By: AgencyEquity.com
An Ohio-based independent insurance agency and a carrier argued over whether the agency could write business in another state. The agency’s principal sued after the carrier terminated the agency.
The carrier appointed her agency in March 2022 to sell personal and commercial lines. Nineteen months later, the carrier allegedly “took issue” with her sales activities in Michigan. One of its directors told her, members of the carrier’s management team, its board of directors, and its chief executive officer that the terms of her appointment authorized her to sell in Ohio only and not in Michigan. She believed this impacted her ability to represent the carrier. She claimed that by early 2024 she was unable to quote new business for the company nor bind business she had sold.
On January 24, 2024, the carrier announced that it would stop selling monoline home and auto policies and require them to be packaged. The change took effect February 1. The agent believed that this change discriminated against disabled homeowners who are unable to drive. She claimed that she engaged in unspecified “whistleblower” activities in response.
On January 29, the director told her that he had confirmed that she was authorized to sell only in Ohio. He also terminated the agency’s contract effective March 20. A few days later, one of her clients received a non-renewal notice, stating that the non-renewal was because the agent no longer represented the company.
In early April, she (and not the agency) sued the carrier and the director who terminated her in Michigan federal court. She cited six grounds that included retaliation, violations of a Michigan state law, defamation, and interference with her business relationships. She followed that with a request for a preliminary injunction that would reinstate her appointment and force the company to renew her clients’ policies.
The court assigned the case to a federal magistrate judge to handle pre-trial proceedings. On July 30, the magistrate recommended that the court dismiss both the lawsuit and the request for preliminary injunction. The agent, director, and the carrier all objected to parts of the recommendation.
On March 31, 2025, the trial court accepted all but one of the recommendations. The judge ruled that the agent’s defamation complaint against the director was plausible. A finding of defamation requires that false or misleading statements be published, and the court said “intra-corporate communications” were equal to publication. Defamation also requires that the statements be made with “actual malice.” The agent claimed that she told the director at least six times that he was misinformed and that her appointment did extend to Michigan. “If (the director) continued to claim otherwise despite this notice,” the judge wrote, “it demonstrates knowledge or reckless disregard of the truth, meeting the actual malice standard.”
However, the judge rejected her other objections to the recommendation. The opinion cast doubt on her attorney’s competence, repeatedly stating that some of her arguments were “unclear” and “confusing” and that she raised arguments against the recommendation that were not in her original complaint, something the rules do not permit. He dismissed all the counts against the carrier and all but the defamation count against the director.
All that is known for certain is what the judge stated in the opinion. However, it appears that there was more to this dispute than an argument over whether the agent could sell in a particular state. That seems like the type of question a review of the contract could answer. More likely is that there was a clash of personalities. Whether terminating her agency’s contract was an appropriate reaction is open to question. What is indisputable is that insurance remains a relationship business. When relationships fail, business is affected, sometimes drastically.
