*1 SULLIVAN, AND POLK
INC., Appellant,
UNITED CITIES GAS COMPANY and McLennan, Inc., Appellees.
Marsh &
Supreme Tennessee,
at Nashville.
Dec. 1989.
Petition for Rehearing Denied
Jan. Bass, Riley, Sims,
Steven A. Berry & Nashville, appellant. Irion, Bomar, Shofner,
Jack M. Irion & Rambo, Shelbyville, appellee Cities Gas Co. Patterson, Boult, Cummings,
Robert S. Nashville, Berry, appellee Conners & Marsh & Inc. *2 its in- purchased had United Cities Gas
OPINION an annu- from Polk and Sullivan on surance DROWOTA, Chief Justice. every fif- year approximately al basis Sullivan, brought this suit Inc. years, several In years. teen these and against United Cities Gas existing annual insur- months before McLennan, Inc., alleging Marsh & coverage expired, Polk and Sullivan ance pay pre- had refused to quotes replacement cover- obtain would a pay miums and refused commission companies. If age from various insurance owed on insurance obtained acceptable to and were Marsh McLen- and that & Sullivan Gas, Polk and would Cities Sullivan United procured nan the breach of the contract to put force and issue what pay commissions. The these and industry known in the as a “binder.” (1) Gas Chancellor held that United Cities expressly incorporated the terms required pay “pro premium, was a rata” underlying policy. and conditions of (2) premium; not a that Unit- “short rate” delivered could not be issued and ed not owe Polk & Sullivan Cities Gas does expired, Polk the binder & Sullivan before procuring a commission for agreed automatically reissue the binder cancelled; (3) and that the suit was as the was issued and until such time procuring Marsh & McLennan for delivered. could be the breach of contract Polk & and Cities Gas should be Clyde Johnson was a Senior Vice-Presi- dismissed. The Court of affirmed Secretary dent of United Gas. and Cities part They agreed in part. and reversed primary duties was the adminis- One of with the Chancellor that United Cities Gas coverage of the of all the insurance tration obligated pay only “pro a rata” was pen- company, including liability coverage, However, premium. they held that United profit sharing plans, medical sion and Polk & Cities Gas owed Sullivan a commis- 1985, insurance, January etc. health sion, only Marsh days, but and that Mr. called Polk and Sullivan to Johnson inducing and McLennan was liable for for the renewal for the quotations seek only 30-day contract but breach of general liability insurance next commission. 1, March 1985. Plaintiff expired issue, underwriting
As to the first whether United obtained information a required sought quotations was for insurance 1, premium, or a “short rate” we March 1985 to March period for the hold of law that United Cities as matter Sulli- February Polk & 1986. On premium. rate” We Gas owed “short quoted van called United Cities Gas find no commission owed further $420,000.00 for figure approximately the Defendant United Cities Gas and that $50,000,000.00 coverage through seven no breach of contract induced was policies. felt the insurance Mr. Johnson Marsh McLennan. Defendant informed Polk and quote high was going to to other that he was talk corporation en- concerning getting price, a better brokers gaged in the of natural and distribution immediately called Pat- and he did so. He gas. Due to of its propane the nature Higgins at Marsh & who rick J. business, company requires exten- gas Cities Gas’s in- had earlier solicited United liability coverage. The com- sive business, He told without success. general liabil- pany’s consists of a he not satisfied with Higgins Mr. $1,000,000.00 ity policy in the amount of given him Polk and Sullivan quote coverage in an addi- layered umbrella quotation and asked for a $49,000,000.00. Layered tional amount of the neces- provided Higgins with He Mr. coverage is from number data, him underwriting did not tell pri- sary being the companies company with one quoted providing um- the cost mary and the others carrier specified in a order. Sullivan. brella February Higgins purchased On Mr. called insur- that United Gas had Mr. Johnson covering and told him he was period of March to locate coverage unable for United Cities 1985 to March Along time, Gas. about that Polk and Sul- meantime, Higgins In the Mr. Marsh *3 again livan called Mr. and told him Johnson coverage & McLennan continued to seek $419,- premium the going was be Cities Gas at a lower cost. put coverage 000.00 and that he would the March, he informed Mr. Johnson that he into, February effect at on midnight 12:00 required the could obtain Polk, According 28th. to Mr. of Polk & $357,000.00. purchased Mr. the Johnson Sullivan, it,” Mr. Johnson him “bind told coverage from Marsh McLennan and meaning that he a binder should issue 28, 1985, March United Cities Gas informed coverage, the with the to be issued Plaintiff that Defendant Marsh McLen- aat later date. nan had purchased Plaintiff the effec- therefore, can- premiums, they lower were 1, 1985, March tive for one and issued 1, celling April the 1985. All of to United evidence of binders Cities Gas as by cancelled Sulli- was policies that promptly the would be issued the except van California 1985, 7, plaintiff thereafter. On March Company, in ef- Insurance which remained sent United Cities and in- Gas the binders provide fect and continued to the second coverage purchased. voices for the Each layer of umbrella terms, incorporated by the binder reference 28, 1985, On March Mr. Johnson mailed conditions and of the limitations Polk and Sullivan eheck the amount by compa- which would be later issued $35,607.11, representing pro premi- rata ny. policy provided the condition that period through um March 1 due for prematurely, insured cancelled 1985, 31, March when the was computed “earned shall be 1985, 1, April effect under binder. On customary accordance with the short-rate returned the check to procedure.” table Gas “since it was not issued Cities Each of the provided: binders pre- short for the correct rate cancellation Mr. Mr. mium due.” Polk also advised Conditions as soon rate Johnson that as the “short kind(s) Company This binds the notices” were from cancellation received stipulated on the reverse side. companies the various he would send terms, subject This insurance is invoices on United Cities. On June poli- conditions limitations 1985, he Mr. Johnson an sent invoice cy(ies) by Company. in current use $64,671.40. The difference by may This binder be cancelled $29,- pro short rata rates is rates by by insured surrender of binder or 064.29. stating notice Company written to the when cancellation will be effective. This I. may Company
binder cancelled question presented The first by notice to the Insured in accordance required Cities was whether United Gas with the conditions. This binder is of the binder to under the terms replaced policy. cancelled when “short premium, or whether policy, replaced binder is not premium applied. Polk and rate” charge entitled to the short rate contends that according to the mium applicable, United Cities contends Company. Rules and Rates in use pro the amount of should be rated, i.e., premi on March of the annual request, At United Cities Gas’s one-twelfth be Correspondence pass continued to issued insurance certifi- um. until Jan parties, including to various tween Mr. Polk Mr. Johnson cates third ac- when Polk and Sullivan agencies, uary to evidence the fact regulatory explicitly incorporated reference check in the were cepted United Gas's $35,607.11, stipulation amount of with the by each binder. they bal- expected still to receive the ance due. United Cities II. amount, and this lawsuit ensued. and Sulli In the second At the time United Gas informed erred van contends that the Chancellor cancelling Plaintiff that were as of Gas does not owe finding that United Cities
April Plaintiff reminded United procuring the one them a commission for penalty. rate Cities Gas about the short replied they under- not cancelled. *4 rate be waived. stood the short could noted, one of the previously As promised request to the Plaintiff then that by Polk and Sullivan was with requested short rate be waived. Plaintiff Company. This Union Insurance California coverage of all at cancellation cancelled, policy coverage was not premium with waiver of the short rate Cities Marsh & was delivered to United It charges. The waiver refused. is By McLennan. a cover letter with the paid uncontroverted that and Sullivan $64,671.40 for the one month voice for short furnishers insurance the binder, Polk mium under the premium 30-day All rate binders. as advised United Cities follows: poli- except was cancelled cy in which was continued force note, billing no youAs will request of Defendant Marsh & McLennan Policy # ZCX007997which the Cal Union they because could not obtain substitute $15,000,- provided Umbrella coverage cheaper. The on premium due $5,000,000. quite excess of There is 30-day merged into this binder was agent regarding the of confusion bit premium paid annual which was to Marsh date, etc., and this record letter effective & McLennan Gas. get as as will have to be handled soon we opinion, in As stated earlier each the word from the broker. terms, incorporated reference the Thus, appears that Polk and did it Sullivan conditions and limitations of the premium for that or payment not even seek compa- which would be later issued any on until some commission provided ny. the condition that time later. prematurely insured cancelled computed “earned shall in in found favor of United The Chancellor customary accordance with the short-rate portion of Polk and upon Gas, procedure.” table United Cities claim, finding that an insurance Sullivan’s binders, by cancelling the its an- cancelled agent of the carrier broker is the nual and therefore liable insured, questions concern- and not the short rate in accordance are settled between commissions to be provisions the cancellation of the insurance carrier. The and the insurance broker policies. no There is evidence that 56-6-124, relied T.C.A. Chancellor on an binders which issued were based provided every agent “who which then agreement they were issued for the application for in- negotiates an solicits to al- purpose temporary insurance sole shall, any controver- any kind opportunity an low United Cities Gas application for insur- sy arising from though purchase Even other insurance. in connection any policy issued ance or its going Gas was to continue agent as regarded therewith” “be insurance, it, cheaper none- search for The not the insured....” the insurer and theless, purchased insurance evidenced Appeals held Court of We find a matter law the binders. they profit Gas owes Polk obligated that United Cities Gas thirty first have realized would premiums required the short rate days with California policy which conditions in each cancelled was in effect.1 remitting the net to California Union or its Appeals broker. The Court of noted, As any the Chancellor suit for the found “willing Marsh McLennan commission must be the insurance (sic) knowingly caused the business carrier. United Cities Gas has (the binder) day thirty to be diverted premium on the California Union from Polk and through channeled Marsh $59,625.00. the amount of gas compa- The the benefit of Marsh and the detriment ny is under obligation pay any no more Polk.” The Appeals Court of found than the provides, contract of insurance represented the business diverted insur- so and Polk and look to Califor- already which had been nia they Union if are dissatisfied with the expired,” “furnished and “leaving only pay- commission that have received. The complete ment therefor to the transaction.” Court is re- “Payment was made never due to the inter- versed and the of the trial court Marsh, vention of reaped who the benefit regard to this issue is reinstated. of the intervention.” The by finding, continued “No more ex- classic III. *5 ample of unlawful con- interference with In the final Polk and Sullivan con- imagined tract could be than the of action tends that the Chancellor erred in dismiss- knowing collection for services rendered ing its suit Marsh & McLennan for another and prevention the resultant of procuring the breach contract between collection the lawful owner of the debt.” Polk and Sullivan United Cities Gas. Polk and Sullivan contends that Marsh The Court of part, concurred in McLennan maliciously” “acted finding to induce that there nowas contract between United breach its contract Polk and Sullivan for with Polk and Sullivan. The did Chancellor furnishing of a full of insurance issue, not even reach this because he found contract, Since there was no there had been no breach of contract Marsh & McLennan could not be liable for United Cities Gas. inducing the breach of a nonexistent con- tract. recognizes law Tennessee both
However, as to the California In- statutory Union common law and a action action binder, Company Ap- for unlawful inducement of a breach of peals found 47-50-109, that United Cities Gas had a contract. T.C.A. v. Edwards § obligation contractual Polk and Hartford, Sul- Travelers Insurance Con pro livan necticut, (6th Cir.1977), rata thirty 563 119 F.2d day so, binder and citing when did not do numerous cases from this Court and gas company its Appeals. breached contract with the Court of T.C.A. 47-50-109 § Polk and Sullivan. The Court of is but a declaration statutory of the com action, found that substituting Marsh McLennan mon expressly induced law tort punitive United Cities Gas to breach its treble damages damages. contract “taking over” Emmco Insurance v. Beacon coverage, billing the California Indemnity Company, Union Unit- Mutual 204 Tenn. year, (1959). ed Cities Gas for full including 322 231 The stat S.W.2d during term thirty mandatory covered day provides damages ute treble period, payment accepting a “clear showing” the event there is Gas, full amount from retain- the defendant the breach. induced Conti Brokers, the commission on the full amount and nental Motel Inc. v. Blanken Appeals recognized though premi- 1. The Court that United the full even annual Cities Gas does not owe Sullivan “a already um under the has been (Emphasis commission as such." in Court of through Marsh & McLennan. The case was However, Appeals opinion.) the Court went on remanded court for a to the trial determination to hold that Polk Sullivan is entitled to due exact amount charge pro United Cities Gas for the “full rata United Cities Gas. premium” thirty days under the California
543 expectancy Cir.1984). rela- of future (6th In With such an 739 F.2d ship, tions, prospective advantage, procurement order to recover prove competitor contract doubt that a has been no contract, which legal interfering privilege that there was a ac- has the aware, he mali wrongdoer was (Em- quire for himself.’ the business breach, ciously intended to induce supplied.) phasis breach, proximate there must been Similarly, 768(1) of Re- Id. acts, ly resulting damages. his caused subject: say on the statement Dynamic Management, Inc. Er Motel per- intentionally causes a third ‘Onewho win, (Tenn.App.1975). S.W.2d prospective con- to enter into son not it is this case clear that who is tractual relation with another displeased with Polk and Cities Gas was existing competitor or not to continue an of their quotation Sullivan’s not inter- contract terminable at will does coverage from the time that the improperly with the other’s relation fere given. quotation this dis made Polk and Sullivan aware of (a) a matter the relation concerns from the start and made it satisfaction competition in the volved gas company would be seek clear actor and the other and expensive coverage. United Cities ing less (b) employ wrongful does not the actor McLennan, a Marsh & bro Gas contacted means and unsuccessfully ker that had solicited their past, (c) business in the and obtained identical his action does not create contin- *6 at lower cost. and ue an unlawful restraint of trade price accepted at the (d) part in to purpose at his is least quoted by Marsh & McLennan and can- competing his in with advance interest ” celled the binder with Polk and Sullivan. the other.’ example This is not a “classic of unlawful in v. recognized As this Court Hutton contract,” with as the Court of interference Watters, 132 Tenn. 179 S.W. Appeals Marsh & McLennan’s ac termed (1915): example tion. is a classic of the free This to and Every right one establish enterprise system at work. United Cities business, is entitled conduct a lawful paid have Gas would been unwise to have organized society, protection of to the $77,- that were over courts, right through its whenever higher necessary. compa 000.00 than The unlawfully right is invaded. Such exist- ny it. better ing, of actionable the commission an good just judgment. That was business As against any one wrong is established recently the Sixth Circuit stated Warde intentionally inter- to (6th Cir.1989) who is shown have Kaiser, citing v. F.2d 97 it, justifiable cause (5th fered with without ed. Prosser and Keeton on Torts “ it justification, To establish 1984) excuse. policy of law has the common ‘[t]he only appear, made to competition, free be always been favor of law- complained of was otherwise say Keeton there the act id. at Prosser and 1012/ manner, may performed in a inter ful and lawful competitor is ‘no that a doubt’ real that it had some tenden- purpose acquiring of the busi but likewise fere advantage cy to effect a reasonable for himself: ness of it. But in order to determine the doer interfered with is ‘Where the contract it such act must be the reasonableness of privilege ... terminable will standpoint both considered from competition recognized. has been ascertaining parties, with a view right contract case there no such merely has acted continued, the defendant whether only an the relation have right own in the due exercise the ex- expectancy, which is similar to carry himself. on business for of a that a customer pectancy business favor, may he in his while with it. found to do business will continue harm, however, prime period, done he cannot be rate for that adjudged injury to have done in the an “not in excess a maximum effective rate sense; is, legal wrongful (10%) percent per act in of ten annum” in accord- legal violation of the right another. T.C.A. 47-14-123. It clear that there no breach
contract induced Marsh & judgment of the Court
finding that Marsh & McLennan induced gas company its contract Indeed,
with Polk and Sullivan is reversed. Sullivan did not invoice even Unit- ed Gas for the California Union ALDER, Richard Glenn mium view of the fact that was a Plaintiff-Appellant, brokers, change of but a continuation of beginning From the obviously recognized the col- INC., BEVERAGES, MID-SOUTH lection of their be a mat- commission would Bottling Company, Mid-South ter to be settled with California Union. Defendant-Appellee. The of the Court Tennessee, Supreme Court of and the the Chancel- reversed at Jackson. lor is reversed as to issue and affirmed issues two as to and three. The costs shall Jan. equally Appellant be taxed Appellee Company.
FONES, O’BRIEN, HARBISON and
JJ., SCOTT, Justice, Special
concur. *7 PETITION FOR REHEARING
ON
PER CURIAM. Sullivan, Inc., timely
Polk filed asking for Rehearing
a Petition this Court pre-judgment determine whether inter- action, point-
est be awarded in should that this Court did address that out 4,1989. opinion our filed December Petition,
Upon consideration of the we opinion
are should the Petition granted accordingly and our pre-judgment
modified allow interest. Sullivan, Inc., brought of contract action Company seeking premiums due
on insurance pre-judgment interest on The amount
that amount. $29,064.29. dispute stipulated to be
Payment July was due 1985. Polk accordingly
and Sullivan is awarded July interest from