LEONARD T. STRAND, United States Magistrate Judge.
TABLE OF CONTENTS I. INTRODUCTION ...................................................908II. PROCEDURAL HISTORY .............................................908III. RELEVANT FACTS .................................................909IV. ANALYSIS .......................................................911A. Summary Judgment Standards .................................911B. Discussion .................................................9121. Negligence .............................................9122. Negligent Supervision ..................................9143. Breach of Fiduciary Duty and Breach of Contract ........915V. CONCLUSION .....................................................916
This case is before me on plaintiff's motion (Doc. No. 29) for partial summary judgment. Defendants have filed a resistance (Doc. No. 35). Plaintiff did not file a reply.
Plaintiff Metropolitan Property and Casualty Insurance Company (Met P & C) commenced this diversity action on May 17, 2012. It alleges that it appointed defendants Pamela Siroky (Siroky) and Agency One Insurance, Inc. (Agency One) to accept applications for insurance and to bind Met P & C to insurance contracts in accordance with Met P & C's underwriting guidelines. On or about December 7, 2010, Agency One applied for coverage with Met P & C on behalf of Patricia Potter for a property described as a one-story, 1500 square foot, single-family residential dwelling built in 1958. This description complied with Met P & C's underwriting guidelines and Met P & C issued a policy to Potter. Potter's property was later destroyed by fire. When she submitted her claim, Met P & C learned for the first time that the property was actually a two-story, 4320
Met P & C alleges the Potter property was erroneously insured and Met P & C was erroneously bound due to Agency One's misrepresentation of the property. It asserts claims for breach of contract, negligence, negligent supervision, breach of fiduciary duty and vicarious liability. Agency One and Siroky filed an answer (Doc. No. 8) on June 28, 2012, in which they deny liability and raise various affirmative defenses. Doc. No. 8 at 3.
On August 29, 2013, with the parties' consent, United States District Judge Mark W. Bennett transferred the case to me. See Doc. No. 20. Trial is scheduled to begin May 27, 2014.
Except as otherwise noted, the following facts are undisputed for purposes of Met P & C's motion for partial summary judgment:
Before Inlay signed his Independent Agent Agreement with Agency One, Hanson gave Inlay permission to use the access code of another Agency One employee to start entering policies into Met P & C's online system. Inlay produced several policies with Met P & C and Hanson described his production as "truly amazing." Indeed, Hanson won a trip to Las Vegas because of all the new business Inlay was generating.
On May 1, 2010, Agency One and Inlay entered into an Independent Agent Agreement. This agreement allowed Inlay to bind insurance carriers (such as Met P & C) to policies through Agency One. Agency One and Inlay would then split the commissions Inlay generated. Inlay's office was in Sioux City and Agency One's was in David City, Nebraska. Inlay employed Candice Hunter and Joe Sauce at his Sioux City office.
In August 2010, Met P & C conducted a background check of Inlay and notified Siroky of a "questionable item." Siroky forwarded the information to Inlay, who stated he would handle it directly with Met P & C. Inlay provided an explanation to
Around November 1, 2010, Siroky learned from Inlay that his insurance license had either been suspended or revoked. Inlay explained he was the victim of misconduct by other agents in his prior position and had hired an attorney to appeal. Siroky and Inlay met with Siroky's attorney to discuss what Inlay could do as a producer without a license. They were advised that Inlay could become an employee of Agency One and continue to service existing customers and policies, but could not sell, solicit or otherwise participate in any part of the sale of an insurance policy, including submitting an application.
On December 1, 2010, Agency One hired Inlay as an employee and paid him a base salary to oversee the Sioux City office. According to his employment agreement, he was not allowed to participate in any part of the sales process of an insurance policy. Siroky informed Hanson of the new arrangement. Met P & C policies continued to be placed through the Sioux City office. Siroky presumed this was done through Sauce, who held an insurance license in December 2010, and later Hunter who also ultimately obtained a license. Inlay was responsible for paying Sauce and Hunter the commissions for these policies from the checks he received from Agency One.
Around March 2011, Inlay and Sauce were involved in a physical altercation at the Sioux City office. Shortly thereafter, Sauce quit and Inlay stopped coming into the office on a regular basis. In May 2011, Inlay could no longer pay Hunter, who was essentially running the office, and Agency One began paying her salary. Siroky visited the Sioux City office a couple times between December 2010 and May 2011, but began visiting more often after May to train Hunter.
Inlay was officially terminated in August 2011. After his termination, Siroky learned that Inlay had continued to sell policies while his license was revoked or suspended.
A fire destroyed the Potter property on or about January 12, 2012, and Potter submitted a claim to Met P & C shortly thereafter. Only then did Met P & C learn that the property was not as Inlay had described, but instead was a two-story, 4320 square foot, six-unit apartment building constructed in 1925. If the property had been accurately described, Met P & C would not have issued a policy because it does provide coverage for commercial risks. Nonetheless, Met P & C paid the claim.
On February 9, 2012, Inlay was charged with Commission of a Specified Unlawful Activity, Acting as an Insurance Producer Without a License, Fraudulent Submission to an Insurer and Forgery in Iowa District Court for Woodbury County. He plead
Any party may move for summary judgment regarding all or any part of the claims asserted in a case. Fed.R.Civ.P. 56(a). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
A material fact is one that "`might affect the outcome of the suit under the governing law.'" Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, "the substantive law will identify which facts are material." Id. Facts that are "critical" under the substantive law are material, while facts that are "irrelevant or unnecessary" are not. Id.
An issue of material fact is genuine if it has a real basis in the record, Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir.1992) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)), or when "`a reasonable jury could return a verdict for the nonmoving party' on the question," Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir.2005) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). Evidence that only provides "some metaphysical doubt as to the material facts," Matsushita, 475 U.S. at 586, 106 S.Ct. 1348, or evidence that is "merely colorable" or "not significantly probative," Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505, does not make an issue of material fact genuine.
As such, a genuine issue of material fact requires "sufficient evidence supporting the claimed factual dispute" so as to "require a jury or judge to resolve the parties' differing versions of the truth at trial." Anderson, 477 U.S. at 248-49, 106 S.Ct. 2505. The party moving for entry of summary judgment bears "the initial responsibility of informing the court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Hartnagel, 953 F.2d at 395 (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548). Once the moving party has met this burden, the nonmoving party must go beyond the pleadings and by depositions, affidavits, or otherwise, designate specific facts showing that there is a genuine issue for trial. Mosley v. City of Northwoods, 415 F.3d 908 (8th Cir.2005). The nonmovant must show an alleged issue of fact is genuine and material as it relates to the substantive law. If a party fails to make a sufficient showing of an essential element of a claim or defense with respect to which that party has the burden of proof, then the opposing party is entitled to judgment as a matter of law. Celotex, 477 U.S. at 322, 106 S.Ct. 2548.
In determining if a genuine issue of material fact is present, I must view the evidence in the light most favorable to the nonmoving party. Matsushita, 475 U.S. at 587-88, 106 S.Ct. 1348. Further, I must give the nonmoving party the benefit of all reasonable inferences that can be drawn from the facts. Id. However, "because we view the facts in the light most favorable to the nonmoving party, we do not weigh
Met P & C seeks entry of partial summary judgment on the issue of liability, against Agency One only, on each of its claims. In its resistance, Agency One argues that there are genuine issues of material fact — particularly with regard to the doctrine of respondeat superior — that preclude entry of summary judgment on any of Met P & C's claims. I will address those claims in the following order: (1) negligence, (2) negligent supervision
To recover on a claim of negligence, Met P & C must prove the existence of a duty of care, a breach of that duty, and that the breach was the cause of the injuries suffered. Smith v. Koslow, 757 N.W.2d 677, 680 (Iowa 2008). The existence of a legal duty is a question of law for the court. Van Fossen v. MidAmerican Energy Co., 777 N.W.2d 689, 693 (Iowa 2009). However, under Iowa law "[i]t is well-settled that `questions of negligence or proximate cause are ordinarily for the jury,' and `only in exceptional cases should they be decided as a matter of law.'" Thompson v. Kaczinski, 774 N.W.2d 829, 832 (Iowa 2009) (quoting Clinkscales v. Nelson Sec., Inc., 697 N.W.2d 836, 841 (Iowa 2005)).
In order to hold Agency One liable for Inlay's actions, Met P & C must show Inlay was acting in the scope of his employment. This is known as the doctrine of respondeat superior, which the Iowa Supreme Court has described as follows:
Godar v. Edwards, 588 N.W.2d 701, 705-06 (Iowa 1999) (citations and internal quotation
Both parties reference the factors found in the Restatement (Second) of Agency for determining whether the conduct of an employee falls within the scope of employment. These factors are:
Restatement (Second) of Agency § 229(2) (1957).
The parties agree that when the Potter policy was issued, Inlay was no longer an independent agent, but rather an employee of Agency One whose duties included, but were not limited to the following:
Defs. Appendix; Doc. No. 35-3 at 73. Agency One argues that Inlay's act of placing the misrepresented Potter policy was outside the scope of employment because he knew it was against the law and was prohibited by his employment contract with Agency One. Met P & C argues that Agency One essentially turned a blind eye to Inlay's conduct by continuing to allow Inlay to use the Met P & C access codes and failing to follow up on who was generating business in the Sioux City office. It argues the relationship between Agency One and Inlay effectively remained the same after Agency One learned Inlay's license had been revoked or suspended.
Viewing the facts in the light most favorable to Agency One as the nonmoving party, I find that a reasonable jury could conclude that Inlay was not acting within the scope of his employment when he
Moreover, Agency One contends that Met P & C cannot recover damages on a negligence theory when it has only suffered economic loss. See Annett Holdings, Inc. v. Kum & Go, L.C., 801 N.W.2d 499, 503 (Iowa 2011) ("As a general proposition, the economic loss rule bars recovery in negligence when the plaintiff has suffered only economic loss."). In Annett Holdings, the Iowa Supreme Court explained that "[w]hen two parties have a contractual relationship, the economic loss rule prevents one party from bringing a negligence action against the other over the first party's defeated expectations — a subject matter the parties can be presumed to have allocated between themselves in their contract." Id.
While this argument may have merit, it is misplaced in the current procedural context. This is Met P & C's motion for summary judgment, not Agency One's. Indeed, neither defendant has filed a motion for summary judgment. Thus, while I have found that Met P & C is not entitled to entry of summary judgment in its favor on its negligence claim, I will not address Agency One's argument that the claim is barred as a matter of law.
Met P & C also seeks to hold Agency One liable based on its own actions. It argues Agency One failed to properly supervise Inlay to ensure he was not writing policies without a valid license and failed to follow up on evidence that Inlay had misrepresented several other policies with Met P & C.
To prevail on a claim of negligent supervision, the plaintiff must show:
Estate of Harris v. Papa John's Pizza, 679 N.W.2d 673, 680 (Iowa 2004) (citing Stricker v. Cessford Constr. Co., 179 F.Supp.2d 987, 1019 (N.D.Iowa 2001)). This claim is based on the Restatement (Second) of Agency § 213 which provides:
Restatement (Second) of Agency § 213 (1957). The Iowa Supreme Court has explained the difference between a claim of
Kiesau v. Bantz, 686 N.W.2d 164, 172 (Iowa 2004) (internal citations omitted).
Here, when viewing the facts in the light most favorable to Agency One, I cannot conclude as a matter of law that Agency One was negligent in supervising Inlay. A reasonable jury could find that Agency One did not know or have reason to know of Inlay's actions. Agency One points out there were two licensed agents in the Sioux City office while Inlay's license was suspended or revoked who could have been selling policies. Inlay also needed the Met P & C access codes to perform his authorized, appropriate duties as an employee. Whether Agency One knew or should have known of Inlay's actions at the time he placed the misrepresented policy, and whether Agency One's allegedly-negligent supervision was the proximate cause of Met P & C's harm, are appropriate questions for a jury. See Thompson, 774 N.W.2d at 832. For these reasons, I will deny Met P & C's motion for summary judgment on its claim of negligent supervision.
Finally, Met P & C argues Agency One breached its fiduciary duty to Met P & C by withholding information material to the issuance of the Potter policy. It alleges that Agency One continued to breach its fiduciary duty by failing to determine whether the Potter property was appropriately described when it renewed the policy in December 2011. Met P & C contends this breach of fiduciary duty also operates as a breach of contract between Agency One and Met P & C.
To prove breach of a fiduciary duty, Met P & C must show: (1) a fiduciary relationship existed between the plaintiff and the defendant, (2) the defendant breached that fiduciary duty and (3) the breach was a proximate cause of damage to the plaintiff. Kurth v. Van Horn, 380 N.W.2d 693, 698 (Iowa 1986). "[A]n insurance agent owes a duty to his principal to exercise reasonable skill, care and diligence in effecting the insurance coverage requested. Furthermore, the agent is liable to his principal for any loss or damage occasioned by his negligence." Smith v. State Farm Mut. Auto. Ins. Co., 248 N.W.2d 903, 905 (Iowa 1976).
Agency One argues that Inlay breached his fiduciary duty to Agency One by submitting fraudulent applications and concealing his activities from Agency One, but his actions cannot be used to establish breach of the fiduciary relationship between Agency One and Met P & C unless respondeat superior applies. Alternatively, it argues a jury would have to find that Met P & C knew or should have known about Inlay's actions in order to find that Agency One breached its fiduciary duty and contract with Met P & C.
I agree with Agency One that my findings on Met P & C's claims of negligence and negligent supervision preclude summary judgment on the breach of fiduciary duty and breach of contract claims. Because I cannot find as a matter of law that Agency One is vicariously liable for Inlay's
For the reasons set forth above, Met P & C's motion (Doc. No. 29) for partial summary judgment is