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06/08/88 the Prudential Insurance v. Ronald P. Sempetrean

June 8, 1988





525 N.E.2d 1016, 171 Ill. App. 3d 810, 121 Ill. Dec. 709 1988.IL.892

Appeal from the Circuit Court of Cook County; the Hon. Richard L. Curry, Judge, presiding.


JUSTICE RIZZI delivered the opinion of the court. WHITE, P.J., and McNAMARA, J., concur.


Plaintiff, The Prudential Insurance Company of America (Prudential), appeals from a dismissal by the trial court of counts I, II, and III of its "Verified Complaint for Injunctive and Other Relief" (Complaint) against defendant, Ronald P. Sempetrean (Sempetrean). On appeal, Prudential argues that the trial court erred in dismissing and not accepting as true the factual allegations of its complaint. Counts I, II and III of its complaint essentially alleged that: (1) the agreement entered into between Sempetrean and Prudential wherein Sempetrean agreed not to interfere with any of Prudential's insurance policies already in effect at Sempetrean's termination was enforceable; (2) Sempetrean owed Prudential a fiduciary duty not to prevent Prudential from accomplishing the purpose of Sempetrean's agency for Prudential; and (3) an implied covenant of good faith in Sempetrean's "Agency Agreement" with Prudential required Sempetrean not to deprive Prudential of the fruits of the contract. We affirm.

Prudential is a national insurance company which sells various life insurance products. Sempetrean worked for Prudential as a district agent from June 9, 1958, to March 1, 1985. As a district agent, Sempetrean sold life insurance, health insurance and annuities for Prudential. Compensation paid by Prudential to Sempetrean was governed by a written "Agency Agreement" prepared by Prudential and the terms of a collective bargaining agreement between Prudential and various unions. Neither the agreement with Prudential nor the collective bargaining agreement prohibited Sempetrean from engaging in any competitive activities with Prudential following the termination of Sempetrean's employment.

The crux of this action concerns life insurance policies that Sempetrean sold for Prudential. When Sempetrean sold Prudential life insurance policies, he received a commission of approximately 45% to 55% of the first-year premiums and a smaller commission in the years thereafter. Upon the termination of Sempetrean's employment with Prudential, he forfeited any right to receive further commissions on any and all policies he sold on behalf of Prudential.

The policies sold by Sempetrean were essentially unilateral contracts wherein the policyholders could cancel their policies or allow them to lapse at any time by failure to pay their annual premiums. Sempetrean's commission was governed by the payment of premiums. If the policyholders opted to cancel or allow their policies to lapse, Sempetrean received no commissions on those policies.

In 1984, disputes arose between Prudential and Sempetrean regarding the manner in which Sempetrean was servicing his policyholder clients. As a result of this dispute, Sempetrean ultimately resigned from Prudential on March 1, 1985. When Sempetrean resigned from Prudential, Prudential prepared and required that he sign a termination agreement, which provided:

"In consideration of the waiver by the Prudential Insurance Company of America (Prudential) of its right to recover certain commissions paid to me . . ., I do hereby agree not to directly, or indirectly through other persons, solicit or encourage termination or replacement of Prudential insurance policies which were placed in force or serviced by me during my tenure as a District Agent of Prudential. . . .

Prudential agrees . . . that it will not initiate any activities to terminate the licensure of Ronald Sempetrean in any trade or profession for which he is presently licensed."

Subsequent to his resignation from Prudential, Sempetrean became an insurance agent with one of Prudential's competitors. Sempetrean alleges that he was approached by clients and Prudential policyholders who desired to terminate their Prudential life insurance policies and replace them with new insurance policies. Prudential, on the other hand, alleges that Sempetrean openly solicited its policyholders and induced them into replacing their Prudential insurance policies with policies sold by Sempetrean's new company.

Pursuant to Illinois Insurance Rule 9.17, Prudential received notices of the replacement activities taking place with respect to its policies. Shortly thereafter, on December 11, 1985, Prudential filed a five-count complaint against Sempetrean in the circuit court of Cook County. Initially, Sempetrean moved to dismiss all five counts of Prudential's complaint, but later withdrew its motion only as to count V. On April 8, 1986, the court entered an order dismissing counts I, II, ...

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