Opinion ID: 604172
Heading Depth: 1
Heading Rank: 1

Heading: Colonial's Liability Under the Administrator Agreement

Text: 7 Colonial argues that the district court erred by failing to hold, as a matter of law, that Colonial did not breach the Administrator Agreement. The crux of this argument is that the Administrator Agreement is, when read together with the Marketing Agreement, unambiguous and that the district court improperly allowed the case to go to the jury. We disagree. There is, as the district court found, a conflict between the explicit five-year term stated in the Administrator Agreement and the provision providing that Hallmark's duties and obligations extend only to those policies specified in Schedule A. The former implies a five-year contract of fixed duration, while the latter suggests that Hallmark's rights under the Administrator Agreement were connected to the Marketing Agreement, a contract which either Markman or Colonial could terminate by giving six-months notice. This ambiguity could only be resolved by the finder of fact. The district court thus did not err by submitting this issue to the jury and instructing it that: 8 Hallmark contends that the parties intended that the non-renewal and termination provisions of the administrator agreement exclusively govern the parties' rights to terminate or non-renew the administrator agreement. 9 If you find that the parties intended the above non-renewal and termination provisions of the administrator agreement to exclusively govern the parties' rights to terminate or non-renew the administrator agreement, then you are to consider only those provisions in determining Hallmark's claim that Colonial Penn terminated the administrator agreement prior to its stated termination date and terminated the administrator agreement for reasons not permitted under the administrator agreement. 10 Tr. at 560-61. The jury apparently credited Hallmark's characterization of the facts. Although reasonable people might reach a different conclusion, we do not believe that the evidence supporting Colonial's position was so overwhelming that the jury's verdict in favor of Hallmark cannot stand, and accordingly we will not disturb the district court's denial of Colonial's motion for judgment notwithstanding the verdict. Commercial Credit Equip. Corp. v. Stamps, 920 F.2d 1361, 1365 (7th Cir.1990). 11 Colonial also relies heavily on language in the Administrator Agreement and on Hallmark's admission, through Kubik, that tend to show that Colonial retained the unrestricted right to make all underwriting decisions pertaining to the new policy, including the ultimate decision whether to offer the policy at all. But again, where Colonial sees unarguable clarity, we find an ambiguity which the jury resolved in favor of Hallmark. We note initially that the provision in the Administrator Agreement to which Colonial refers does not explicitly address Colonial's obligation to offer the proposed policy in the first instance. Instead, this provision merely provides that Colonial retains sole authority to establish underwriting rules for approval of applicants for Policies. DX 3 § 5.2. On its face, this provision establishes only that, once (or if) the new policy is issued, all underwriting rules are within Colonial's unfettered discretion. We thus reject, as did the district court, Colonial's argument that this language of the Administrator Agreement is unambiguous as a matter of law. Walton v. Philadelphia Nat'l Bank, 376 Pa.Super. 329, 545 A.2d 1383, 1389 (1988) (contract ambiguity is a question of law reviewed de novo on appeal). 3 12 Colonial's real argument seems to be that the language in question is insurance industry boilerplate, which all parties to the transaction, including Kubik, understood as granting Colonial the absolute right to decide when, if ever, to offer the new major medical policy. As evidence of this, Colonial points to Kubik's testimony that, as a general matter, an insurer, such as Colonial, has the right to decide whether to offer a particular product at all. Tr. at 244, 248, 256-57, 264. Colonial construes this as an admission by Kubik that Colonial could decide, without breaching the Administrator Agreement, not to offer the proposed policy. But Colonial fails to point out that Kubik went on to state that this default rule did not operate in cases where there are other conditions. E.g., Tr. at 256. See also Tr. at 244 (Q: [I]sn't it true ... that ... you have never been involved with a company who wrote a product and did not retain the right to withdraw it from the market? A: In the absence of external conditions that's correct.) (emphasis supplied); Tr. at 248 (Kubik testified, In the absence of other conditions the insurance company has the right to offer a product or not.) (emphasis supplied). Specifically, he referred to the Administrator Agreement, and, presumably, its fixed, five-year term, as such a condition. Tr. at 257 (Q: And as we talked about this morning, [Colonial] had the underwriting ... capability to stop offering [the policy] at any time ...? A: I didn't agree with that; I said subject to other conditions like my contract. ) (emphasis supplied); Tr. at 264 (Q: [Colonial] can agree not to accept any more applications for policies? A: Subject to my contract.). 13 Considered in its entirety, Kubik's testimony supports Hallmark's position that Colonial breached the Administrator Agreement when it decided not to offer the contemplated medical insurance product. Kubik acknowledged that insurers typically retained the authority to decide whether or not to offer a particular policy for sale. But he went on to state that the agreement between Hallmark and Colonial was to the contrary. Kubik never questioned Colonial's power to refuse to offer the product, 4 but merely assailed its right to do so under the Administrator Agreement. In denying Colonial's motion for summary judgment on this point, the district court noted: 14 Kubik's admission that an underwriter customarily reserves the right to cease issuing a policy does not prove conclusively that Colonial expressly reserved that right in the context of this case. With Kubik's testimony, it remains disputed whether Colonial promised Hallmark that the policy would be available at least until 1991. 15 Hallmark Ins. Adm'rs, 697 F.Supp. at 324 n. 4. The jury again resolved this factual dispute in favor of Hallmark. The record evidence adequately supports this verdict, which the district court properly allowed to stand. 16