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).
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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 ___, ___
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(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.
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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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