Title: Hamilton Ins. Serv., Inc. v. Nationwide Ins. Cos.

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Hamilton Ins. Serv., Inc. v. Nationwide Ins. Cos., 86 Ohio St.3d 270, 1999-Ohio-162.] 
 
 
 
 
HAMILTON INSURANCE SERVICES, INC. ET AL., APPELLEES, v. NATIONWIDE 
INSURANCE COMPANIES, APPELLANT. 
[Cite as Hamilton Ins. Serv., Inc. v. Nationwide Ins. Cos. (1999), 86 Ohio St.3d 
270.] 
Contracts — Employment agreement between independent insurance agent and 
insurance company — Termination of Corporate Agency Agreement by 
insurance company with or without cause not wrongful or in bad faith, when 
— Noncompetition clause reasonable, when. 
(No. 98-405 — Submitted April 21, 1999 at the Hardin County and Ohio 
Northern University Law School Session — Decided September 1, 1999.) 
APPEAL from the Court of Appeals for Richland County, Nos. 97CA27 and 
97CA42. 
 
This case arises from the termination of an agency agreement between 
appellant, Nationwide Insurance Companies (“Nationwide”), and appellee, 
Hamilton Insurance Companies, Inc.  Neil Hamilton was employed as an insurance 
agent for Western & Southern Insurance Company from 1975 to 1984.  While still 
employed with Western & Southern, Hamilton began to explore the possibility of 
obtaining his own insurance agency. 
 
In 1984, Hamilton was contacted by Tom Dove, agency manager for 
Nationwide, about the possibility of taking over a Nationwide agency in Lucas, 
Ohio.  Dove explained to Hamilton the process of becoming an Independent 
Nationwide Agent.  As Hamilton understood the process, his first three years with 
Nationwide would serve as a validation period in which he would be an employee 
of Nationwide, pursuant to an employment contract with Nationwide.  Following 
this three-year validation period, Hamilton understood that he would become an 
independent agent, meaning that he “would run the business [his] own way.”  
2 
Thus, Hamilton hoped that he would achieve his goal of becoming an independent 
insurance agent at the completion of the three-year validation period. 
 
In October 1984, Hamilton and Nationwide executed an Agent Employment 
Agreement.  This agreement provided that it “may be terminated at will by the 
Companies or by the Agent.”  Hamilton worked as an employee of Nationwide 
pursuant to this agreement until 1987, the end of the three-year validation period. 
 
Following the three-year validation period, Hamilton became an independent 
contractor and independent agent.  This transition required him in May 1987 to 
execute another contract with Nationwide, designated the Agent’s Agreement.  The 
agreement provided that it could be cancelled by either party “at any time after 
written notice.” 
 
Hamilton operated his insurance agency pursuant to the 1987 agreement 
until 1992 when he decided to incorporate the agency.  As a result of this decision, 
Nationwide and Hamilton executed a Corporate Agency Agreement.  As with the 
previous two agreements, the Corporate Agency Agreement contained a 
cancellation clause, but the Corporate Agency Agreement allowed either party to 
terminate the agreement “with or without cause.”  Additionally, this agreement 
contained a noncompetition clause and an integration clause.  The agreement 
further provided that the agent was entitled to certain benefits, referred to as 
Agency Security Compensation (“ASC”), upon termination of the agreement, 
regardless of the reason for the termination.  However, the noncompetition clause 
provided for the forfeiture of ASC benefits if the agent decided to compete with 
Nationwide within a radius of twenty-five miles and one year of termination. 
 
When Hamilton first began to work for Nationwide in 1984, he was 
furnished with a copy of Nationwide’s Agency Administration Handbook.  This 
handbook contains provisions entitled “Contractual Stability” and “Agent’s 
Administrative Review Board.”  The “Contractual Stability” section provides 
3 
various reasons for the termination of the Agent’s Agreement.  These reasons 
include such things as breach of contract, criminal acts, dishonesty, or fraud, and 
“[a]ctions clearly contrary to the best interests of customers and the Company.”  
The Agent’s Administrative Review Board section of the handbook applies only to 
career agents and enunciates the purpose and procedures of the review board. 
 
In April 1991, Nationwide implemented the Auto Portfolio Management 
Plan (“APMP”).  The APMP evaluates an agent’s performance based on the “paid 
loss ratio” of the policyholders in the agency.  Basically, this plan evaluates an 
agent’s performance by comparing the amount of payments for losses made on the 
policy with the premium amounts paid by the insureds.  Under the plan, an agent 
whose loss-to-paid-loss ratio is ninety percent or more is considered to be 
“historically unprofitable,” and, absent improvement within the next two years, the 
agency may be terminated. 
 
In March 1992, Hamilton was advised by Nationwide that he was not 
meeting the necessary performance levels as measured by the APMP.  He was, 
therefore, advised that he was subject to termination under the plan at the end of 
two years.  On April 1, 1994, Nationwide terminated the agency agreement. 
 
Hamilton filed a complaint against Nationwide in the Richland County 
Court of Common Pleas, alleging that the April 1, 1994 termination by Nationwide 
was wrongful and in bad faith, and also that the termination clause of the Corporate 
Agency Agreement was unconscionable.  The trial court found that the termination 
clause in the contract was a question for the jury.  The court, therefore, allowed 
Hamilton to present evidence that the agreement was terminable only for just 
cause.  The case proceeded to jury trial, and Hamilton was awarded $100,000.  The 
court also determined that the forfeiture of benefits pursuant to the noncompetition 
clause was unconscionable and awarded Hamilton accumulated benefits.  The 
court, therefore, entered judgment for Hamilton in the amount of $208,164.  The 
4 
trial court overruled Nationwide’s motion for judgment notwithstanding the 
verdict. 
 
Nationwide filed a timely notice of appeal in the Fifth District Court of 
Appeals.  Hamilton filed a cross-appeal alleging that the trial court erred in failing 
to issue discovery sanctions against Nationwide.  The court of appeals affirmed the 
trial court’s judgment against Nationwide and overruled Hamilton’s cross-appeal. 
 
The cause is now before this court upon the allowance of a discretionary 
appeal by Nationwide. 
__________________ 
 
Inscore, Rinehardt, Whitney & Enderle and Larry L. Inscore, for appellees. 
 
Arter & Hadden, L.L.P., and Irene C. Keyse-Walker; Lutz & Oxley and Fred 
M. Oxley, for appellant. 
 
Kerger & Kerger, Richard M. Kerger and Jessica C. Kerger, urging 
affirmance for amicus curiae, Nationwide Insurance Independent Contractors 
Association. 
 
Spater, Gittes, Schulte & Kolman, Frederick M. Gittes and Kathaleen B. 
Schulte, urging affirmance for amici curiae, Ohio Employment Lawyers 
Association, Ohio Academy of Trial Lawyers, Ohio Chapter of the National 
Association of State Farm Agents, and Cincinnati Employment Lawyers 
Association. 
 
Crabbe, Brown, Jones, Potts & Schmidt, Larry H. James and Amy Fulmer 
Stevenson, urging reversal for amici curiae, Ohio Chamber of Commerce and the 
Ohio Association of Civil Trial Attorneys. 
__________________ 
 
MOYER, C.J.  The principal issue in this case is whether the Corporate 
Agency Agreement, which governed the relationship between Nationwide and 
Hamilton at the time of Nationwide’s termination of the relationship, was clear and 
5 
unambiguous, thus allowing Nationwide to terminate the agreement with or 
without cause.  The trial court and the court of appeals determined that the contract 
was ambiguous and, therefore, allowed Hamilton to present additional evidence to 
support his contention that the Corporate Agency Agreement was terminable only 
for just cause.  For the reasons that follow, the judgment of the court of appeals is 
reversed. 
 
In construing the terms of any contract, the principal objective is to 
determine the intention of the parties.  Aultman Hosp. Assn. v. Community Mut. 
Ins. Co. (1989), 46 Ohio St.3d 51, 53, 544 N.E.2d 920, 923.  Generally, contracts 
should be construed in a manner to give effect to the intentions of the parties.  Id., 
citing Employers’ Liab. Assur. Corp. v. Roehm (1919), 99 Ohio St. 343, 124 N.E. 
223, syllabus; Skivolocki v. E. Ohio Gas Co. (1974), 38 Ohio St.2d 244, 67 O.O 2d 
321, 313 N.E.2d 374, paragraph one of the syllabus.  We apply these basic 
principles to determine the intent of the parties in order to establish the terms of the 
Corporate Agency Agreement. 
 
When the terms included in an existing contract are clear and unambiguous, 
we cannot create a new contract by finding an intent not expressed in the clear and 
unambiguous language of the written contract.  Alexander v. Buckeye Pipe Line 
Co. (1978), 53 Ohio St.2d 241, 246, 7 O.O.3d 403, 406, 374 N.E.2d 146, 150.  
Here, paragraph nine of the Corporate Agency Agreement clearly provides that 
“the Agency or Nationwide have the right to cancel this Agreement at any time 
with or without cause.”  This section further provides that “the Agency shall have 
access to the Agents Administrative Review Board, and its procedures, as may 
exist from time to time.” 
 
Hamilton argues that the Corporate Agency Agreement was not clear and 
unambiguous.  We do not agree.  The contract clearly states that either party may 
cancel the agreement “with or without cause.”  The agreement does provide that 
6 
the Agent shall have access to the Agent’s Administrative Review Board.  In 
addition, assuming the admissibility of the employee handbook, the “Contractual 
Stability” section in that handbook enumerates several reasons for which the 
Agent’s Agreement may be cancelled.  These reasons include breach of contract, 
criminal acts, dishonesty, and fraud, and “[a]ctions clearly contrary to the best 
interests of customers and the Company.” 
 
While the handbook outlines several reasons for terminating the Agent’s 
Agreement for just cause, and the handbook, as well as the Corporate Agency 
Agreement itself, refers to an administrative board that may review the 
performance of agents, these provisions are not inconsistent with the provision in 
the Corporate Agency Agreement allowing either party to terminate the contract 
without cause.  Instead, we find that the Contractual Stability section of the 
employee handbook and the reference to an Agent’s Administrative Review Board 
in both the Corporate Agency Agreement and the employee handbook merely 
detail several reasons for which the agreement may be terminated.  However, this 
does not imply that either party may not terminate the agreement at any time with 
or without cause. 
 
Hamilton’s assertion that the Corporate Agency Agreement is terminable 
only for cause is inconsistent with the clear wording of the agreement.  There can 
be no implied covenants in a contract in relation to any matter specifically covered 
by the written terms of the contract itself.  Kachelmacher v. Laird (1915), 92 Ohio 
St. 324, 110 N.E. 933, paragraph one of the syllabus.  The agreement of parties to a 
written contract is to be ascertained from the language of the instrument itself, and 
there can be no implication inconsistent with the express terms thereof.  Latina v. 
Woodpath Dev. Co. (1991), 57 Ohio St.3d 212, 214, 567 N.E.2d 262, 264.  Here, 
to infer that termination may be based only upon just cause would directly 
contradict the express terms of the Corporate Agency Agreement.  Furthermore, 
7 
the integration clause in the agreement provides that “this Agreement may be 
changed, altered, or modified only in writing signed by Agency and an officer of 
Nationwide.”  Therefore, we find that the Corporate Agency Agreement was 
terminable by either party with or without cause.  Therefore, Nationwide did not 
breach the terms of the agreement when it terminated the contract in April 1994. 
 
In addition to finding that the Corporate Agency Agreement was ambiguous, 
the trial court found that the noncompetition clause contained in the agreement was 
unconscionable.  The court of appeals disagreed with the ruling of the trial court, 
finding that the clause was reasonable.  However, because the court of appeals 
found that Nationwide had breached the terms of the Corporate Agency 
Agreement, it held that the noncompetition clause was unenforceable.  Based upon 
our finding that Nationwide did not breach the terms of the Corporate Agency 
Agreement, we must look to the terms of the noncompetition clause to determine if 
it is valid and enforceable. 
 
A noncompetition clause is reasonable if the restraint is no greater than 
necessary for the protection of the employer, does not place undue hardship on the 
employee, and is not injurious to the public.  Raimonde v. Van Vlerah (1975), 42 
Ohio St.2d 21, 71 O.O.2d 12, 325 N.E.2d 544, paragraph two of the syllabus.  
Here, the clause in question contained a restriction disallowing competition within 
a twenty-five-mile radius and one year of termination.  We agree with the 
determination of the court of appeals that this is a reasonable restriction.  
Therefore, we conclude that Nationwide did not breach the Corporate Agency 
Agreement and hold that the noncompetition clause is valid and enforceable. 
 
For the reasons set forth in this opinion, the judgment of the court of appeals 
is reversed. 
Judgment reversed. 
 
DOUGLAS, COOK and LUNDBERG STRATTON, JJ., concur. 
8 
 
RESNICK, F.E. SWEENEY and PFEIFER, JJ., dissent. 
__________________ 
 
ALICE ROBIE RESNICK, J., dissenting.  I would affirm the judgment of the 
court of appeals. 
 
F.E. SWEENEY and PFEIFER, JJ., concur in the foregoing dissenting opinion.