| Schorr v Guardian Life Ins. Co. of Am. |
| 2007 NY Slip Op 07331 [44 AD3d 319] |
| October 2, 2007 |
| Appellate Division, First Department |
| Jerome Schorr, Appellant, v The Guardian Life InsuranceCompany of America, Respondent, et al., Defendant. |
—[*1] Proskauer Rose LLP, Newark, N.J. (Edward Cerasia II of counsel), for respondent.
Order, Supreme Court, New York County (Rolando T. Acosta, J.), entered June 7, 2006,which granted defendant Guardian Life's motion to dismiss the complaint for failure to state acause of action and sua sponte dismissed the claims against nonmoving defendant Kadosh,modified, on the law, plaintiff's claim for tortious interference with prospective business relationsreinstated against both defendants, and otherwise affirmed, without costs.
Plaintiff failed to plead properly a claim for breach of the implied covenant of good faith andfair dealing since he did not demonstrate the existence of a valid contract from which such a dutywould arise (American-European Art Assoc. v Trend Galleries, 227 AD2d 170 [1996]).
He did, however, properly plead a cause of action for tortious interference with prospectivebusiness relations. The complaint alleged that defendant Guardian Life interfered with plaintiff'slongstanding relationship with his client by utilizing "wrongful means" to provide a quote forgroup insurance coverage to another broker while declining to give a quote to plaintiff for thesame coverage. The wrongful means alleged are violations of the Penal Law and the InsuranceLaw. This was sufficient to satisfy the pleading requirements (see Guard-Life Corp. v ParkerHardware Mfg. Corp., 50 NY2d 183, 194 [1980]; cf. NBT Bancorp v Fleet/Norstar Fin.Group, 87 NY2d 614, 624-625 [1996]).
The court failed even to consider the claim for tortious interference with prospective businessrelations against the nonmoving defendant, who did not appear on the motion, and plaintiff wasthus deprived of an opportunity to oppose any arguments that might have been raised.Nevertheless, the court inexplicably dismissed the complaint in its entirety.Concur—Nardelli, J.P., Williams, Buckley and McGuire, JJ.
Catterson, J., dissents in a memorandum as follows:[*2]Because I believe that both of plaintiff's claims should be reinstated, I write separately.
The plaintiff, Jerome Schorr, a licensed independent insurance broker, was appointed by thedefendant Guardian as its agent for the purpose of selling its insurance products in 1973 pursuantto a brokerage agreement between Guardian and its general agent, Spaulder & Warshall, Ltd.(hereinafter referred to as S & W Agency).
In 1981, the plaintiff was appointed as the broker of record for Israel Aircraft IndustriesInternational, Inc.'s (hereinafter referred to as IAII) group life, medical and dental insurancecoverage. In 1986, IAII appointed him as broker of record for the group life, medical and dentalinsurance coverage of its subsidiary, Commodore Aviation, Inc. (hereinafter referred to as CAI).In 2003, IAII appointed the plaintiff as broker of record for the group life, medical and dentalinsurance coverage of another subsidiary, Empire Aero Center, Inc. (hereinafter referred to asEAC).
In the meantime, in 1990, 1996 and 1998, the plaintiff signed three separate group insurancespecial producer compensation agreements with Guardian. Pursuant to these agreements, theplaintiff was entitled to receive additional compensation for selling Guardian group insuranceplans, provided that he had at least five Guardian group plans in effect at a certain qualifyingdate.
In late 2003, IAII contacted the plaintiff and advised that for the coverage periodcommencing January 1, 2004, it wished to have new bids for all of its group life, medical anddental insurance coverages for all of its employees, as well as the employees of its subsidiaries.The plaintiff submitted materials he received from IAII, such as a September census of all of itsemployees, including the employees of its subsidiaries, to competing insurers for quotingpurposes.
Thereafter, he received a "no quote" from Guardian for a combined group medical and lifeinsurance coverage for IAII and its subsidiaries. Guardian informed the plaintiff that it could notprovide a competitive bid because it lacked a network of physicians and other healthcareproviders in the location of EAC's facilities in upstate New York. Thereafter, the plaintiffrequested a quote limited to the employees of IAII, exclusive of its subsidiaries. In response, hereceived another "no quote." Guardian's sales representative explained in writing that Guardiancould not compete with the pricing quoted by other insurance companies due to a 25% surchargethat its underwriters needed to apply to IAII business. The plaintiff, was, however, able to obtaina quote from Guardian for group dental coverage.
The plaintiff subsequently learned that another broker, defendant Itzhak Kadosh had metwith representatives from IAII in October or November 2003 and boasted that he could obtainbetter rates from Guardian than the plaintiff. IAII authorized Kadosh to obtain a quote fromGuardian for its group coverage and provided him with the necessary materials, including a copyof the November census, a more recent version than the September census submitted by plaintiff.
Thereafter, Guardian, through John Feeney, one of its sales representatives in itsWashington, D.C. office, provided a competitive quote to Kadosh for the group medicalcoverage. The plaintiff subsequently learned that the quote provided was, among other things,calculated without the 25% surcharge which Guardian had waived for Feeney and Kadosh.
The plaintiff alleges that Kadosh and/or Feeney falsified the census and that Guardian'sunderwriters knew or should have known that the census had been falsified since they were in[*3]possession of other renewal censuses from IAII thatcontradicted the census provided by Kadosh and/or Feeney. The plaintiff asserts that falsifyingIAII's employee census was a violation of Insurance Law § 4224.
He further asserts that pursuant to Insurance Law §§ 2402 and 2403, a violationof section 4224 constitutes an unfair method of competition and/or a deceptive act or practice. Inaddition, the plaintiff asserts that waiving the surcharge improperly discounted Guardian'spremium quotes in a discriminatory manner, in violation of Insurance Law § 4224.
As a result, IAII replaced its MetLife coverage previously procured by the plaintiff as brokerwith life insurance coverage from Guardian with Kadosh as broker. The plaintiff remained thebroker for the medical insurance coverage of IAII and its subsidiaries for the 2004 coverage yearsince he had obtained quotes from other carriers that were still more competitive than theGuardian quote obtained by Kadosh. However, IAII revoked the plaintiff's authority to obtainfuture quotes from Guardian on its behalf and granted Kadosh the exclusive right to obtain suchquotes.
The plaintiff subsequently lost IAII's medical and dental business for the 2005 coverage yearafter Kadosh was able to obtain extremely competitive quotes from Guardian. The plaintiffalleges that this was the direct result of the illegal activity engaged in by Kadosh and Feeney. Hefurther alleges that IAII's 2006 renewal information confirmed that Guardian lost money on theIAII group medical and dental coverages for 2005 and 2006. He asserts that this "arrangementbetween Guardian and Kadosh" resulting in Guardian's loss of money "directly contravenesparagraph (g) of section 4235 of the New York Insurance Law." He further asserts that "[b]ut forthe effects of the scheme between defendants Kadosh and Guardian, [he] would not have lost thebusiness of IAII and its subsidiaries and the substantial commissions derived therefrom."
On or about November 22, 2005, the plaintiff commenced the instant action for breach of thecovenant of good faith and fair dealing, and for tortious interference with a prospective businessrelationship. Defendant Kadosh served an answer on or about January 11, 2006. In lieu of ananswer, Guardian served a motion to dismiss pursuant to CPLR 3211 (a) (7) seeking an orderdismissing the causes of action against it. In opposition to the motion, the plaintiff submitted anaffidavit with exhibits, documenting his 33-year direct selling relationship with Guardian.
The court granted Guardian's motion, finding that there was no contract between the plaintiffand Guardian and thus, no implied duty of fair dealing between the two. The court further foundthat even if it could be found that the plaintiff and Guardian were parties to the 1973 agreement,there would still be no implied duty of fair dealing inasmuch as the agreement expressly statedthat it could be terminated at any time by either party and thus was terminable at will.
With regard to the plaintiff's claim for tortious interference with prospective businessrelations, the court found that the plaintiff failed to state a cause of action. Specifically, the courtstated "that Guardian would be a party to the prospective business relations and 'only a strangerto a contract, such as a third party, can be liable for tortious interference with a contract.' "
In my view, the motion court erred for the following reasons: The plaintiff properly pleaded aclaim for breach of the implied covenant of good faith and fair dealing since he sufficientlyalleged the existence of a series of valid contracts from which such duty would arise. (Cf.American-European Art Assoc. v Trend Galleries, 227 AD2d 170 [1996].) The plaintiffstated in his affidavit that since his appointment as an agent for Guardian in [*4]1973, he has always communicated directly with Guardian's salesrepresentatives. He submitted all requests for quotes exclusively to Guardian sales executiveswho issued all quotes, or refusals to quote, directly to him. All Guardian policies were issued tohim for delivery to his clients and all matters having to do with those policies have been handleddirectly by the plaintiff and Guardian's sales representatives. All renewal quotes and all otherrenewal matters relating to Guardian policies issued to the plaintiff's clients have also beenhandled exclusively by the plaintiff and Guardian's sales representatives. Thus, the plaintiffmaintained that he and Guardian had a direct selling relationship for more than 30 years.
The plaintiff also submitted a printout of his listing with the National Insurance ProducerRegistry which, he maintains, evidences his appointment by Guardian as its agent within NewYork State as well as copies of the special producer compensation agreements which he enteredinto with Guardian. Furthermore, the at-will character of the agreements is not relevant here sincenone of the agreements between Guardian and the plaintiff were ever terminated.
The plaintiff also properly pleaded a cause of action for tortious interference with prospectivebusiness relations, which required the plaintiff to show: (1) the existence of a businessrelationship between the plaintiff and a third party; (2) the defendants' interference with thatbusiness relationship; (3) that the defendants acted with the sole purpose of harming the plaintiffor used dishonest, unfair, improper or illegal means that amounted to a crime or an independenttort; and (4) that such acts resulted in the injury to the plaintiff's relationship with the third party.(Carvel Corp. v Noonan, 3 NY3d182, 189 [2004]; NBT Bancorp v Fleet/Norstar Fin. Group, 87 NY2d 614 [1996];Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183 [1980].)
In this case, the complaint alleged that defendant Guardian interfered with the plaintiff'slongstanding relationship with his client, IAII, by utilizing "wrongful means" to provide a quotefor group insurance coverage to another broker while declining to give a quote to the plaintiff forthe same coverage. The wrongful means alleged may constitute violations of the Penal Law andthe Insurance Law. The motion court also erred in its finding that no tortious interference existedsince Guardian was a party to the insurance policies interfered with and thus could not tortiouslyinterfere with its own policies.
As the plaintiff properly asserts, here the business relationship interfered with by thedefendants Guardian and Kadosh was the relationship that existed between himself (as broker ofrecord) and IAII (as his client)—not the relationship between IAII (insured) and Guardian(one of several potential insurers). Thus, I believe this was sufficient to satisfy the pleadingrequirements.
Moreover, the record confirms that each time that the defendants' tortious interference causedIAII to shift its respective life, medical and dental policies from the plaintiff as broker of recordto Kadosh as broker of record, Guardian was not the insurer for the group policy at issue.Specifically, at the time that IAII accepted the Guardian group life quote that Kadosh obtainedfrom Guardian for upcoming coverage year 2004, Guardian was not the insurer on the 2003group life policy. Rather, at the time in question, the 2003 group life insurance contract wasbetween MetLife and IAII (and its subsidiaries), with the plaintiff as broker of record, thus,Guardian was not a party to the contract in which it interfered.[*5]
Finally, the court failed to even consider the claim fortortious interference with prospective business relations against the nonmoving defendant, whodid not appear on the motion. The plaintiff was thus deprived of an opportunity to oppose anyarguments that might have been raised. Nevertheless, the court inexplicably dismissed thecomplaint in its entirety. For the foregoing reasons, I believe that the plaintiff's claims should bereinstated against both the defendants.