Unibar Maintenance v. Saigh

769 N.W.2d 911

283 Mich. App. 609

UNIBAR MAINTENANCE SERVICES, INC v. SAIGH.

Docket No. 279774.

Court of Appeals of Michigan.

Submitted March 11, 2009, at Detroit.

Decided March 19, 2009.

Approved for publication May 7, 2009, at 9:00 a.m.

Hyman Lippitt, P.C. (by Douglas Hyman, H. Joel Newman, and Daniel J. McCarthy), Birmingham, for the plaintiff.

Plunkett Cooney (by Robert G. Kamenec), Bloomfield Hills, for the defendants.

Before: DONOFRIO, P.J., and K.F. KELLY and BECKERING, JJ.

PER CURIAM.

After a jury trial, Joseph Saigh and Lawrence Wells (hereafter defendants) were found liable for innocent or negligent misrepresentation and constructive and actual fraud. The jury returned a verdict of $1,282,575 in compensatory and exemplary damages and, subsequently, the trial court entered a judgment against defendants in the same amount. Defendants then moved for a new trial, judgment notwithstanding the verdict (JNOV), and for remittitur. The trial court denied all motions. Defendants now appeal as of right. We affirm.

I. FACTS AND PROCEDURAL HISTORY

Plaintiff is a maintenance and meter-reading contractor, employing approximately 700 employees across numerous states. In 1999, plaintiff retained Benefits USA, Inc. (Benefits), operated by Gregory Cooper, who is a licensed insurance agent, as its insurance agent. In February or March of 2002, Benefits recommended that plaintiff put a segment of its employees on UltraMed, allegedly a full-coverage primary insurance company, and plaintiff enrolled its employees in the plan. Plaintiff was provided with documentation and promotional materials regarding this plan.

Benefits had learned of UltraMed through Kim Thiteca, who is a licensed insurance agent who sold health insurance for Financial Healthcare Systems (FHS) and who recommended UltraMed for plaintiff through Benefits.¹ FHS is run by defendants Saigh and Wells as partners, both of whom are licensed insurance agents in Michigan. Defendants, including Kim, held themselves out as "specialists" in health care insurance coverage. FHS typically sold one plan at a time and would transition into a new plan when the previous plan failed. According to Kim, it was defendants who "brought" the health care plans into the office for their employees to sell. FHS's employees would prepare presentation booklets and other promotional materials using the of information defendants provided them and these materials would be distributed to other agents. Any insurance agent not employed by FHS who wanted to set their clients up with plans held by FHS had to go "through" FHS. In such instances, both FHS and the external agent would receive commissions.

When Kim recommended UltraMed for plaintiff to Benefits in 2002, Kim knew that plaintiff was seeking major full-coverage primary health care insurance and, despite not knowing whether UltraMed was licensed, did not advise Benefits or plaintiff to perform a "due diligence" or take any special precautions. In addition, one of FHS's service representatives testified that FHS already knew that UltraMed was not paying its claims when plaintiff was placed with it. UltraMed, in fact, was not a health insurance company licensed to operate in Michigan. At the time, UltraMed also had a cease and desist order against it in the state of Florida indicating that defendants had made misrepresentations regarding UltraMed.

Subsequently, the claims of plaintiff's employees under the UltraMed plan began to go unpaid. On March 14, 2002, FHS issued a letter informing plaintiff that UltraMed had gone into receivership and had been ordered to stop selling insurance by the state of Texas. The letter was signed by a customer service representative who received the information from defendants. The letter stated:

We have looked and found another TPA [third-party administrator] to administer this business. They have agreed to keep your current premiums and Plan Descriptions (excluding the discount Dental and Vision plan) for existing groups that want to rollover. They also have agreed to retroactive [sic] the effective date to March 1, 2002 provided the appropriate documentation is received. It has been guaranteed that you will not have any lapse of coverage once the signed documentation is received. You will get this information from your agent. The deadline for this rollover is Friday, March 22, 2002.

The new plan recommended to plaintiff was Southern Plan Administrators (SPA). According to Wendy Thiteca, Kim's sister who was a service representative employed by FHS, it was defendants' decision to roll its clients over to SPA.

FHS sent Wendy, who is not a licensed insurance agent, to conduct a due diligence on SPA. During the due diligence Wendy learned that SPA's "reinsurance carrier [was not] on board" and that it was using the premiums it received to pay claims. According to Wendy, the reinsurance carrier was located in Greece and "no one could ever contact [them.]" Defendants were apparently aware of this situation. In other words, SPA was not an actual insurance company; rather, it was an employee health benefit plan that would pay the individual claims and be "backed-up" by reinsurance.

Despite this knowledge, Kim and Benefits made a presentation to plaintiff recommending that plaintiff switch to SPA. Kim presented SPA to plaintiff as a fully insured, first-dollar-coverage, health insurance company and provided a plan description matching UltraMed's. Kim also provided plaintiff with pamphlets and promotional materials, including information about coverage and price quotes. These materials indicated that its customers were satisfied with SPA's coverage. Consequently, in March 2002, plaintiff purchased the SPA plan to replace the UltraMed plan. Under the plan, plaintiff paid SPA $36,000 a month in premiums for the benefit coverage plus an additional 30 percent of each monthly payment to cover agent fees, commissions, and other administrative costs. SPA, however, was not a health insurance company licensed to operate in Michigan.

On December 12, 2002, Kim sent plaintiff an "urgent" fax requesting plaintiff to fill out a new application for reinsurance with CIC Insurance Company. SPA's reinsurance carrier, Market Trends, had stopped paying claims and SPA decided to switch reinsurance carriers. Kim requested plaintiff to submit another payment, which plaintiff did. CIC, however, also failed to pay any claims and it also was not a licensed insurance company in Michigan. One day later, a cease and desist order was issued against SPA in Texas directing it to stop its operations because of fraudulent practices.

In March 2003, plaintiff began experiencing claims problems. Unbeknownst to plaintiff, SPA had discontinued its operation, but plaintiff continued to make the premium payments. However, when plaintiff could not "get a direct answer out of anybody," it refused to make its July 2003 premium payment. Defendant Saigh and Kim then visited plaintiff in August 2003 in an attempt to resolve the problem. Saigh indicated that if plaintiff made another payment within 24 hours, the claims would be paid. Instead of paying SPA another premium payment, plaintiff, at Saigh's recommendation, signed up with Fleet Care. Soon thereafter, plaintiff discovered that Fleet Care was also not a first-dollar-coverage insurance company. Plaintiff ceased doing business with defendants and switched, with some difficulty, to Aetna Insurance.

As a result of the unpaid claims, plaintiff received "hundreds" of complaints from its employees because their prescriptions were not being covered, collection agents were contacting them, or their doctors refused to provide any care. In some instances, plaintiff directly paid for its employees' medications and some employees were sued in small claims court by their health care providers. Consequently, "a lot" of plaintiff's employees quit. Further, while plaintiff paid $67,762.55 in premiums to UltraMed and $263,887.15 to SPA, only $124,257 in claims were ever paid.

After discovering this alleged "Ponzi" scheme, plaintiff brought a three-count complaint alleging negligent and innocent misrepresentation, breach of contract, and actual and constructive fraud. The trial court dismissed plaintiff's contract claim on defendants' motion for summary disposition. Plaintiffs then proceeded to trial against defendants Saigh and Wells on the remaining counts.²

The trial began on October 17, 2006. Before opening statements, the parties indicated to the trial court that they had stipulated all the trial exhibits. After plaintiff presented its case, defendants moved for a directed verdict. The court denied defendants' motion, determining that reasonable minds could differ. Defendants did not present any witnesses and, after closing arguments, the trial court provided the jury with instructions that the parties stipulated. Subsequently, the jury found defendants guilty of innocent or negligent misrepresentation and actual and constructive fraud, and awarded plaintiff $1,282,575 in compensatory and exemplary damages against defendants jointly and severally. On November 13, 2006, the trial court entered judgment for plaintiff.

After trial, both defendants' counsel and plaintiff's counsel spoke with one of the jurors, Tina Rhines, who indicated that the jury foreperson had brought two prepared documents into the jury deliberation room. According to Rhines, the foreperson had prepared two chart summaries showing all the participants in the case and a description of their testimony, as well as a time line of events. These summaries were allegedly used to direct deliberation and were relied on heavily during deliberations.

Defendants then filed numerous postjudgment motions, including motions for a new trial, JNOV, and remittitur. The court denied all three of defendants' motions in a written order. This appeal followed.

II. DIRECTED VERDICT AND JNOV

Defendants first assert that for various reasons...