Hanick v. Ferrara

161 N.E.3d 1

2020 Ohio 5019

Roberta HANICK, Plaintiff-Appellant,

v.Thomas P. FERRARA et al., Defendants-Appellees.

No. 19 MA 0074

Court of Appeals of Ohio, Seventh District, Mahoning County.

Dated: September 28, 2020

Atty. Dimitrios Makridis, Atty. Irene Makridis, 155 South Park Avenue, Suite 160, Warren, Ohio 44481, for Plaintiff-Appellant.

Atty. Aaren Host, Atty. Andrew Illig, Atty. Brian Nally, Reminger Co. L.P.A; Atty. Jesse Linebaugh, Atty. Monika Sehic, Faegre Baker Daniels LLP, 801 Grand Avenue, 33rd Floor, Des Moines, IA 503, for Defendants-Appellees.

BEFORE: Carol Ann Robb, Gene Donofrio, Cheryl Waite, Judges.

OPINION AND JUDGMENT ENTRY

Robb, J.

{¶1} Plaintiff-Appellant Roberta Hanick appeals the decision of the Mahoning County Common Pleas Court granting summary judgment in favor of Defendants-Appellees Thomas Ferrara (her former insurance agent) and Aviva Life and Annuity Company (nka Athene Annuity and Life Company). Appellant sets forth eight assignments of error. Initially, she raises issues with: the refusal to extend the discovery deadline for her expert's report; the denial of leave to amend the complaint; and the quashing of a subpoena. As we do not find the court abused its discretion on the motions, these discretionary decisions are affirmed.

{¶2} As to the fraud claim, Appellant only raises an issue with the failure to provide state-mandated replacement disclosures, but this was not pled with particularity or raised below. Thus, the summary judgment on fraud is affirmed. Similarly, Appellant did not raise the replacement disclosure topic in the opposition to summary judgment on the claims for breach of fiduciary duty and negligent misrepresentation. Consequently, the trial court did not err in failing to evaluate whether an issue with state-mandated replacement disclosures precluded summary judgment.

{¶3} On the claim for breach of fiduciary duty, Appellant also states the trial court erred in refusing to apply the exception to the general rule that an insurance agent does not occupy a fiduciary relationship with the insured. Viewing the evidence in the light most favorable to Appellant, we conclude that a reasonable person could find Appellant had a special trust relationship with her insurance agent. The trial court alternatively granted summary judgment on the breach of fiduciary duty claim because Appellant failed to present expert testimony. However, expert testimony was not required on that claim.

{¶4} The trial court also ruled that an expert was required for the claim of negligent misrepresentation. Although Appellant failed to demonstrate that alleged misrepresentations on the application (about net worth or income) caused an injury, various other allegations raised as to the negligent misrepresentation claim did not require expert testimony in order to avoid summary judgment. Accordingly, the entry of summary judgment on the breach of fiduciary duty claim is reversed, the entry of summary judgment on the negligent misrepresentation claim is reversed in part, and the case is remanded for further proceedings on these claims.

STATEMENT OF THE CASE

{¶5} On February 6, 2017, Appellant filed a complaint sounding in tort against Thomas Ferrara, an insurance agent who sold her various annuities and life insurance policies beginning in 2009. Appellant said Ferrara advised her to cancel an annuity she purchased from another agent in 2008. She claims Ferrara thereafter sold her: an ING annuity for $80,600 in 2009; a life insurance policy in 2010 (which lapsed); an Aviva annuity for $15,000 in 2010; an Aviva annuity for $46,300 in 2012 (after the ING annuity was surrendered); an Aviva life insurance policy in 2012 with a $6,000 annual premium; an Aviva life insurance policy on May 17, 2013 with a $75,000 death benefit and a $5,500 annual premium (which lapsed in 2014); and an Accordia life insurance policy in February of 2015 with a $100,000 benefit (which was rescinded with premiums refunded upon Appellant's request in May 2015). Only the claims regarding the last two sales were not time-barred due to the trial court's application of the four-year statute of limitations, which is not contested on appeal.

{¶6} Appellant set forth three claims against Ferrara: negligent misrepresentation, breach of fiduciary duty, and fraud. The negligent misrepresentation claim alleged Ferrara made various misrepresentations to her, including: the products were affordable; his advice was sound; an annuity was like a savings account even though it had surrender charges on withdrawals; the life insurance did not have recurring premiums; and there were benefits to terminating old policies and buying new policies. The complaint alleged Ferrara made misrepresentations which induced Appellant to loan him money and to liquidate a portion of the annuity. The factual section of the complaint mentioned that Ferrara made misstatements on her life insurance applications where he inflated her income and net worth.

{¶7} The breach of fiduciary duty claim alleged Ferrara took advantage of their special relationship and cited to prior paragraphs in the complaint. In addition to the misrepresentations, she said he induced her to purchase products in order to make commissions or sales quotas, without regard for the appropriateness of the product to her situation or the detriment to her (such as through surrender charges for annuity withdrawals which were used to pay life insurance premiums). She also complained that Ferrara induced her to loan him $3,500 in a 2014 written agreement providing for repayment with 5% interest with payments of $150 beginning on June 15, 2014 and full payment due by November 15, 2014.

{¶8} Her fraud claim specified this allegation of loan inducement and said she relied on his promise to repay the loan by the due date. The fraud claim also referred to Ferrara's unauthorized withdrawals from her annuity (to pay her insurance premiums and to provide her with funds after she asked him to repay the loan).

{¶9} Appellant named Aviva as a defendant under agency and vicarious liability principles. Appellant also sued ING and a local insurance agency where Ferrara previously worked, but the court dismissed the case against them after finding the four-year statute of limitations had run as to the sales in 2009 and 2010. (3/26/18 J.E.). The court additionally noted Appellant's acknowledgement that ING did not issue the 2010 life insurance policy. Appellant asked to amend the complaint to add the correct company and to add a different agent who ING claimed sold the 2010 annuity. (1/22/18, 2/8/18 Motions). The court denied leave to add these defendants finding it would be futile due to the statute of limitations. (3/26/18 J.E.).

{¶10} In applying the statute of limitations, the trial court also dismissed the claims against Ferrara and Aviva as related to the sale of the pre-2013 products. The court found Aviva remained as a defendant only as to the allegations of its agent's misrepresentation in the 2013 sale. (3/26/18 J.E.). Ferrara's motion sought partial judgment on the pleadings only as to the first five (pre-2013) sales and did not seek dismissal as to the 2013 and 2015 sales. Yet, the court's entry ruling on the motion seemed to dismiss all parts of the negligent misrepresentation and breach of fiduciary claims against Ferrara (finding the fraud count remained against him). The parties subsequently agreed at a hearing that those counts were reinstated against Ferrara for post-2013 sales. (3/13/19, 3/29/10 Mag. Orders).¹

{¶11} On May 25, 2018, Ferrara filed a motion for summary judgment, which Aviva joined. The motion argued: an expert was required for the negligent misrepresentation and breach of fiduciary duty claims; an insurance agent does not owe a fiduciary duty to a client unless a special relationship is understood by both parties; a misrepresentation claim cannot proceed where the plain language of the contract provides the information; breach of contract for failure to finish repaying a loan is not fraud; and the economic loss rule bars claims where the relationship was governed by contract.

{¶12} The motion for summary judgment pointed to Appellant's deposition testimony where she acknowledged her prior history of buying life insurance, her knowledge that a policy would lapse if an annual premium is not paid, her prior history of buying annuities from other agents (2008, 2005, 1998, and the one surrendered in 1998), and her past experience with surrender charges. The motion also cited a letter showing Appellant chose to let the 2013 life insurance policy lapse because she was upset about a withdrawal she directed from her Aviva annuity; a letter she wrote to Aviva said the company did not follow her instructions on gross versus net and on the percentage to withhold for taxes.

{¶13} In her April 26, 2019 response to summary judgment,² Appellant said she could not afford and did not need life insurance as she was divorced with no biological children and was estranged from her twin brother. She reviewed all transactions initiated by Ferrara but recognized the statute of limitations had run as to the sale of the first five products. She said Ferrara: failed to inform her how life insurance and an annuity were different; failed to disclose that the life insurance policies had premiums; withdrew from her annuity to pay her life insurance premiums; failed to inform her about early withdrawal penalties from annuities; withdrew money from her annuity without her consent; and lied on insurance applications. Her opposition to summary judgment argued: expert testimony was not required as the issues were not complex; their special relationship was an exception to the general rule that an insurance agent does not have a fiduciary duty to the client; there was justifiable reliance on the agent; misrepresentation and fraud claims are not barred merely because there was a contract; and she is not barred by the economic loss...