The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
International Administrators, Inc. ("IAI") and its President
Sheldon Harrison ("Harrison")*fn1 originally filed a 12-count
Complaint against Life Insurance Company of North America
("LINA"), charging interference with IAI's contractual
relationships, interference with prospective advantage, breach
of contract and defamation. In turn LINA filed a motion to
dismiss, which this Court granted only as to Count VIII.
541 F. Supp. 1080 (N.D.Ill. 1982)("Opinion I"). LINA has now moved
under Fed.R.Civ.P. ("Rule") 56 for summary judgment as to the
surviving counts. For the reasons stated in this memorandum
opinion and order, LINA's motion is granted in its entirety.
Beginning in 1971 IAI was broker and administrator for
various group insurance programs of the Department of Iowa of
the American Legion and its Ladies Auxiliary (collectively
"Iowa Legion"). In 1976 IAI solicited LINA to underwrite the
policy*fn3 for Iowa Legion members. Then a few years later
IAI selected LINA as underwriter for Iowa Legion's "Cancer"
and "Wheels" policies.
During the preliminary negotiations as to IAI's commissions
for securing Cancer and Wheels coverage, LINA Group Manager
John Haffner sent a November 22, 1978 letter to former IAI
President Richard Albert ("Albert"), providing "a synopsis of
our continuing discussion on these risks." That letter
(dealing with such insurance for both Iowa and Illinois
Legions) confirmed LINA's willingness to pay IAI, as an
inducement to place the Wheels business with LINA, a
"contingent commission" supplementing any commissions IAI
received directly from the Legion:
We will allow an agency contingency on Iowa and
Illinois Legion Wheels policies whereby we will
take 20% for our expenses profit, etc., allow you
25% commission takeover first year (30% new and
20% renewal thereafter), subtract the paid claims
and IBNR (15% premium at year end) and split the
remainder 50/50 until you reach 10% total
additional compensation. . . .
On January 9, 1979 LINA and IAI executed a written agreement
establishing a commission schedule for Cancer and Wheels
coverage for several policyholders, including Iowa Legion.
That contract makes no mention of any contingency fee
agreement. It did however improve on IAI's position under the
November 22 letter "synopsis" in two ways:
1. Its commission rates are higher than those
contemplated in the letter.
2. It provided a $50,000 advance on
Sometime in 1980 IAI replaced LINA with another insurance
company as underwriter of Cancer and Wheels coverage for Iowa
Legion subscribers. No other change in the relationship among
IAI, LINA and Iowa Legion occurred until the fall of 1980,
when IAI became more than 90 days delinquent in remitting Iowa
Legion premiums in the "six figures" (Jackson Dep. 28).*fn4
That period of delinquency comports with neither industry
custom (Roehr Dep. 33-34; Sweeney Dep. 24-25) nor IAI's past
practice (Jackson Dep. 29; Harrison Dep. 60-61).*fn5 Indeed
IAI was contractually obligated to transmit AGL-270 premiums
within 45 days after the first day of the billing quarter
(LINA Doc. 01809).
Through mid-March 1981 LINA repeatedly asked IAI to pay the
delinquent premiums. Each time Harrison provided immediate
payment (Jackson Dep. 28-29). In an undated letter received by
Harrison March 18 (the "March 18 letter"), LINA Vice President
Lowell Jackson ("Jackson") threatened suit if the premiums
were not paid by March 23, 1981:
We must insist that all past due premiums be
remited to us immediately. If we do not receive a
full accounting with the appropriate premiums by
March 23, 1981, we shall begin legal action to
collect these accounts.
By that time LINA had decided to discontinue its dealings
with IAI. To accomplish that LINA realized it must also sever
its relationships with any policyholder, such as Iowa Legion,
represented by IAI. Termination of AGL-270 coverage required
notice to Iowa Legion 30 days before the policy's "anniversary
date" — the only permissible cancellation date.*fn6 Believing
the anniversary date to be May 1,*fn7 LINA felt it had to act
quickly to comply with the notice requirement. Consequently
Jackson sent identically-worded letters (the "March 19
letters") to two Iowa Legion officials, one of whom was
Adjutant John B. Brokens ("Brokens"):
I.N.A. has provided Hospital Income coverage to
members of the Iowa American Legion and its
Auxiliary since May 1, 1976. During that time we
have been very appreciative of our relationship
with your organization. I.N.A. is a leading
underwriter of American Legion insurance
coverages and we value the business highly.
We regret to inform you that we have not received
certain premiums on policies issued to the Iowa
American Legion that were due as far back as
September, 1980. These premiums were collected by
your broker, Mr. Sheldon Harrison of G & H
Insurance Administrators, Inc., but have not been
remitted to I.N.A.
We must inform you that under these circumstances
it is no longer possible for us to do business
with Mr. Harrison. Since he is your appointed
broker, we are in a position that forces us to
terminate our relationship with your organization
as long as he is your representative. We regret
that this action is necessary and trust you can
appreciate our situation. Please accept this
letter as intent to cancel Policy # AGL-270 on
May 1, 1981. We will, of course, cooperate with
you in every way and see that individual claims
are handled properly.
1. For the six months preceding March 19
Jackson and other LINA officials had sought
assiduously to resolve IAI's delinquency problems
in an amicable manner (Jackson Dep. 29).
2. LINA's March 19 letter simply sought to
convey (and explain) to Iowa Legion LINA's
intention not to renew the AGL-270 policy
(Jackson Dep. 20). There is no hint the letters
were stimulated by a desire to sabotage IAI's
relationship with Iowa Legion.*fn9 Indeed
Jackson had no idea "what would happen" as a
result of the letters and in fact did not expect
the Iowa Legion "would even contact [him]"
(Jackson Dep. 26).
3. In drafting the March 19 letters Jackson
sought all possible sources of information on
IAI, including up-to-date reports from LINA's
Accounting Department (Jackson Dep. 32). That
coupled with the close proximity in time (three
days between LINA's receipt of the delinquent
September premiums and Jackson's March 19
letters) reconfirms the bona fides of Jackson's
belief he was reporting IAI's delinquency
After receiving the March 19 letter Brokens telephoned
Jackson and asked him to recommend a broker with whom LINA was
willing to deal. Jackson "absolutely would not recommend" a
specific replacement for IAI but instead suggested three
possibilities, John P. Pearl and Associates, Ltd.
("Pearl")*fn11 and two others (Brokens Dep. 55-56, Jackson
Dep. 25). After interviewing Pearl and at least one of the
other two brokers, on April 1, 1981 Iowa Legion's Executive
Committee chose Pearl as IAI's successor ...