The Winfield Group, Inc. v. The Erie Insurance Group

Filing 26

MEMORANDUM-DECISION and ORDER - That Erie's 17 Motion for Summary Judgment is GRANTED. That Winfield's 21 Cross Motion for Partial Summary Judgment is DENIED. That the 1 Complaint is DISMISSED. Signed by Chief Judge Gary L. Sharpe on 10/12/2012. (jel, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
________________________________
THE WINFIELD GROUP, INC.,
Plaintiff,

1:10-cv-1541
(GLS/CFH)

v.
THE ERIE INSURANCE GROUP,
Defendant.
________________________________
APPEARANCES:
OF COUNSEL:
FOR THE PLAINTIFF:
Office of James B. Tuttle
10 Century Hill Drive, Suite 4
Latham, NY 12110
FOR THE DEFENDANT:
Bond, Schoeneck Law Firm
111 Washington Avenue
Albany, NY 12210-2280

JAMES B. TUTTLE, ESQ.

ARTHUR J. SIEGEL, ESQ.

Gary L. Sharpe
Chief Judge
MEMORANDUM-DECISION AND ORDER
I. Introduction
Plaintiff The Winfield Group, Inc. commenced this diversity action
against defendant The Erie Insurance Group pursuant to 28 U.S.C. § 1332,
alleging claims of conversion, interference with business relationships, and
a violation of N.Y. Gen. Bus. Law § 349. (See Compl., Dkt. No. 1.)

Pending before the court are Erie’s motion for summary judgment and
Winfield’s cross motion for partial summary judgment as to liability. (See
Dkt. Nos. 17, 21.) For the following reasons, Erie’s motion is granted and
Winfield’s cross motion is denied.
II. Background
A.

Facts1
On May 17, 2007, Winfield, an insurance agency authorized to write

insurance in New York, entered into an asset purchase agreement (APA)
with Farley Insurance Agency, Inc., an insurance agency with offices in the
Town of Clifton Park, New York. (See Dkt. No. 17, Attach. 2 at 13; Def.’s
Statement of Material Facts (SMF) ¶¶ 1, 3, Dkt. No. 17, Attach. 26.)
Pursuant to the APA, Farley agreed to sell, among other things, its
expirations—the records or copies of an insurance agency’s policies
containing “the date of the policy, name of the insured, date of expiration,
amount of insurance, premiums, property covered, and terms of
insurance,” Richard T. Blake & Assocs. v. Aetna Cas. & Sur. Co., 255
A.D.2d 569, 570 (2d Dep’t 1998)—to Winfield. (See Dkt. No. 17, Attach. 2
at 13.) A large percentage of policies serviced by Farley were Erie policies,
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Unless otherwise noted, the facts are undisputed.
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and Winfield’s intention in buying out Farley was to “expand [its] personal
line insurance, build up volume, and acquire the right to offer and service
insurance from other companies not previously represented by [it],
including, potentially, Erie.” (Def.’s SMF ¶¶ 5-6.) John Tomassi, Winfield’s
president, was aware at the time the APA was executed, however, that Erie
may decline to appoint Winfield as its agent and that Erie was not obligated
to do so, even on a temporary basis. (See id. ¶¶ 4, 10-11.) Nonetheless,
Tomassi expected to retain no less than eighty to eight-five percent of the
policyholders by selling them non-Erie policies; he also believed that
whether or not Winfield was named an Erie agent, it would continue to
service the Erie policies until the end of their term and any authorized
extensions. (See Pl.’s SMF ¶¶ 11, 13-14, Dkt. No. 21, Attach. 17.)
Within days after execution of the APA, Tomassi contacted James
Nolan, district sales manager for Erie, and discussed with him the
possibility of Winfield being appointed as an Erie agent. (See Def.’s SMF
¶¶ 19-21.) Nolan eventually advised Tomassi that Erie was not interested
in appointing Winfield as a permanent agent. (See id. ¶ 22.) On June 26,
2007, however, Erie appointed Winfield as a temporary agent, which was
memorialized in a written temporary agency agreement (TAA). (See id.
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¶ 27.) The TAA specifically required termination of the temporary agency
“very shortly after” it began, and Erie was required to send out notice of
termination to Winfield “within no more than one (1) month” after execution
of the TAA. (Dkt. No. 17, Attach. 10 at 3-4.) By letter, in September 2007,
Erie notified Winfield that it was terminating the TAA effective December 4,
2007. (See Def.’s SMF ¶¶ 35-40; Dkt. No. 17, Attach. 12 at 1.)
On September 26, 2007, Erie sent “offer letters” to policyholders
being serviced by Winfield, which explained “that the agency relationship
between Winfield and Erie had been terminated” and contained other
information—relevant to the individual policyholders’ options in light of
Erie’s termination of the TAA—that is at the center of this action. (Def.’s
SMF ¶ 42.) In pertinent part, the letters, which existed in three iterations
for personal lines, automobile, and commercial lines policies, explained
that Winfield had been terminated as an agent, the policyholder was
entitled to continue the policy through Winfield, and Erie would non-renew
the policy at the appropriate time. (See Dkt. No. 17, Attachs. 13-15.) As
for personal lines and automobile policies, if no action was taken, the policy
would be serviced by Erie directly, and the policyholder was given only
three weeks to express his or her intention. (See Dkt. No. 17, Attachs. 134

14.) The letter sent to commercial lines policyholders did not require any
affirmative action on their part to remain with Winfield. (See Dkt. No. 17,
Attach. 15.) All three letters also encouraged the policyholder—in bold and
mostly capitalized text—to contact Winfield to inquire about his or her
policy and potentially “ARRANGE FOR REPLACEMENT COVERAGE
WITH ANOTHER COMPANY.” (Dkt. No. 17, Attachs. 13-15.)
Winfield sent out its own letters afterward, and therein attempted to
explain the Erie offer letters to the policyholders in an effort to retain their
business. (See Def.’s SMF ¶¶ 51-53.) Consistent with Erie’s offer letters,
some policyholders elected to continue with Winfield during the statutory
run-off period and Erie paid commissions to Winfield until the policies were
non-renewed. (See id. ¶ 54.) Erie also permitted Winfield to service the
policies after it objected to the offer letters even if an individual policyholder
did not indicate his or her intention to remain with Winfield by returning a
signed letter. (See id. ¶ 55.) Only policyholders that specifically requested
a new agent from Erie were provided information about how to obtain an
Erie-approved agent, and, even then, Erie would merely refer the
policyholder to the website that listed Erie agents, or provide the names
and telephone numbers of such agents to the inquiring policyholder. (See
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id. ¶¶ 56-59.) Ultimately, Winfield only retained approximately thirteen
percent of the expirations, far less than the eighty to eighty-five percent that
Tomassi hoped for. (See Dkt. No. 21, Attach. 11 ¶ 26; Pl.’s SMF ¶ 11.)
B.

Procedural History
Winfield commenced this action on December 21, 2010 alleging

claims of conversion, tortious interference with business relationships, and
a violation of N.Y. Gen. Bus. Law § 349. (See Compl. ¶¶ 34-44.)
Following joinder of issue, (see Dkt. No. 8), and discovery, (see, e.g., Dkt.
No. 17, Attachs. 4-5, 17, 20-22; Dkt. No. 21, Attachs. 5, 8-9), Erie moved
for summary judgment, (see Dkt. No. 17), and Winfield cross-moved for
partial summary judgment, (see Dkt. No. 21). Winfield has withdrawn its
cause of action pertaining to N.Y. Gen. Bus. Law § 349. (See Dkt. No. 21,
Attach. 15 at 4.)
III. Standard of Review
The standard of review pursuant to Fed. R. Civ. P. 56 is well
established and will not be repeated here. For a full discussion of the
standard, the court refers the parties to its decision in Wagner v. Swarts,
827 F. Supp. 2d 85, 92 (N.D.N.Y. 2011).

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IV. Discussion2
Erie contends that it is entitled to summary judgment on all claims
primarily because the offer letters it mailed to policyholders whose policies
were being serviced by Winfield after its buyout of Farley were required by
N.Y. Ins. Law §§ 3425(j)(1)(A), (B) and 3426(k)(1) (McKinney 2007). (See
Dkt. No. 17, Attach. 27 at 9-15.) In particular, Erie argues that, upon its
termination of the TAA, it was obligated by law to send offer letters to the
policyholders. (See id. at 10-15.) Further, Erie claims that, notwithstanding
its obligation to communicate with policyholders, no claim of conversion lies
here because the property at issue—the expirations—is intangible and not
subject to conversion, and the facts simply do not support that any
conversion took place. (See id. at 15-18; Dkt. No. 24, Attach. 5 at 12-19.)
Finally, Erie alleges that Winfield’s tortious interference with business
relationships claim fails as a matter of law because the only contact by Erie
with the policholders was required by §§ 3425(j)(1)(A), (B) and 3426(k)(1),
and, among other things, Erie’s contact with them was not “wrongful” or
“solely malicious.” (Dkt. No.17, Attach. 27 at 18-21; see Dkt. No. 24,
2

The parties apparently agree, as demonstrated by their reliance on
New York decisional and statutory law, that New York law is applicable to
this diversity action; the court agrees.
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Attach. 5 at 19-22.)
Winfield claims that it is entitled to summary judgment on the issue of
liability. (See Dkt. No. 21, Attach. 15 at 5-22.) In support, Winfield argues
that the offer letters sent by Erie to the policyholders “were not required by
the New York State Insurance Law and were nothing more than marketing
letters sent out by Erie to get an upper hand in the battle between Winfield
and Erie for the customers making up the Farley book of business.” (Id. at
3, 10-15.) As for its specific causes of action, Winfield contends that an
agency’s book of business, or expirations, is its tangible, saleable property,
and that Erie’s contact with the policyholders constituted conversion of its
expirations and tortious interference with business relations. (See id. at 59, 16-19, 20-22.) Although the court disagrees with Erie that its offer letters
are wholly excusable, it agrees that claims of conversion and tortious
interference are unavailable in this case.
A.

Erie’s Offer Letters
Pursuant to sections 3425 and 3426 of the New York Insurance Law,

upon the termination of an agent, an insurer must offer to the insured the
opportunity to continue the policy for any remaining part of the required
policy period and, under some circumstances, for additional periods of time
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with respect to personal lines and automobile insurance, through the
terminated agent. See N.Y. Ins. Law §§ 3425(j)(1)(A) & (B); 3426(k)(1).
The exact parameters of such an offer are not clear. For example, while
the agency responsible for supervising and regulating insurance business
within New York has generated various opinions and documents, (see
generally Dkt. No. 17, Attach. 28; Dkt. 21, Attach. 6; Dkt. 24, Attach. 8),
directing that “[t]he letter from the insurer should be sent at the time of the
termination,” (Dkt. No. 17, Attach. 28 at 9), and it is inherent in the statutes
and the agency’s opinions that the insured should be informed of the
termination itself, there is nothing in the statutes that: (1) specifically
permits the insurer to place upon the insured the obligation to take some
affirmative act to retain the terminated agent; (2) to advise the insured that
it intends to non-renew a particular policy in advance of the time frames set
out in N.Y. Ins. Law §§ 3425(d)(1) and 3426(e); or (3) require the insured to
express his or her intention about continuing with the terminated agent
within any particular time frame. Thus, the content and form of Erie’s
letters cannot be explained away as entirely harmless simply by referring to
sections 3425(j)(1)(A), (B) and 3426(k)(1). In any event, Erie is entitled to
summary judgment on Winfield’s remaining claims of conversion and
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tortious interference for the reasons that follow.
B.

Conversion of Expirations
“A conversion takes place when someone, intentionally and without

authority, assumes or exercises control over personal property belonging to
someone else, interfering with that person’s right of possession.” Colavito
v. N.Y. Organ Donor Network, Inc., 8 N.Y.3d 43, 49-50 (2006). The
elements of the tort, therefore, are that: (1) the plaintiff has a “possessory
right or interest in the property”; and (2) that the defendant takes dominion
over the property or interferes with it in derogation of the plaintiff’s rights.
Id. at 50. Importantly, here, however, “‘an action for conversion will not
normally lie, when it involves intangible property’ because there is no
physical item that can be misappropriated.” Thyroff v. Nationwide Mut. Ins.
Co., 8 N.Y.3d 283, 289 (2007) (quoting Sporn v. MCA Records, 58 N.Y.2d
482, 489 (1983)).
While Winfiled contends that the expirations are tangible property, it
provides no cogent support for that proposition. (See Dkt. No. 21, Attach.
15 at 5-9.) In contrast, one of the cases that Winfield relies on clearly
identifies expirations as intangible assets, see Barrow v. Lawrence United
Corp., 146 A.D.2d 15, 19 (3d Dep’t 1989); (Dkt. No. 21, Attach. 15 at 6),
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while the others only support the proposition that expirations are a valuable
or “major asset” in the insurance industry. Gotchis v. Allstate Ins. Co., Civ.
A. No. 90-12553-Y, 1993 WL 795440, at *2 (D. Mass. Feb. 19, 1993); see
In re Williams, 354 B.R. 604, 608-09 (Bankr. N.D.N.Y. 2006); Clarion
Assocs., Inc v. Colby Co., 276 A.D.2d 461, 461-63 (2d Dep’t 2000);
Richard T. Blake & Assocs., 255 A.D.2d at 570-71; World Wide Specialty
Programs, Inc. v. Lexington Ins. Co., 2012 N.Y. Slip. Op. 30638U, at *2
(Sup. Ct. Mar. 13, 2012). While it is uncontested that Winfield owned the
expirations, (see Dkt. No. 17, Attach. 10 at 1), because they are intangible
property, a claim of conversion does not lie here. See Sun Gold, Corp. v.
Stillman, 95 A.D.3d 668, 670 (3d Dep’t 2012) (“The conversion of intangible
property is not actionable.”).
C.

Tortious Interference With Prospective Economic Relations
To establish a claim of tortious interference, “a plaintiff must plead

that the defendant directly interfered with a third party and that the
defendant either employed wrongful means or acted ‘for the sole purpose
of inflicting intentional harm on plaintiff[].’” Posner v. Lewis, 18 N.Y.3d 566,
570 n.2 (2012) (quoting Carvel Corp. v. Noonan, 3 N.Y.3d 182, 190
(2004)). “Wrongful means include physical violence, fraud or
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misrepresentation, civil suits and criminal prosecutions, and some degrees
of economic pressure; they do not, however, include persuasion alone
although it is knowingly directed at interference with the contract.” Carvel
Corp., 3 N.Y.3d at 191 (internal quotation marks and citation omitted). A
violation of the duty of fidelity owed to the plaintiff “by reason of a relation of
confidence existing between them” can also serve as wrongful means.
Guard-Life Corp. v. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 194
(1980). Further, where the motive for a defendant’s interference with a
prospective economic relationship is “normal economic self-interest,” the
plaintiff is unable to show that the defendant acted solely to harm it. Carvel
Corp., 3 N.Y.3d at 190.
Here, Winfield does not, and cannot, argue that Erie’s interference
was solely for the purpose of inflicting harm to it.3 Instead, Winfield
contends that Erie used wrongful means to deprive Winfield of the
opportunity to retain the policyholders. (See Dkt. No. 21, Attach. 15 at 20-

3

Indeed, Winfield alleges in its Complaint that Erie’s interference
involved wrongful encouragement of policyholders to permit Erie to directly
service their policies rather than remain Winfield's clients. (See Compl. ¶
38.) Inherent in that allegation is Erie’s economic self-interest, which
would demonstrate that its purpose was not solely to inflict harm to
Winfield.
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22.) In particular, Winfield claims that Erie’s interference with its ability to
solicit renewals “was wrongful in itself” and “constituted the tort of
conversion,” and Erie’s conduct violated the TAA, which gave rise to a duty
of fidelity preventing it from taking any action in derogation of Winfield’s
rights. (Id. at 22.) Persuasion alone, however, is insufficient and, because
the expirations are intangible, a claim of conversion is unavailable. With
respect to Winfield’s contention that Erie acted by wrongful means because
it violated a duty of fidelity, the court does not agree. While little case law
speaks to this issue, Erie owed no duty of fidelity to Winfield by reason of a
relation of confidence, and, thus, Winfield’s argument fails in that regard as
well. See, e.g., Hayes v. Case-Hoyt Corp., 262 A.D.2d 1018, 1018 (4th
Dep’t 1999) (explaining that employees owe employers a duty of fidelity by
virtue of relation of confidence); ENV Servs, Inc. v. Alesia, 10 Misc.3d
1054(A) (N.Y. Sup. Ct. 2005) (describing “relation[s] of confidence” as
existing between key employees of a corporation or a manufacturer and
distributor). Moreover, as discussed above, it is not even clear if Erie’s
communication with the policyholders amounts to non-sanctioned
interference; indeed, some communication was mandated by New York
law.
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V. Conclusion
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED that Erie’s motion for summary judgment (Dkt. No. 17) is
GRANTED; and it is further
ORDERED that Winfield’s cross motion for partial summary judgment
(Dkt. No. 21) is DENIED; and it is further
ORDERED that the Complaint (Dkt. No. 1) is DISMISSED; and it is
further
ORDERED that the clerk close this case; and it is further
ORDERED that the clerk provide a copy of this MemorandumDecision and Order to the parties.

IT IS SO ORDERED.
October 12, 2012
Albany, New York

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