Hutchinson v. Am. Family Mut. Ins. Co.

Monica Hutchinson, Plaintiff,

v.American Family Mutual Insurance Company, et al., Defendants.

No. CV-11-00785-TUC-CKJ

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Dated: March 29, 2013

ORDER

Pending before this Court is Defendant Thom Wadlund's ("Wadlund") Motion for Summary Judgment. On December 9, 2011, Wadlund filed a Motion to Dismiss Plaintiff's Complaint. (Doc. 4). This Court's April 9, 2012 Order converted Wadlund's Motion to Dismiss into a Motion for Summary Judgment. (Doc. 18).

I. Factual Background¹

American Family Mutual Insurance Company ("American Family") is an insurance company with thousands of employees. Wadlund operates an insuranceagency. On January 1, 1993, Wadlund entered into an agency agreement with American Family. Pursuant to the agreement, Wadlund could only sell American Family insurance products and is required to meet American Family's production, profitability and service requirements. Joel Helixon, the agency sales manager with American Family, explained that profitability means that Wadlund cannot continually write unprofitable insurance policies. (Doc. 40 at ¶26). If Wadlund failed to reach American Family's production or profitability requirements, American Family would give him a notice of undesirable performance, which could result in termination of the agency agreement.²

The agency agreement further requires Wadlund to maintain a trust fund account and permits American Family to audit that account. It permits American Family to monitor Wadlund's performance and to change its payment obligations to Wadlund without his consent and without prior notice. It also provides for a death benefit to Wadlund's legal representative in certain circumstances. The agency agreement contains a non-solicitation clause, prohibiting Wadlund from soliciting American Family customers for a period of one year after the termination of the agency agreement. Each year, employees of American Family work with the agents including Wadlund to prepare a business plan outline. However, participating in the business plan outline exercise is a discretionary practice, which Wadlund chooses to perform. (Doc. 40 at ¶11). Mr. Helixon goes over the business plan outline with Wadlund, only to provide advice and guidance. Id.

Wadlund is free to hire whomever he chooses. However, Wadlund is not permitted to hire any solicitor, broker, or other licensed individual without the written consent of American Family. (Doc. 40 at ¶¶18, 47). Wadlund is required to use an American Family authorization form when hiring someone. Further, any of Wadlund's prospective employees who would represent American Family products to the public, must be approved by the agency sales manager, the state sales director and the sales vicepresident of American Family before Wadlund can hire them.³

If Wadlund terminates an appointed employee, he is required to adhere to the procedures set forth by American Family and use the necessary American Family forms. However, these procedures and forms are merely to remove the person from the American Family computer system. (Doc. 40 at ¶55). After removal from the computer system, Wadlund could retain the person as an employee of his agency, so long as the person had no contact with the public concerning American Family products. Id.

American Family provided Wadlund with an agency administration manual. This manual included procedures to be used when interviewing candidates for employment, potential interviewing questions, office organization ideas, and agency operations. American Family also provides agents with an employee handbook. However, Wadlund was not required to use the manual or the handbook.⁴ (Doc. 40 at ¶¶19, 21, 23).

The agents are responsible for training their own employees. (Doc. 38, Ex. R). However, the education division of American Family provides training materials, simulations and courses to assist agents in training their staff. Id. American Family asserted that there is no requirement that the agent's use all of these materials (Doc. 40 at ¶¶45, 46), however, there are certain required courses, services and tools, which an agent's employee must complete. (Doc. 38, Ex. R).

Plaintiff has been a licensed insurance producer in Arizona since 2004. Prior to joining Wadlund's agency, she was an agent of American Family pursuant to an agency agreement, similar to the agreement between Wadlund and American Family.⁵ Prior tobecoming an American Family agent, Plaintiff was required to submit to American Family an application for employment, a consumer credit report authorization and a motor vehicle report authorization. American Family then conducted extensive training with the Plaintiff. Plaintiff described in detail how American Family instructed her on where she would operate her agency and how to improve her financial performance. American Family provided Plaintiff with computers and software to use in her agency and required that she keep her agency open on certain days and work a certain number of hours per week. American Family determined which insurer Plaintiff could use for errors and omission coverage. The marketing of her agency was controlled by American Family. American Family had final approval over any marketing materials that utilized a company logo or mentioned American Family in any capacity and American Family further dictated to Plaintiff how she should display marketing materials in her office. Furthermore, while Plaintiff was an agent of American Family, her financial performance was monitored closely by American Family. American Family countered that not all agents are treated the same and Wadlund was specifically treated differently than other agents. ⁶ (Doc. 40 at 112)

Beginning in 2010, Plaintiff ceased being an agent of American Family and began working at Wadlund's agency. Prior to being hired, Plaintiff was required to fill out an American Family application for employment. Wadlund argued there was no requirement that he use any particular form of employment application, and he chose to use the American Family application. (Doc. 40 at ¶36). However, since Plaintiff was being hired as a licensed representative who would have communication with the public concerning American Family products, American Family had to review her application for employment before she could be hired for that position. Id.

On October 26, 2010, Mr. Helixon requested that American Family approvePlaintiff as a licensed office staff employee for Wadlund. Mr. Helixon's email provided that since Plaintiff was a former agent, she should be processed as a transfer. (Doc. 38 at Ex. N). Mr. Helixon explained that the term "approval" in the letter referred to approval for Plaintiff to be appointed as American Family's representative not approval for Plaintiff to be hired by Wadlund. (Doc. 40 at ¶41). Also, on October 26, 2010, Ranger Durand, the American Family Vice-President of sales, received the American Family Office Staff Appointment Checklist, appointing Plaintiff as a staff person in Wadlund's agency. Another American Family email explained that Plaintiff would be working as a customer service representative and that Plaintiff would be processed as a "transfer within the company" because of her prior status as an agent with American Family. Mr. Helixon testified that the discussion of Plaintiff's transfer within the company related to the transfer of her license not her employment within American Family. (Doc. 40 at 144).

After being approved by American Family, Plaintiff was required to sign a document entitled American Family Agreement to License Agent's Office Employee. (Doc. 38, Ex. J). This agreement was signed by Plaintiff, Wadlund and a representative from American Family, and became effective on November 1, 2010. Id. It provides that Plaintiff is appointed by American Family as its licensed insurance sales representative. Id. This agreement further explicitly provides that Plaintiff is an employee of Wadlund and not American Family and provides that Wadlund is responsible for the training, direction, supervision and delegation of authority to the Plaintiff. However, the authority delegated by Wadlund is limited by an endorsement to the agreement and further must be in compliance with the rules and regulations of American Family. Id.

On November 1, 2010, Mr. Zurfluh sent an email to Wadlund approving Plaintiff as a customer service representative and identifying mandatory online training courses for Plaintiff to complete. (Doc. 38 at Ex. K). Later that day, Mr. Zurfluh sent Plaintiff an email informing her that American Family had approved her employment as a customer service representative in Wadlund's agency. The email provided:

The email instructed Plaintiff to read and review the code of conduct documentwith her employer, and complete an online training course called American Family Code of Conduct and Business Ethics. (Doc. 38 at Ex. L). The code of conduct and business ethics course was required so Plaintiff would perform her duties on behalf of American Family in an ethical and legal manner. (Doc. 40 at ¶39). After being hired, a representative from American Family signed a customer service representative appointment form, which was sent to American Family by Wadlund so that Plaintiff could access American Family's computer database. (Doc. 40 at ¶40).

After being hired, Plaintiff was required to study American Family's policies and procedures and complete additional testing on the materials she studied. American Family tracked Plaintiff's completion of these courses of instruction, which included a variety of subjects.⁷ Plaintiff testified that her role as a customer service representative was identical to her role as an agent, with the exception of payroll. However, Wadlund testified that in addition to his responsibilities to solicit business, he is also responsible for running the business, locating and maintaining an office, hiring personnel, purchasing...