Am. Family Mut, Ins. Co. v. Graham, No. 14-2174 (8th Cir. 2015)
Annotate this CaseGraham sold insurance for American Family from 1988 until 2011. In 1996, they entered into an Agent Agreement. In 2010, following a customer complaint, American Family concluded that Graham had increased coverage and added endorsements without customer permission, increasing premiums; improperly applied multi-vehicle discounts to accounts with only one car; and changed vehicle-rating symbols used to assign risk and determine appropriate premiums for automobile insurance. American Famly terminated the Agreement. Weeks later, Graham formed an independent agency and sent letters to approximately 1,500 of his former American Family customers telling them he no longer represented American Family and had signed an agreement not to solicit or induce former customers for one year, but was not prohibited from serving needs not covered by American Family. Graham stated he now represented over 50 companies and could offer clients “more choices, expanded coverage, and excellent rates” that might be “better suited for your needs.” If a former customer contacted Graham, the customer was asked to sign a “non-inducement form.” American Family sued. Graham counterclaimed for wrongful termination. American Family asserted that Graham’s conduct qualified as “dishonest,” obviating the need for notice under the Agreement. The Eighth Circuit affirmed enforcement of a stipulated damages clause in the Agreement, in favor of American Family.
Court Description: Kelly, Author, with Gruender, Shepherd, Circuit Judges] Civil case - Contracts. The evidence was sufficient to support the jury verdict that defendant had violated the provisions of his Agent Agreement by contacting former customers after plaintiff terminated him and inducing them to cancel their policies and place their insurance with him; admission of another agent's testimony that defendant had, in his view, violated the Agent Agreement was a small portion of his overall testimony and was not so prejudicial that a new trial would likely produce a different result; with respect to defendant's counterclaim that his Agent Agreement had been wrongfully terminated, the district court did not err in rejecting his proposed instruction on "dishonest," as the court properly instructed the jury under applicable Wisconsin law; the court did not err in determining that a provision of the Agent Agreement was a valid stipulated-damages clause rather than an unenforceable penalty.
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