the fraud claims. The court submitted the contract claims to the jury, but refused to instruct on punitive damages. The jury found EML had not breached any of the contracts.

Scope of Review. We review grant of a motion for directed verdict for correction of errors at law. McClure v. Walgreen Co., 613 N.W.2d 225, 230
(Iowa 2000). When ruling on such a motion, the court was required to consider the evidence in a light most favorable to the plaintiffs. Id. A refusal to give a jury instruction is also reviewed for correction of errors at law. Beyer v. Todd, 601 N.W.2d 35, 38 (Iowa 1999). The plaintiffs were entitled to have their legal theory submitted to the jury if it was supported by substantial evidence in the record. Id.

Fraud Claims. The plaintiffs contend Huisinga’s 1990 letter contained two fraudulent misrepresentations. The first, that the plaintiffs would be granted a long-term or perpetual RGA agreement, is limited to a claim of affirmative misrepresentation. See Gibson v. ITT Hartford Ins. Co., 621 N.W.2d 388, 400 (Iowa 2001) (setting forth elements of claim). The second, that EML would maintain an open line of communication, is centered on EML’s 1998 failure to disclose information about the viability of the external RGA system. The plaintiffs appear to alternately posit this claim as one of affirmative misrepresentation, as well as nondisclosure. See Clark v. McDaniel, 546 N.W.2d 590, 592 (Iowa 1996) (setting forth elements of fraudulent concealment). Reviewing the record in the light most favorable to the plaintiffs, we conclude at least one element of each claim was unsupported by substantial evidence. As such, the directed verdicts were appropriate. McClure, 613 N.W.2d at 230.

Even if we assume the 1990 letters operated to control the plaintiffs’ RGA status separate and apart from the 1990 agency agreements, nothing on the face of the letters themselves would seem to constitute a promise for a perpetual arrangement or one that exceeded the roughly eight years during which the plaintiffs served as RGAs. In the letters EML expressed only its commitment to the Managing General Agency system and assured continuation of the arrangement with the plaintiffs only as long as it was mutually profitable. The letter very carefully avoided a promise of long-term commitment, twice articulating the uncertainty of the future, and affirming the plaintiffs’ right to terminate the agreement.

However, even if the letter and surrounding oral representations were sufficient to send the element of representation to the jury, there is no evidence of false intent on the part of Huisinga or EML. Intending that the letter not create a binding promise, and intending to mislead the plaintiffs into assuming a binding promise was made, are two separate things. While the record contains evidence of the former, it does not contain evidence of the latter.

The claim centered on EML’s failure to disclose information is similarly flawed. Even if we assume there was substantial evidence of a promise to share information relevant to the RGA system, Gibson, 621 N.W.2d at 400, or of special circumstances which gave rise to a duty to disclose on the part of EML, Clark,546 N.W.2d at 592, there is no evidence that, in 1990, EML intended to deceive the plaintiffs about the scope of the “open means of communications” or somehow intended to conceal a then nonexistent fact. The district court did not err in directing verdicts on the plaintiffs’ fraud claims.

Jury Instruction 20. The plaintiffs contend the court erred when it instructed the jury, in pertinent part:

If you determine the October 1990 letters do not form part of the Plaintiffs’ contracts, then EML had the right to terminate the RGA Supplemental Agreements by written notice with or without cause. This result is required whether you find the RGA Supplemental Agreement is a part of and subject to or is independent of the Agency Agreement.

On appeal the plaintiffs focus on the controlling nature of the 1990letters, and any integration between the letters and the RGA SupplementalAgreements. However, the objection at trial was limited to whether,without reference to the 1990 letters from Huisinga, the RGA SupplementalAgreements allowed for at-will termination. We therefore limit ouranalysis to issues regarding the agency agreements and the RGAsupplemental agreements. See Kellar v. Peoples Natural Gas Co., a Div. ofInterNorth, Inc., 352 N.W.2d 688, 692 (Iowa Ct.App. 1984) (“We do notconsider on appeal objections to jury instructions which were notpresented to the trial court.”).

Essentially, the plaintiffs sought an instruction that required the juryto first determine whether the RGA Supplemental Agreements hadincorporated any of the agency agreements. The plaintiffs argued that ifthe jury found the supplemental agreements had not incorporated theagency agreements, but were independent and separate agreements, the juryshould have then been required to determine whether the supplementalagreements created a perpetual agency that was not terminable at will.Reviewing the requested instruction,[4] we find no reversible error.

The court’s failure to give the requested jury instruction warrantsreversal only if it resulted in prejudice to the plaintiffs. Vaughan v.Must, Inc., 542 N.W.2d 533, 539 (Iowa 1996). Here, no prejudice isshown. If the jury had determined the agency agreements and the RGASupplemental Agreements were incorporated, then it seems clear theplaintiffs’ RGA status was terminable by the written notice provided byEML. If the jury had determined the RGA Supplemental Agreements wereindependent agreements, there was no basis upon which to find a permanentagency, as lifetime duration must be clearly and unequivocallyexpressed. Thompson v. Miller, 251 Iowa 324, 327, 100 N.W.2d 410, 412(1960). That requirement cannot be met by the vague and largely silentdocuments at issue here, nor by any of the alleged oral promises by EMLofficers.

The plaintiffs alternately argue that if the RGA Supplemental Agreementswere independent agreements silent as to termination, then under DesMoines Blue Ribbon Distrib., Inc. v. Drewrys Ltd., U.S.A., Inc.,256 Iowa 899, 908, 129 N.W.2d 731, 737 (1964), a no-cause terminationrequired “reasonable notice.” However, the plaintiffs do not point outwhich evidence was allegedly relevant on the issue of reasonable notice,and we cannot discern any such evidence from the abbreviated recordprovided. Because there was not substantial evidence in the record fromwhich a jury could conclude EML’s notice was unreasonable, any error inthe court’s instruction was harmless.

Punitive Damages. As we find no error in the proceedings below, and as the jury found no breach of contract, it is not necessary to address the contention punitive damages should have been submitted to the jury. We note, however, that in breach of contract cases, there must be a showing “the breach (1) constitutes an intentional tort, and (2) is committed maliciously. . . .” Magnusson Agency v. Public Entity Nat’l Co. Midwest, 560 N.W.2d 20, 29 (Iowa 1997). We further note the facts of this case fall far short of such a standard.

AFFIRMED.