Title: Simbeck Inc. v. Dodd Sisk Whitlock Corp.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  All the Justices 
 
SIMBECK, INC. 
 
 
 
OPINION BY JUSTICE A. CHRISTIAN COMPTON 
v.  Record No. 980355 
January 8, 1999 
 
DODD SISK WHITLOCK CORP., ET AL. 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF WINCHESTER 
John E. Wetsel, Jr., Judge 
 
 
This appeal involving the trucking insurance business is 
limited to consideration of the following issue:  Did the trial 
court err in setting aside the jury's verdict for punitive 
damages?  We conclude that the court was correct, and will 
affirm. 
 
Appellant Simbeck, Inc., filed a motion for judgment, twice 
amended, against appellees Dodd Sisk Whitlock Corp. and James H. 
Dodd seeking compensatory and punitive damages for alleged 
wrongful business practices in connection with procuring 
insurance coverage for plaintiff's trucking business.  Plaintiff 
operates trucks nationwide from its base in Winchester.  The 
corporate defendant is an insurance agency in Louisa employing 
the individual defendant, an insurance agent. 
 
The plaintiff sought recovery against defendants on 
numerous theories.  Following many pretrial rulings, the case 
was tried to a jury in September 1997 on allegations that 
defendants were guilty of tortious interference with a business 
expectancy and breach of fiduciary duties. 
 
During the three-day trial, the jury found in favor of the 
plaintiff and awarded compensatory damages of $30,000 against 
both defendants.  The trial court reduced this amount to 
$12,328, the amount of the ad damnum.  The jury also awarded 
punitive damages against the corporate defendant in the sum of 
$17,700 and against the individual defendant in the sum of 
$60,000. 
 
The defendants filed motions to set aside the verdicts.  
Following argument of counsel, the trial court, in a detailed 
written opinion, denied the motion to set aside the compensatory 
damage verdict and granted the motion to set aside the punitive 
damage verdict.  The court memorialized these rulings in a 
November 1997 judgment order, from which we awarded the 
plaintiff this appeal, limited to the foregoing issue. 
 
When a plaintiff's verdict has been set aside by the trial 
court, the verdict is not entitled to the same weight upon 
appellate review as one that has received the trial court's 
approval.  But in considering the facts under these 
circumstances, the appellate court will accord the plaintiff 
benefit of all substantial conflicts in the evidence and all 
reasonable inferences that may be drawn from it.  Commercial 
Bus. Sys. v. Halifax Corp., 253 Va. 292, 296, 484 S.E.2d 892, 
894 (1997). 
 
2
 
We shall summarize the pertinent evidence, much of which 
was conflicting, in accord with the foregoing principles.  In 
July 1994, plaintiff entered into "an insurance relationship" 
with the defendants (collectively, the defendant) for defendant 
to "write" plaintiff's business insurance coverage.  As the 
result of defendant's efforts, plaintiff entered into a series 
of insurance contracts with several insurers to provide 
liability insurance, physical damage insurance, and related 
coverages (hereinafter, the insurance policy) necessary to 
conduct plaintiff's business.  The policy remained effective for 
a period of one year, commencing July 20, 1994. 
 
Defendant was "the retail producer or the seller of 
insurance" to the plaintiff, the insured.  Also involved in this 
type of transaction were "intermediaries or wholesalers which 
were in between the retail insurance producers and the insurance 
companies."  The wholesaler in this transaction was W. E. Love & 
Associates, Inc., a North Carolina broker, with whom defendant 
had a written brokerage agreement. 
 
In early July 1995, as the insurance policy was "coming due 
for renewal," plaintiff, through its president Ronald 
Simkhovitch, sought renewal coverage with a number of companies, 
including Service Insurance Agency, a Richmond "retail insurance 
agency" and competitor of defendant.  Simkhovitch "indicated 
that he would like to do business with" Service.  Greg Pohler, 
 
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the owner of Service, was aware that defendant had obtained "a 
quote" for a renewal premium from "Occidental Insurance 
Company."  Service then proceeded to obtain a premium quotation 
from Occidental. 
 
Because defendant was first in obtaining a "quote" for 
plaintiff from Occidental, however, "professional courtesy" in 
the industry entitled defendant to a "10-day hold" on its 
Occidental quotation.  This means that Service, the competing 
agency, could not write the renewal policy with Occidental until 
defendant released the "quote" that it previously had obtained 
for plaintiff from Occidental.  Plaintiff's insurance policy was 
to expire July 20, 1995.  This was two days before expiration of 
defendant's ten-day hold period on the Occidental quotation. 
 
Defendant refused to release the "quote" to Service unless 
Service agreed to give defendant 50 per cent of its commission 
and unless plaintiff executed a promissory note payable to 
defendant, to be personally guaranteed by Simkhovitch, in the 
sum of $84,000 bearing 10 per cent interest payable over a 30-
day period.  Plaintiff had been regularly late in submitting 
premium payments to defendant and owed defendant thousands of 
dollars, the exact sum being undetermined at that time. 
 
Service agreed to share its commission with defendant but 
plaintiff refused to execute the note.  Because plaintiff 
apparently would not be able to obtain insurance coverage, and 
 
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thus would lack "operating authority," it began "slowing down 
its operations" on July 19.  But at 5:17 p.m. on the 19th, 
Liberty Mutual Insurance Company, one of the insurers plaintiff 
had contacted, notified plaintiff it was providing the necessary 
insurance coverage effective July 20.  Thus, plaintiff did not 
suspend its operations. 
 
Defendant James Dodd, called by plaintiff as an adverse 
witness, testified defendant's refusal to release the "quote" 
unless plaintiff executed the note was an effort to put "the 
squeeze" on plaintiff.  Dodd explained that his use of the 
"squeeze" term as it applied to plaintiff meant he was trying 
"to get our money that was owed us." 
 
Expert testimony offered by the plaintiff established that 
defendant's conduct was "totally improper," and a deviation of 
established custom and practice in the trucking insurance 
industry.  The witness also indicated that defendant owed 
fiduciary duties as insurance broker to its insured, the 
plaintiff, which were breached. 
 
On appeal, the plaintiff contends the trial court erred in 
setting aside the punitive damage award and in entering judgment 
for compensatory damages only.  The plaintiff dwells on the 
elements of causes of action for tortious interference with a 
contract and breach of fiduciary duty.  Then, plaintiff argues 
it "introduced testimony of the intentional and improper 
 
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interference" by defendant with plaintiff's "contractual 
relationships."  It says the evidence supports the conclusion 
that the defendant's "interference" prevented Service Insurance 
Agency from entering into "the prospective contract" with the 
plaintiff and likewise prevented the plaintiff from obtaining 
insurance coverage through Service.  Plaintiff notes that Dodd 
admitted his actions were meant to put the "squeeze" on 
plaintiff "despite the fiduciary duty" he owed plaintiff. 
 
Finally, briefly addressing the law on punitive damages, 
the plaintiff contends defendant's conduct was "not only 
malicious but it borders on extortion."  Plaintiff argues a jury 
question was presented whether defendant's conduct was "wilful 
or wanton as to show a conscious disregard for others."  It 
contends the trial court, in deciding the issue as a matter of 
law, "deprived the jury of its responsibility to analyze the 
facts and its verdict should be reinstated."  We do not agree. 
 
The broad rule governing the award of punitive damages, the 
purpose of which is not so much to compensate the plaintiff but 
to punish the wrongdoer and to warn others, is that such damages 
may be recovered only when there is misconduct or actual malice, 
or such recklessness or negligence as to evince a conscious 
disregard of the rights of another.  Hamilton Dev. Co. v. Broad 
Rock Club, Inc., 248 Va. 40, 45, 445 S.E.2d 140, 143 (1994).  
Accord Webb v. Rivers, 256 Va. ___, ___, ___ S.E.2d ___, ___ 
 
6
(1998); Smith v. Litten, 256 Va. ___, ___, ___ S.E.2d ___, ___ 
(1998).  Under the allegations in this case of interference with 
a business expectancy and breach of fiduciary duty, however, 
punitive damages may be awarded only if the acts are done with 
malice or wantonness.  Smith v. Litten, 256 Va. at ___, ___ 
S.E.2d at ___.  See Worrie v. Boze, 198 Va. 533, 543, 95 S.E.2d 
192, 200 (1956). 
 
Awards of punitive damages are not favored generally 
because they are in the nature of a penalty and should be 
assessed "only in cases involving the most egregious conduct."  
Bowers v. Westvaco Corp., 244 Va. 139, 150, 419 S.E.2d 661, 668 
(1992).  This is not a case involving egregious conduct. 
 
Of course, the jury's finding of compensatory damages, 
confirmed by the trial court, is a determination that defendant 
was guilty of both tortious interference with a prospective 
contract and a breach of fiduciary duty.  The plaintiff 
established the elements of the former cause of action, i.e., 
that plaintiff had a contract expectancy of which defendant 
knew; that defendant intentionally interfered with the 
expectancy by using improper means or methods; and that 
plaintiff suffered loss.  See Maximus, Inc. v. Lockheed Info. 
Management Sys. Co., 254 Va. 408, 414, 493 S.E.2d 375, 378 
(1997). 
 
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The plaintiff's losses resulting from its "slowing down of 
operations" on July 19 were reflected in the compensatory damage 
award.  But awarding plaintiff damages for interference with a 
contract expectancy and for breach of fiduciary duty does not 
ipso facto support an award of punitive damages, as the 
plaintiff seems to argue.  Rather, as we have said, under these 
circumstances there must be malicious or wanton conduct. 
 
According the plaintiff benefit of all substantial 
conflicts in the evidence and all reasonable inferences that may 
be drawn from it, we conclude the trial court correctly ruled 
there was no evidence of acts done with malice or wantonness.  
As the trial court noted, the defendant violated unwritten trade 
customs or ethical practices in the trucking insurance business 
in an effort to make the plaintiff pay a debt owed to defendant.  
The defendant requested plaintiff to execute a note for an 
underlying debt and refused to release an insurance "quote," 
both of which were lawful acts, in an effort to make plaintiff 
pay defendant the sum it owed.  If Simkhovitch had executed the 
note, plaintiff would have suffered no loss. 
 
The plaintiff argues the amount of the note, $84,000, "bore 
no resemblance to the amount demanded by [defendant] for 
payment.  In fact, it was admitted by the [defendant] at trial 
that the debt paid was approximately $25,000."  This is not an 
accurate summary of the evidence. 
 
8
 
Instead, the evidence shows that, based upon defendant's 
records, defendant reasonably believed plaintiff owed it more 
than $76,000 when the note was presented for Simkhovitch's 
signature.  Because of the provisions of the brokerage agreement 
between defendant and W. E. Love, the North Carolina broker, 
defendant was liable to Love for plaintiff's insurance premiums, 
whether or not plaintiff paid defendant.  At the time the note 
was presented for signature on July 18, 1995, the amount due 
defendant could only be estimated because no policy audits had 
been conducted, and because plaintiff, without defendant's 
knowledge, had made some premium payments directly to Love and 
Love had not credited defendant's account.  Thus, defendant was 
confronted not only with large sums due it from plaintiff, but 
also with a possible debt due from defendant to Love on account 
of plaintiff's failures.  In a letter attached to the note, 
however, defendant said the amount was only "an estimated 
figure" and that when "we get the exact amount and audits are 
completed, we can then give credits . . . ." 
 
In August 1995, defendant sued plaintiff in the Circuit 
Court of Louisa County for approximately $76,000 for unpaid 
premiums due on the 1994-1995 insurance policy.  Following 
completion of the audits and when the exact amount due was 
determined, the Louisa action eventually was settled for $25,000 
in July 1996. 
 
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In sum, an accurate and complete review of the evidence 
shows that defendant's attempt to collect a debt due it by 
plaintiff by putting "the squeeze" on plaintiff was not 
malicious or wanton, but merely an act of commercial "hard 
ball."  Consequently, we hold the trial court did not err in 
concluding that, while defendant's violations of trade standards 
were the basis of both the tortious interference and breach of 
fiduciary duty rights of action, such violations were 
insufficient as a matter of law to justify imposition of 
punitive damages. 
 
Thus, the trial court acted properly in setting aside the 
punitive damage verdict, and the judgment below will be 
Affirmed. 
 
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