Filed: Jan. 14, 2011
Latest Update: Feb. 21, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-1691 LUMBERMENS MUTUAL CASUALTY INSURANCE COMPANY, Plaintiff - Appellant, v. FIRST INSURANCE SERVICES, INCORPORATED, Defendant - Appellee. Appeal from the United States District Court for the Eastern District of North Carolina, at Greenville. Malcolm J. Howard, Senior District Judge. (5:04-cv-00580-H) Argued: October 26, 2010 Decided: January 14, 2011 Before WILKINSON and MOTZ, Circuit Judges, and Damon J. KEITH, Senior Cir
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 09-1691 LUMBERMENS MUTUAL CASUALTY INSURANCE COMPANY, Plaintiff - Appellant, v. FIRST INSURANCE SERVICES, INCORPORATED, Defendant - Appellee. Appeal from the United States District Court for the Eastern District of North Carolina, at Greenville. Malcolm J. Howard, Senior District Judge. (5:04-cv-00580-H) Argued: October 26, 2010 Decided: January 14, 2011 Before WILKINSON and MOTZ, Circuit Judges, and Damon J. KEITH, Senior Circ..
More
UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1691
LUMBERMENS MUTUAL CASUALTY INSURANCE COMPANY,
Plaintiff - Appellant,
v.
FIRST INSURANCE SERVICES, INCORPORATED,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of North Carolina, at Greenville. Malcolm J. Howard,
Senior District Judge. (5:04-cv-00580-H)
Argued: October 26, 2010 Decided: January 14, 2011
Before WILKINSON and MOTZ, Circuit Judges, and Damon J. KEITH,
Senior Circuit Judge of the United States Court of Appeals for
the Sixth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Chad Eric Jacobs, DREW, ECKL & FARNHAM, Atlanta,
Georgia, for Appellant. Michael Terry Medford, MANNING, FULTON
& SKINNER, Raleigh, North Carolina, for Appellee. ON BRIEF:
Paul W. Burke, DREW, ECKL & FARNHAM, Atlanta, Georgia, for
Appellant. William S. Cherry, III, MANNING, FULTON & SKINNER,
Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
A jury trial began in the Eastern District of North
Carolina on May 26, 2009 pursuant to diversity jurisdiction on
the plaintiff’s claims of breach of fiduciary duty,
misrepresentation, and negligence arising under North Carolina
law. The plaintiff, an insurer, Lumbermens Mutual Casualty
Company a subsidiary of Kemper (“Kemper”) alleged that the
defendant, First Insurance Services, an independent insurance
agency (“FIS”) sold one of its homeowners’ insurance policies
but unlawfully withheld appraisal information. Kemper contended
that it would not have provided the insurance coverage had FIS
timely informed it of a Wachovia bank appraisal FIS received.
The insured home was damaged by fire and the plaintiff paid over
$3 million to cover the homeowners’ loss.
At trial, following the close of the plaintiff’s case-in-
chief, FIS orally moved for judgment as a matter of law, which
the district court held in abeyance until after the close of the
defendant’s evidence. Upon FIS’s renewal of its oral motion for
judgment as a matter of law, the court orally granted the
motion, but only as to Kemper’s breach of fiduciary duty claim.
The jury returned a verdict in favor of the defendant as to the
other two claims. Kemper appeals the district court’s order
granting FIS’s motion for judgment as a matter of law on its
claim of breach of fiduciary duty. We affirm.
2
I. BACKGROUND
Kemper offers insurance products through agreements with
independent insurance agencies including FIS. J.A. 330-34.
FIS, an independent insurance agency, handles insurance issued
by multiple insurance carriers, including Kemper. J.A. 373-74,
430-32. Kemper and FIS entered into a franchise agreement which
permitted FIS to bind insurance coverage for houses costing less
than $600,000 on Kemper’s behalf, and FIS was designated a
“franchise agency.” J.A. 334-37. Houses costing more than
$600,000 required approval from Kemper’s underwriting
department. J.A. 337-38. After it issued an insurance policy
for a home, Kemper sent inspectors to the insured property if it
was valued at more than $400,000. J.A. 374-75. Kemper
generally sent these inspectors within thirty to sixty days of
issuance of the insurance policy to determine the replacement
cost of the insured home. J.A. 375-76, 441-43.
Sally and John Graham were long-time Kemper policyholders
and customers of FIS. J.A. 407-08, 413-14. The Grahams built a
new home and sought to obtain a Kemper insurance policy from
FIS. J.A. 407-08. The stated replacement cost of the Grahams’
6400 square foot home was $800,000, which equaled the cost of
the home’s construction. J.A. 408-09, J.A. 444-45. John
Curtis, an FIS agent, added, as buffer, an additional $50,000
coverage for a total policy amount of $850,000. J.A. 420-21,
3
445-46. Curtis submitted the Grahams’ policy information to
Kemper since the cost was above the $600,000 limit and,
accordingly, required approval from Kemper’s underwriters. J.A.
420-21. Curtis and FIS obtained approval for the $850,000
coverage. J.A. 343. Kemper issued the written homeowner’s
insurance policy with an effective date of February 15, 2003.
J.A. 449. Curtis ate lunch with John Graham on February 26,
2003 and planned to deliver the homeowner’s insurance policy to
him and obtain his signature. J.A. 419-21. At lunch, Graham
told Curtis that a Wachovia bank appraisal estimated the
replacement cost of slightly less than $1.3 million. Id.
Graham then gave Curtis a copy of the Wachovia appraisal.
Id.
Curtis did not give the Wachovia appraisal to Kemper. J.A. 421-
25. Curtis made a notation in FIS’s records that he felt
Wachovia’s appraisal was inaccurate and knew Kemper would
conduct its own appraisal. J.A. 420, 444.
Kemper’s inspector missed his initial appointment on March
6, 2003; however, the appointment was rescheduled and the
appraisal was completed on March 26, 2003. J.A. 420, 451. The
inspector estimated the replacement cost of the Grahams’ home at
about $1.6 million. Kemper received the report on Friday, April
11, 2003. Kemper did not make any adjustments to the Grahams’
policy. On Thursday, April 17, 2003, a fire severely damaged
the Grahams’ house. J.A. 412. The Grahams received about $3
4
million from Kemper to cover their losses from the fire. J.A.
412-13.
Kemper filed suit against FIS under North Carolina law for
breach of contract, breach of fiduciary duty, misrepresentation,
and negligence. J.A. 14-20. The district court granted FIS’s
motion for summary judgment only on the breach of contract
claim, thus, a jury trial ensued on three claims. J.A. 124-128.
At trial, Kemper’s underwriter contended that Kemper would have
canceled the Grahams’ homeowners’ insurance policy had it known
about the Wachovia appraisal, J.A. 345-46; that Kemper had never
approved policies over $1 million, J.A. 389-90; and that Kemper
would not have approved the Grahams’ policy if it had known that
the home was not within 1,000 feet of a fire hydrant, J.A. 127;
398-99. Trial evidence also included issuance of a Kemper
policy for a home with a replacement cost of $1.4 million to
another FIS customer from 2002 to 2003, J.A. 390-92; testimony
that there was no rigid cut-off beyond which homes would not be
insured, J.A. 479; testimony that Kemper never communicated a
cut-off to FIS, J.A. 479; testimony that Kemper always sent its
inspectors to evaluate high-value homes after policy issuance to
determine replacement cost, J.A. 440-43; and testimony that Fire
Protection Class 10 (and nothing lower) was the only category
for homes that resulted in automatic, non-renewal of a
homeowners’ insurance policy at the end of a policy term such
5
that the Grahams’ home in Class 9 would not have necessitated
policy cancellation or non-renewal, J.A. 456-59.
The district court granted FIS’s motion for judgment as a
matter of law pursuant to Federal Rule of Civil Procedure 50,
having found that FIS owed no fiduciary duty to Kemper. J.A.
715-16. Kemper timely appealed.
II. JUDGMENT AS A MATTER OF LAW
A. STANDARD OF REVIEW
A district court’s ruling on a motion for judgment as a
matter of law is renewed de novo. Myrick v. Prime Ins.
Syndicate, Inc., 395 F.3d 485, 489 (4th Cir. 2005).
If a reasonable jury could reach only one conclusion
based on the evidence or if the verdict in favor of
the non-moving party would necessarily be based upon
speculation and conjecture, judgment as a matter of
law must be entered. If the evidence as a whole is
susceptible of more than one reasonable inference, a
jury issue is created and a motion for judgment as a
matter of law should be denied.
Id. (internal citations omitted); see Fed. R. Civ. P. 50. North
Carolina law applies to this diversity action. See Breezewood
of Wilmington Condos. Homeowners’ Ass’n, Inc. v. Amerisure Mut.
Ins. Co., 335 F. App’x 268, 270 (4th Cir. 2009).
6
B. ANALYSIS
Pursuant to North Carolina law, a fiduciary duty exists
where:
‘there has been a special confidence reposed in one
who in equity and good conscience is bound to act in
good faith and with due regard to the interests of the
one reposing confidence . . ., [and] ‘it extends to
any possible case in which a fiduciary relationship
exists in fact, and in which there is confidence
reposed on one side, and resulting domination and
influence on the other.’
Dalton v. Camp, 353 N.C. 647, 651-52 (2001) (quoting Abbitt v.
Gregory,
201 N.C. 577 (1931)) (emphasis in original) (additional
internal citations omitted). North Carolina law generally
provides that contracting parties “owe no special duty to one
another beyond the terms of the contract. . .” Broussard v.
Meineke Disc. Muffler Shops,
155 F.3d 331, 347-48 (4th Cir.
1998). “Only when one party figuratively holds all the cards --
all the financial power or technical information, for example --
have North Carolina courts found that the ‘special circumstance’
of a fiduciary relationship has arisen.”
Id. at 348 (internal
citation omitted) (emphasis added). Generally, the existence of
a fiduciary relationship is a question of fact for a jury. Tin
Originals, Inc. v. Colonial Tin Works, Inc.,
98 N.C. App. 663,
666 (1993).
In Tin Originals, the defendant’s tin items constituted
eighty percent of the plaintiff’s sales and the defendant was
7
the plaintiff’s only source of those items, but, ultimately, the
defendant began to sell its items directly to the public and
sought to take over the relevant market. Id. at 665-66. The
defendant asserted that despite the special trust and confidence
the plaintiff placed in the defendant, the defendant held no
corresponding superiority or influence necessary to establish a
fiduciary relationship.
Id. The North Carolina Court of
Appeals affirmed the trial court’s grant of a directed verdict
to the defendant, having found that the parties had mutually
interdependent businesses; and, therefore, no fiduciary
relationship existed.
Id.
In Mikels v. Unique Tool & Mfg. Co., the district court
denied the defendant’s motion for summary judgment where the
plaintiff, who sold the defendant manufacturing company’s
products as a representative, alleged that the defendant company
failed to properly pay him commissions and fraudulently
concealed information which it had a duty to disclose to him as
a fiduciary. No. 5:06CV32,
2007 U.S. Dist. LEXIS 91814, at *29-
36 (W.D.N.C. Dec. 3, 2007). The court found that the
plaintiff’s allegation that the defendant withheld the total
amount of sales for which the plaintiff was responsible
prevented the plaintiff from accurately keeping track of his
commissions. See
id. Thus, the court held that a genuine issue
8
of material fact existed since only the defendant had access to
the aggregate sales. Id.
Kemper argues that the franchise agreement is of paramount
importance and establishes the fiduciary relationship between
Kemper and FIS. Kemper contends that it relied on FIS since
Kemper generally has no contact with its insured, the agent is
the sole source of information for Kemper, and, therefore, FIS
bore a fiduciary duty to Kemper and should have relayed the
Wachovia appraisal to Kemper. Kemper states that it would have
declined insurance for the Grahams’ home if it knew the home’s
true value. Kemper contends that it presented sufficient
evidence for a jury to consider its breach of fiduciary duty
claim and find in Kemper’s favor.
FIS asserts that no authority exists to establish that a
fiduciary relationship is created between an insurance carrier
and an independent insurance agency where the independent
insurance agency handles insurance issued by multiple carriers
and acts an agent for the customers. The defendant also
contends that Kemper’s claim of negligence, considered and
rejected by the jury, was predicated on the same assertions
Kemper makes in support of its fiduciary duty claim — that it
would not have insured the Grahams’ home if it had known that
the replacement cost exceeded $1 million and that Kemper placed
special trust in FIS as its “franchise agency” and only source
9
of information about the replacement cost. Further, FIS asserts
that coverage had begun already at the time Curtis learned of
the Wachovia appraisal. Thus, FIS states that Kemper was too
late to reject the application for coverage solely based on the
Wachovia appraisal and that FIS and its agent Curtis acted
reasonably.
Contrary to Tin Originals and Mikels where one party
exercised domination and control over another party, in the
instant action, the evidence presented at trial established that
FIS was not the sole means of Kemper’s ability to calculate
replacement cost value of the Grahams’ home and FIS. The
evidence presented at trial, the record, and relevant North
Carolina case law demonstrate that no fiduciary relationship
existed between Kemper and FIS; rather, they were mutually
interdependent parties. See Tin Originals, 98 N.C. App. at 666.
Routinely, Kemper did not rely upon FIS’s determinations of
replacement costs but always sent its own inspectors for high
value homes. FIS learned of the Wachovia appraisal after the
policy was issued and during the time period within which
Kemper’s inspection was to take place. Nothing in Kemper’s
designation of FIS as a “franchise agency” transformed the
parties’ relationship into that of a fiduciary, since Kemper
continued to do its own inspections and continued to require
approval for issuance of its insurance policies. That fire
10
destroyed the Grahams’ home so soon after the issuance of the
policy is unfortunate, but Kemper had opportunity to conduct its
own inspection and had access to the replacement cost of the
Grahams’ home. Indeed, Kemper received the inspector’s report
prior to the fire. Therefore, the district court properly found
that no genuine issue of material fact existed such that
judgment as a matter of law was appropriate on Kemper’s claim of
breach of fiduciary duty.
III. CONCLUSION
The judgment of the district court is
AFFIRMED.
11
