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Daigle & Associates v. Farm Family Casualty Insurance Co.

United States District Court, D. Maine

December 19, 2018

DAIGLE & ASSOCIATES, et al., Plaintiffs
v.
FARM FAMILY CASUALTY INSURANCE COMPANY, Defendant

          RECOMMENDED DECISION ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          JOHN C. NIVISON, U.S. MAGISTRATE JUDGE

         In this action, Plaintiff Daigle & Associates alleges that Defendant Farm Family Casualty Insurance Company unlawfully terminated payments required to be made to Plaintiffs pursuant to an extended earnings agreement. In its counterclaim, Defendant alleges Plaintiff and former plaintiff Andrew Daigle breached the agreement.[1]

         The matter is before the Court on Defendant's Motion for Summary Judgment. (ECF No. 35/44.) Through its motion, Defendant contends the undisputed facts establish that Plaintiffs breached the contractual provisions upon which the payments were conditioned, and, therefore, Plaintiffs are not entitled to the payments. Defendant also asks the Court to enter judgment on the liability issues in Defendant's counterclaim.[2]

         Following a review of the summary judgment record, and after consideration of the parties' arguments, I recommend the Court grant in part the motion.

         Background[3]

         Defendant is a New York Corporation licensed to do business in the State of Maine. (Statement of Stipulated Material Facts, ECF No. 35-1, ¶ 1.) Andrew Daigle was at all relevant times an insurance agent licensed in Maine to sell insurance policies written by Defendant. (Id. ¶ 2.) Mr. Daigle began his relationship with Defendant as an insurance agent in 1988 and initially did business as a sole proprietorship under the business name “Andrew Daigle Insurance.” (Id. ¶ 3.)

         In the 1990s, Mr. Daigle's wife, Diane Daigle, became licensed to sell insurance in Maine and worked in the same office as Mr. Daigle. (Id. ¶ 4.) In 2002, Mr. and Mrs. Daigle formed A.D. Insurance, LLC, as part of an effort to facilitate relationships with insurers in addition to Defendant, and to offer types of insurance not offered by Defendant. (Id. ¶ 5.) At the formation of the company, Andrew and Diane Daigle were officers and members of A.D. Insurance, LLC. (Id. ¶ 6.) In 2009, Mr. Daigle formed a corporation known as Daigle & Associates. (Id. ¶ 7.) Mr. Daigle served as the president and Diane Daigle served as the vice president of Daigle & Associates. (Id. ¶ 8.)

         Daigle & Associates and A.D. Insurance, LLC, shared one payroll account, and office space in a building located at 400 Main Street in Madawaska, Maine. (Id. ¶¶ 15, 17.) They also shared a customer service representative, telephone numbers, facsimile numbers, office supplies, and email addresses. (Id. ¶¶ 18 - 19.)

         In July 2009, Defendant entered into a written Agent Contract with Daigle & Associates. (Id. ¶ 9.) Under the terms of the Agent Contract, Daigle & Associates and Andrew Daigle agreed to the following terms, which are material to the parties' dispute:

1. Daigle & Associates was required to provide Defendant with a “right of first refusal on all property and casualty insurance policies which [Daigle & Associates] may seek to place with any insurance company or broker during the term of this Agreement”;
2. All insurance business placed with Defendant through Daigle & Associates was owned by Defendant and treated as part of Defendant's trade secrets;
3. Daigle & Associates was required to protect Defendant's proprietary and confidential information and, upon termination of the agreement, promptly surrender to Defendant all materials relating to Defendant;
4. Daigle & Associates was required, upon termination, to refrain from, directly or indirectly, contacting or soliciting any of Defendant's policyholders or customers for a period of two years after termination of the agreement and within a 50-mile radius of the Daigle & Associate's office;
5. Daigle & Associates was required to protect the privacy of Defendant's customer and policyholder information; and
6. A failure or delay on the part of Defendant or Daigle & Associates to take action regarding a violation or to enforce its rights would not constitute a waiver of their ability to claim breach.

(Id. ¶¶ 10 - 11; Kubetz Dec. ¶ 7, Ex. 4.)

         Under the agreement, Plaintiffs were entitled to certain commissions on Defendant's insurance business, including “Extended Earnings, ” which were periodic commissions following termination of the agreement. To be entitled to extended earnings commissions, Plaintiffs, i.e., the “Agent, ”[4] were required to comply with the confidentiality and two-year noncompete clauses of the Agent Contract, along with certain additional terms and conditions in the Agent Commission Schedule for a period of eight years following termination of the agreement, which period coincided with the duration of the payment of the extended earnings commissions.

         To be eligible for the extended earnings commissions, Plaintiffs could not “directly or indirectly contact or solicit any policyholder or customer … or induce or attempt to induce any policyholder or customer of [Defendant] … to cease doing business with the [Defendant] … or in any way interfere with the relationship between the Company … and any of their policyholders or customers;” nor “replace any policy or insurance product held by any policyholder or customer of [Defendant] with any similar policy or insurance product offered by another insurance company.”[5] (Statement of Stipulated Material Facts, ¶¶ 12 - 14.)

         On October 20, 2014, in a letter to Daigle & Associates and Andrew Daigle, Defendant advised that due to the commingling of office space, employees, telephone numbers, and facsimile numbers, and the relationship between Daigle & Associates and A.D. Insurance, LLC, Defendant believed Daigle & Associates might be in violation of certain contractual obligations. (Id. ¶ 20.) The letter in part read:

As an officer of Daigle & Associates, you are responsible for both your and the corporation's compliance under the Agent Contracts. Our review of your and Daigle & Associates' relationship with A.D. Insurance, LLC indicates that certain contractual provisions may have been violated including: (1) the duty to protect proprietary and confidential information of the Insurers; (ii) the duty to protect the privacy of the Insurers' policyholders; (iii) the duty to ensure all sub producers and employees comply with the provisions of the Agent Contracts; and (iv) the obligation to obtain prior authorization before placing insurance business with companies other than the Insurers.

(Id. ¶ 21.)

         Defendant instructed Plaintiffs to take the following corrective action or the Agent Contract would be terminated immediately:

a. Andrew Daigle and Daigle & Associates confirm their intent to comply with all contractual obligations to Defendant;
b. Maintain separation from A.D. Insurance, LLC;
c. Establish separate and distinct telephone numbers, staff and personnel, computer servers, leases, e-mail accounts and separate email domains, different facsimile numbers, and different advertising;
d. Refrain from providing customer service to other insurance agencies, including A.D. Insurance, LLC;
e. Refrain from becoming an owner or, officer, partner, member, or stockholder of any other insurance agency, including A.D. Insurance LLC, unless authorized by Defendant;
f. Maintain separate business and premium trust bank accounts, as well as own professional ...

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