Mid-America Risk Managers, Inc. v. Chubb & Son, et al

Filing 11

MEMORANDUM AND ORDER that MARM's request for a Temporary Restraining Order is denied. MARM's request for a hearing on the issue of a preliminary injunction is granted. A hearing on the issue of a preliminary injunction is set for November 1, 2017, at 9:00 a.m. in Courtroom 4, Roman L. Hruska Federal Courthouse, 111 South 18th Plaza, Omaha, NE before Judge Robert F. Rossiter Jr. Ordered by Judge Robert F. Rossiter, Jr. (JSF)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MID-AMERICA RISK MANAGERS,
INC.,
8:17CV392
Plaintiff,
MEMORANDUM
AND ORDER

vs.
CHUBB & SON, a Division of Federal
Insurance Company; and CHUBB
INSURANCE SOLUTIONS AGENCY,
INC.,
Defendants.

This matter is before the Court on plaintiff Mid-America Risk Managers, Inc.’s
(“MARM”) Motion for Temporary Restraining Order and Preliminary Injunction (Filing
No. 4). MARM seeks a Temporary Restraining Order (“TRO”) prohibiting Chubb &
Son, a Division of Federal Insurance Company (“Chubb”) from contacting MARM’s subproducers. MARM also requests a preliminary injunction hearing seeking the same
relief. For the reasons stated below, the Motion is granted in part and denied in part.
I.

BACKGROUND 1
MARM is a 22-year-old general insurance agency that operates as a managing

general underwriter. It has an established network of independent agents, general agents,
and sub-producers.

MARM specializes in inland marine polices which cover farm

irrigation systems.
On October 29, 2013, MARM entered into a Producer Agreement (“agreement”)
with Chubb & Son, a Division of Federal Insurance Company (“Chubb”). The agreement

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The following facts are submitted by MARM through affidavits and other
documents and are considered true for the purpose of the pending Motion.

gave MARM the authority to act as Chubb’s producer to solicit applications, submit the
applications to Chubb for approval, and to service approved policies. MARM and Chubb
also entered into a Policy Administration Agreement (“PAA”) which set up an
arrangement through which MARM undertook the duties in the agreement through its
established network of sub-producers. MARM informed Chubb prior to entering the
agreement and PAA of its longstanding relationship with its sub-producers, general
agents, and independent agents.
On January 14, 2016, ACE Limited acquired Chubb and adopted the Chubb name.
MARM felt the business relationship changed and informed Chubb on July 12, 2017, that
MARM would no longer place new business or renewals effective August 1, 2017.
Chubb Insurance Solutions Agency, Inc. (“CISA”), presumed to be affiliated with
Chubb, began contacting MARM’s sub-producers stating that MARM “unilaterally
terminated its relationship with Chubb in favor of a different market,” 2 and soliciting the
sub-producers to work directly with CISA. CISA offered various incentives to the subproducers, including promising to increase commissions to 20% if the sub-producer
would renew the policy directly with CISA.
II.

DISCUSSION
A.

Requirements for Injunctive Relief

“A district court considering injunctive relief evaluates the movant’s likelihood of
success on the merits, the threat of irreparable harm to the movant, the balance of the
equities between the parties, and whether an injunction is in the public interest.”
Conquest Commc’ns. Grp., LLC, v. Swanson (In re Gresham), 866 F.3d 853, 854 (8th

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This statement as presented in the Complaint and the supporting evidence is
ambiguous. It could be taken to mean that MARM is simply no longer affiliated with
Chubb (at least going forward), or it could mean that MARM is no longer in the business
of inland marine insurance. The first meaning is accurate, the second could be viewed as
materially misleading.
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Cir. 2017) (quoting Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir.
1981) (en banc)).
In addition to qualifying for injunctive relief, a TRO granted without written or
oral notice to a party requires that (1) specific facts in an affidavit or a verified complaint
clearly show that immediate and irreparable injury, loss, or damage will result to the
movant before the adverse party can be heard in opposition, and (2) the movant’s
attorney certifies in writing any efforts made to give notice and the reasons why it should
not be required. Fed. R. Civ. P. 65(b).
B.

Likelihood of Success

“Success on the merits has been referred to as the most important of the four
factors.” Roudachevski v. All-American Care Ctrs., Inc., 648 F.3d 701, 706 (8th Cir.
2011). MARM states three claims for relief: (1) a breach of the implied covenant of good
faith and fair dealing, (2) tortious interference with business relationships, and
(3) conversion.
1.

Implied Covenant of Good Faith and Fair Dealing

“The implied covenant of good faith and fair dealing exists in every contract and
requires that none of the parties to the contract do anything which will injure the right of
another party to receive the benefit of the contract.” Coffey v. Planet Group, Inc., 845
N.W.2d 255, 263 (Neb. 2014). “A violation of the covenant of good faith and fair
dealing occurs only when a party violates, nullifies, or significantly impairs any benefit
of the contract.” Id. at 263-64.
MARM bases its implied covenant claim on language from the agreement and
from the PAA. The agreement states Chubb will not “solicit Policyholders for the sale of
insurance or other products or services without first obtaining your written consent.” On
its face this is not a breach because Chubb is not soliciting Policyholders but contacting
sub-producers. The PAA states that Chubb “recognizes the independent ownership by
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[MARM] of the expirations and renewal of the insurance business subject to [the PAA].”
However, the PAA also states that “if this Agreement is terminated by Strategic Alliance
Manager [defined as Paul Friskopp and MARM] . . . then the records, expirations and
renewals of Policies written under this Agreement will belong to [Chubb] at its option
and Strategic Alliance Manager relinquishes all right or claim to commissions.” MARM
terminated the PAA with Chubb. Because Chubb has apparently not violated any benefit
of the contract, MARM does not appear likely to succeed on its implied covenant claim,
at least on this record.
2.

Tortious Interference with Business Relationships

A claim for tortious interference with a business relationship requires the plaintiff
to “prove (1) the existence of a valid business relationship . . . , (2) knowledge by the
interferer of the relationship . . . , (3) an unjustified intentional act of interference . . . ,
(4) proof that the interference caused the harm sustained, and (5) damage to the” plaintiff.
AON Consulting, Inc. v. Midlands Fin. Benefits, Inc., 275 Neb. 642, 662-63 (2008).
MARM has alleged (1) the prior existence of relationships with its sub-producers,
(2) it informed Chubb of the relationship, and (3) it has suffered hardship by reason of
Chubb’s actions. This satisfies the first and second requirement. Whether or not Chubb
engaged in an “unjustified” intentional act of interference appears to be dependent on the
question of whether Chubb’s communication that MARM “terminated its relationship
with Chubb in favor of a different market” was materially and intentionally misleading.
If it was, then MARM has satisfied most of the third remaining requirement; if not, then
Chubb has not committed “an unjustified intentional act of interference” that would cause
harm.

Id.

Finally, there is no evidence of any concrete harm (e.g. actual loss of

relationship, business, or income). MARM only states that it has “suffered hardship.”
The factual record in the Complaint is quite sparse on this issue, and the Court therefore
cannot determine if MARM is likely to succeed on this claim.

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3.

Conversion

The allegation that “Chubb has exerted dominion over MARM’s business
relationship with its sub-producers for an indefinite period of time, thereby depriving
MARM of its property” is quite novel. However, if Chubb improperly interfered with
MARM’s business relationships, that is more properly handled as a tortious interference
with a business relationship. See H.J., Inc. v. International Tel. & Tel. Corp., 867 F.2d
1531, 1547 (8th Cir. 1989) (stating conversion does not apply to business relationships
because “the general rule is that [conversion] only applies to tangible property, or
intangible property customarily merged in, or identified with, some document.” (citing
Prosser and Keeton on Torts, 91-92 (1984); Restatement (Second) of Torts §§ 222A, 242
(1965))).
C.

Immediate Irreparable Injury

In addition to the Court’s doubts about MARM’s likelihood of success on this
record, it is unclear what irreparable injury MARM has suffered or would suffer before
Chubb could be heard in opposition. MARM has alleged that the injury occurs in the
form of damage to its business relationships with its sub-producers, but that harm results
from Chubb’s original communication, which MARM admits has already occurred.
Additionally, MARM is not prohibited from contacting its sub-producers to remedy the
situation. It does not appear that MARM will suffer any irreparable harm prior to
November 1, 2017, the date which the Court will set for a Preliminary Injunction hearing.
III.

Conclusion
On this record, MARM has not shown a likelihood of success on the merits, or

that it will experience irreparable injury before Chubb can be heard in opposition.
Accordingly,
IT IS ORDERED:
1.

MARM’s request for a Temporary Restraining Order is denied.

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2.

MARM’s request for a hearing on the issue of a preliminary injunction is
granted.

3.

A hearing on the issue of a preliminary injunction is set for November 1,
2017, at 9:00 a.m. in Courtroom 4, Roman L. Hruska Federal Courthouse,
111 South 18th Plaza, Omaha, NE before Judge Robert F. Rossiter Jr .

Dated this 20th day of October, 2017.
BY THE COURT:
s/ Robert F. Rossiter, Jr.
United States District Judge

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