An Ohio exclusive insurance agent sued her carrier after they, unfairly in her opinion, terminated her for cause.
She had been a contracted agent for the carrier since 2008. The contract she signed permitted either party to cancel the agreement “with cause, immediately upon providing written notice …” The contract’s text listed several examples of “cause,” including:
- Breach of the contract
- Fraud
- Forgery
- Misrepresentation
- Conviction of a crime.
It stated that these were not the only examples of cause. By reference, the contract incorporated the carrier’s entire agency manual. One part of that manual specifically stated that fraud could include “allowing a family member or other party to sign or otherwise act on behalf of the policy owner unless they are duly authorized to do so.”
In August 2019, an individual called the carrier’s customer service department regarding a lapsed payment notice he had received on a life insurance policy. He was questioning why he received the notice when he had never purchased a life insurance policy from the carrier. As a cancer survivor, he believed that he would not qualify for life insurance. He told the customer service department that he suspected his ex-wife of purchasing the policy without his knowledge.
The carrier investigated and found that:
- The agent had sold the policy.
- A box on the application was checked indicating that the agent saw the insured at the time the application was completed and signed.
- The application was signed electronically from two different internet protocol (IP) addresses, indicating that the agent and insured were not at the same location at signing.
- The application named the ex-wife as beneficiary and provided her information.
- There was no mention of the insured’s cancer diagnosis in the application.
In interviews, the ex-wife admitted to buying the policy. Her ex-husband maintained that he had never consented to it. The agent said she could not remember him or the policy but claimed she would have obtained information directly from him, despite his denials that this happened.
Based on the investigation and interviews, the carrier concluded that their agent had acted fraudulently, giving them cause to cancel her contract. In September 2020, they did so. The contract gave her a 90-day window to sell her economic interests in her accounts to another agency with the carrier’s approval. Failing that, she was entitled to a “termination payment” from the carrier. The sale did not happen and the carrier paid her $227,000.
The agent, “surprised by the termination,” continued to claim no memory of the transaction but that she would have handled it by the book. She also said that she checked the box in error, and such mistakes and application irregularities were ordinarily caught in the underwriting process.
She sued the carrier for breach of contract, arguing that they had no cause to terminate the contract.
In February 2024, the court ruled in the carrier’s favor. The judge wrote:
“Plaintiff points to no other evidence, other than her own statements, to show that the investigation was in any way incorrect or improper. These statements are nothing more than speculation — Plaintiff does not remember (the insured) or his policy application, but nevertheless states that (his) policy could not have been improperly created because it is simply not something that she would do. … These statements only show that she did not agree with Defendant’s internal investigation, not that the investigation was wrong. … Moreover, even if the underwriting process should have caught errors in (the) application, this fact does not make Plaintiff’s actions any less fraudulent. The same can be said for Plaintiff’s act of falsely indicating that she was present with (the insured) — even if it were only a mistake, it was nevertheless improper.”
At the very least, this agent’s handling of her business was sloppy. At the worst, it was fraud. An insurance application completed by an agent is the agent’s representation of the truth. It is incumbent on every agent to complete all applications carefully, accurately, and truthfully. This agent failed to do that and she lost her business as a result.
