ATTORNEYS FOR APPELLANTS
George M. Plews
Jeffrey A. Townsend
ATTORNEYS FOR APPELLEES
Patricia Polis McCrory
Mark W. Pfeiffer
Joseph H. Yeager, Jr.
Shawna Meyer Eikenberry
SUPREME COURT OF INDIANA
THOMAS G. ALLEN, )
JOE M. GILSTRAP, THOMAS G. )
GRIER, JAMES H. NELSON, )
DONALD K. OWENS, RICHARD K. )
PATIERNO, RICHARD K. )
PATIERNO, JR., SILVINE M. )
PATIERNO and JOHN M. STONE, ) Indiana Supreme Court
) Cause No. 29S05-0204-CV-222
Appellants (Plaintiffs Below), )
) Indiana Court of Appeals
v. ) Cause No. 29A05-0003-CV-95
GREAT AMERICAN RESERVE )
INSURANCE COMPANY and )
GLENN H. GUFFEY, )
Appellees (Defendants Below). )
APPEAL FROM THE HAMILTON CIRCUIT COURT
The Honorable Judith S. Profitt, Judge
Cause No. 29C01-9709-CP-751
ON PETITION FOR TRANSFER
April 2, 2002
Factual and Procedural Background
are insurance agents licensed in North or South Carolina. Each of
them sold the Flex II, a tax-deferred annuity issued by Jefferson National Life
(JNL), to individual residents of those states. The plaintiffs were recruited by
defendant Glenn H. Guffey, then a resident of South Carolina, and entered into
contracts with JNL calling for them to work under Guffey, who served as
JNLs general agent. JNL subsequently merged into defendant Great American Reserve Insurance
Company (GARCO), a Texas life insurance company with its principal office in Indiana,
and GARCO succeeded to the policies. Each plaintiffs contract with GARCO contained
a choice of law provision that the contract was to be construed in
accordance with the laws of the State of Indiana exclusive of choice of
laws provisions. There was also a forum selection clause providing that venue
for any action between the parties arising under this Agreement was to be
in a court in Hamilton County, Indiana.
In exchange for annual premiums, the Flex II promised annuity income in the
future. Guffey trained the plaintiffs, and part of that instruction included telling
the plaintiffs that the Flex II had no front-end load, meaning that no
commission or other fees would reduce the amount of premiums used to build
up the value of the policy. In fact, the Flex II did
have a front-end load, and for most policyholders only 65% of the first
years premium was applied to add to the value of the policy.
Just over 85% was applied in years two through five, and only in
year six did the entire premium go to enhance the value of the
annuity. After some of the plaintiffs customers complained about misrepresentations in the
sale of the Flex II, the South Carolina Department of Insurance launched an
investigation. As a result of the investigation, most of the plaintiffs entered
into consent decrees with the department admitting that they had misrepresented the Flex
II as to the existence of a front-end load.
The plaintiffs first sued Guffey and GARCO in federal court in South Carolina.
That suit was dismissed without prejudice for improper venue and lack of
diversity of citizenship. The plaintiffs then initiated this suit in the Hamilton
Circuit Court, asserting twelve counts against both Guffey and GARCO. The substance
of many of these claims was that the plaintiffs incurred liability to their
customers and costs of regulatory proceedings and defense of civil lawsuits, all as
a result of Guffeys and GARCOs misrepresentations that the Flex II had no
front-end load. The trial court, applying South Carolina law to the entire
proceeding, granted partial summary judgment in favor of Guffey and GARCO on most
of the counts on the ground that the plaintiffs, as licensed insurance agents,
could not have reasonably relied on the claimed misrepresentations.
The Indiana complaint also asserted three Indiana statutory causes of action, and a
claim for negligence. The trial court granted summary judgment as to the
statutory claims on the ground that these Indiana statutes were not applicable to
claims governed by South Carolina law, and also on statute of limitations grounds.
The negligence claim was also dismissed on statute of limitations grounds.
Finally, two counts remain in the trial court while this interlocutory appeal proceeds.
The Court of Appeals concluded that the plaintiffs Indiana statutory claims and the
claim for negligence were properly preserved by the Journeys Account statute, and reversed
that portion of the summary judgment order dismissing those counts, but agreed that
the plaintiffs status as experts in the field of insurance precluded recovery under
the misrepresentation counts. The plaintiffs seek transfer to this Court.
Standard of Review
On appeal, the standard of review of a grant or denial of a
motion for partial summary judgment is the same as that used in the
trial court: summary judgment is appropriate only where the evidence shows that there
is no genuine issue of material fact and that the moving party is
entitled to a judgment as a matter of law.
Bemenderfer v. Williams,
745 N.E.2d 212, 215 (Ind. 2001). All facts and reasonable inferences drawn
from those facts are construed in favor of the nonmoving party. Id.
The Parties Contentions
No one in this lawsuit claims that because the policies were represented to
contain no front-end load, the purchasers were entitled to that benefit. Rather,
all parties agree that the policies in fact carried a front-end load.
The plaintiffs contend, in broad brush, that they were assured by Guffey that
they were selling no-load policies, they sold the policies on that basis, and
they incurred losses as a result of the false assurances. Because Guffey
was GARCOs general agent, plaintiffs contend GARCO is liable as principal as well
as for its own actions.
The defendants point out that the plaintiffs admit that they never read the
Flex II policies they sold. The defendants contend that a reading of
the policies discloses that the cash value of the policy is less than
the premiums paid until year seven. They also note that the plaintiffs
received commissions on the sale of the policies, and the money had to
come from somewhere. From this they argue that no licensed insurance agent
could reasonably conclude that the policies were no-load. The plaintiffs contentions are
found in twelve different counts. We note at the outset that because
the parties hail from different states, and because many of the activities in
question occurred in different states, this case raises significant choice of law issues.
In analyzing each of the counts of the plaintiffs complaint, it is
first necessary to determine which states law applies to that count. The
answer may differ for different counts and may differ between defendants as to
a single count. As a preliminary matter, except as to Count VI,
no party argues for the application of the law of North Carolina to
any claim. Accordingly, we discuss only the choice between South Carolina and
Indiana law as to each of the other counts.
Count I: Breach of Contract Accompanied by Fraudulent Act
In this count, the plaintiffs allege that their contract with GARCO and their
sub-agency relationship with Guffey implied a duty and obligation of good faith and
fair dealing. The plaintiffs claim that, with fraudulent intent and through fraudulent
acts, GARCO and Guffey breached these implied covenants, and that those breaches are
equivalent to breaches of contract.
Ordinarily a choice of law issue will be resolved only if it appears
there is a difference in the laws of the potentially applicable jurisdictions.
Here we are unclear whether this is the case as to these or
potentially other issues raised by these claims after remand. Accordingly, we address
choice of law as to this count. Because these cases are brought
in Indiana, Indiana choice of law doctrines control. Hubbard Mfg. Co., Inc.
v. Greeson, 515 N.E.2d 1071, 1073 (Ind. 1987).
A. As to GARCO
The plaintiffs describe their claim in Count I against GARCO as a claim
for breach of a covenant of good faith implied in their contracts with
GARCO. Indiana choice of law doctrine favors contractual stipulations as to governing
law. Hoehn v. Hoehn, 716 N.E.2d 479, 484 (Ind. Ct. App. 1999);
Homer v. Guzulaitis, 567 N.E.2d 153, 156 (Ind. Ct. App. 1991), trans. denied;
Barrow v. ATCO Mfg. Co., 524 N.E.2d 1313, 1315 (Ind. Ct. App. 1988).
There is no reason here to disregard that presumption. Accordingly, the
contractual provision that Indiana law governs the construction of the contract is controlling
on the choice of law issue. Indiana law recognizes an implied duty
of good faith in all insurance contracts requiring that an insurer will act
in good faith with its insured. Erie Ins. Co. v. Hickman by
Smith, 622 N.E.2d 515, 518 (Ind. 1993). This duty results from the
unique nature of the insured/insurer relationship, which may be at varying times arms-length,
fiduciary, and/or adversarial. Id. But Indiana does not imply such a
covenant in every contract. See First Fed. Sav. Bank v. Key Mkts.,
559 N.E.2d 600, 604 (Ind. 1990) (not courts province to require party acting
pursuant to unambiguous contract to be reasonable, fair, or show good faith cooperation).
We nevertheless think these agency agreements, though by professionals, are in the
category of agreements that carry some implied covenants. Agency relationships generally carry
with them the obligation of the principal to exercise reasonable care to avoid
placing the agent in harms way in the course of carrying out the
agency. Montgomery Ward & Co., Inc. v. Tackett, 163 Ind. App. 211,
217, 323 N.E.2d 242, 246 (1975).
See footnote This is essentially what the plaintiffs
allege was not done here. Thus, if the plaintiffs can establish that
Guffey or GARCO allowed or caused them to misrepresent the no-load feature, with
knowledge that the plaintiffs believed their representation to be true, and plaintiffs reliance
on a defendants actions or omissions was reasonable, then perhaps a breach of
this duty would be established under Indiana law, which applies to GARCO by
reason of the contract.
As to Guffey
As to Guffey, who had no contract with any plaintiff, Count I alleges
a breach of the duty of good faith and fair dealing arising from
the agency relationship itself, apart from any claims of breach of contract.
However, we do not believe such a claim against Guffey is governed by
Indiana law on the facts of this case.
This Court has not addressed the choice of law governing a multistate agency,
apart from contract. We think comment f to the Restatement (Second) of
Conflict of Laws (Restatement) section 291 accurately states the law applicable here: if
the agent is employed to do a number of acts on the principals
behalf in a single state, the local law of this state will usually
determine the rights and duties owed by the principal and agent to each
other. The activities conducted under this agency relationship were substantially all in
South Carolina, and we conclude the trial court correctly ruled that the law
of South Carolina governs this claim against Guffey.
The trial court, also applying South Carolina law, determined that summary judgment was
appropriate on this count because the plaintiffs reliance on Guffeys alleged misrepresentations was
not reasonable as a matter of law, and thus no claim for fraud
could lie. We agree that this claim requires reasonable reliance on the
part of the plaintiffs. Although we find no directly relevant South Carolina
authority, we believe that to the extent a claim asserts a breach of
the duty of good faith and fair dealing has been accomplished by means
of an allegedly fraudulent misrepresentation, the resulting claim is in substance a claim
for fraud based on misrepresentation. In South Carolina, [f]raud based on a
misrepresentation and negligent misrepresentation both include a requirement that the plaintiff justifiably relied
on the representation made by the defendant. West v. Gladney, 533 S.E.2d
334, 338 (S.C. Ct. App. 2000).
C. Summary Judgment
We do not agree that summary judgment is appropriate as to this count
under either Indiana or South Carolina law. It is true that in
South Carolina an insurance agent is deemed to be an expert dealing in
a highly specialized business, with knowledge and means of knowledge not possessed by
the average applicant for insurance. Riddle-Duckworth, Inc. v. Sullivan, 171 S.E.2d 486,
490 (S.C. 1969). It is also true that where an insurance agent
or broker, with a view toward being compensated, undertakes to procure insurance for
a member of the public, the law holds the agent or broker to
the exercise of good faith, and reasonable skill, care and diligence in so
doing. Id. We think these authorities establish the plaintiffs liability to
their customers. It does not necessarily follow, however, that as between the
plaintiffs and the general agent (Guffey) and their principal (GARCO), the plaintiffs reliance
on representations by Guffey was unreasonable as a matter of law. We
are directed to no South Carolina case that stands for the proposition that
the reliance of an insurance agent, particularly where intentional misrepresentations may be involved,
is to be measured by any standard other than that applied to any
other litigant. In South Carolina, as a general rule, issues of reliance
and its reasonableness . . . are preeminently factual issues for the trier
of facts. Unlimited Servs., Inc. v. Macklen Enters., Inc., 401 S.E.2d 153,
155 (S.C. 1991).
Indiana similarly requires reasonable reliance as an element of any recovery for alleged
misrepresentation or failure to notify. See, e.g., Eby v. York-Div., Borg-Warner, 455
N.E.2d 623, 628-29 (Ind. Ct. App. 1983). As a general proposition under
the law of both states, the reasonableness of the plaintiffs reliance is usually
a question for the trier of fact. Unlimited Servs., 401 S.E.2d at
155; Biberstine v. N.Y. Blower Co., 625 N.E.2d 1308, 1316 (Ind. Ct. App.
1993). On the other hand, both states recognize that the reasonableness of
reliance can in some circumstances be determined as a matter of law.
Biberstine, 625 N.E.2d at 1316 (When confronted with representations which are simply not
the stuff that fraud is made of, a court may find as a
matter of law either that the representations are not actionable or that the
plaintiff had no right to rely as a matter of law. (quoting Plymale
v. Upright, 419 N.E.2d 756, 763 (Ind. Ct. App. 1981))); Nine v. Henderson,
437 S.E.2d 182, 184 (S.C. Ct. App. 1993) (summary judgment appropriate against purchaser
of home on claim that defendant misrepresented extent of termite problem at home
because purchaser himself discovered additional termite damage prior to closing, was provided at
closing with expert reports regarding the possibility of hidden termite damage, and chose
not to postpone closing until additional tests could be performed). The issue
on this appeal from a grant of summary judgment is whether the inflexible
rule of law of either state is that a licensed agent may never
rely on a general agents or the insurers affirmative misrepresentations if they are
contradicted or called into question by an informed reading of the policy or
other documentation. We think there are circumstances where that reliance may be
reasonable and therefore conclude whether or not any such circumstances apply here is
for the trier of fact. Therefore, summary judgment on this basis was
Count II: Common Law Fraud
Allegations of common law fraud assert a tort. Indiana has traditionally followed
lex loci delicti in its choice of law as to tort actions.
This is said to apply the substantive law of the state where the
tort was committed. Hubbard Mfg. Co., Inc. v. Greeson, 515 N.E.2d 1071,
1073 (Ind. 1987). In turn, a tort is deemed to have been
committed in the state where the last event necessary to make an actor
liable for the alleged wrong takes place. Id. Here, if the
plaintiffs have a valid claim, the reliance and consequent damage incurred by the
plaintiffs is the last event necessary to establish the elements of misrepresentation of
a material fact reasonably relied upon. We think that South Carolina has
a sufficient relationship to this action to satisfy traditional lex loci delicti under
Hubbard. Even if this were not the case, as in Hubbard, and
some of the factors enunciated in the Restatement (Second) of Conflict of Laws
are considered, or other reasonable choice of law doctrines are applied, the result
is the same.
See footnote Accordingly, we conclude that South Carolina law applies to
this count as well. As explained with respect to Count I, in
South Carolina, [f]raud based on a misrepresentation and negligent misrepresentation both include a
requirement that the plaintiff justifiably relied on the representation made by the defendant.
West v. Gladney, 533 S.E.2d 334, 338 (S.C. Ct. App. 2000).
However, as we noted above, the trial court erred when it found the
reliance of the plaintiffs to be unreasonable as a matter of law.
Therefore, summary judgment on this count was not appropriate.
Counts III, IV, and V: Indiana Statutory Claims
Counts III-V of the plaintiffs complaint are based on Indiana statutory causes of
action. Specifically, the plaintiffs seek treble damages pursuant to the Crime Victims
Relief Act, Ind. Code § 34-24-3-1 (1998), and damages for violations of sections
35-43-5-3(a)(9) (statutory fraud), 35-43-5-3(a)(2) (statutory deception), and 35-43-1-2(a)(2) (criminal mischief). The trial
court granted summary judgment for GARCO on these counts because (1) the plaintiffs
claims were governed by South Carolina law, and therefore the Indiana statutes were
not applicable, and (2) these claims, as well as the plaintiffs claim for
negligence, were not preserved by Indianas Journeys Account statute and were therefore barred
by the statute of limitations. As to the second contention, we agree
with the Court of Appeals that the claims were preserved by the Journeys
Account statute and summarily affirm the Court of Appeals on that issue.
Allen v. Great Am. Reserve Ins. Co., 739 N.E.2d 1080, 1085 (Ind. Ct.
App. 2000). As to the first contention, the question is not which
states law applies to these claims. There is no doubt that Indiana
law applies to a claim under an Indiana statute. Rather, the issue
is whether the statutes apply to the facts alleged to support these claims,
given that the allegations are based in significant part on acts that occurred
outside of Indiana.
In Count III of their complaint, the plaintiffs allege that GARCO and Guffey
provided them with various literature, brochures, handouts, work sheets and prepared sales presentations,
indicating that the Flex II annuities bore no Front End Load, and that
the provision of these materials constituted the dissemination to the public of a
misleading advertisement in violation of section 35-43-5-3(a)(9). This subsection prohibits the dissemination
to the public of an advertisement that the person knows is false, misleading,
or deceptive, with intent to promote the purchase or sale of property or
the acceptance of employment. I.C. § 35-43-5-3(a)(9). In Count IV, the
plaintiffs allege that the provision of the same materials by GARCO and Guffey
amounted to the making of false or misleading written statements with the intent
to obtain property in violation of section 35-43-5-3(a)(2). Finally, in Count V
the plaintiffs allege that the actions of GARCO and Guffey knowingly or intentionally
caused the plaintiffs to suffer pecuniary loss by deception in violation of section
Accepting these allegations as we must for summary judgment purposes, it is clear
that if these Indiana statutes were violated by GARCO, the acts taken by
GARCO to violate the statutesthe dissemination of the allegedly fraudulent materials, the making
of allegedly false or misleading written statements, and deception that knowingly or intentionally
caused pecuniary lossall occurred in Indiana. We do not think the resulting
pecuniary loss needs to occur in Indiana for the statutes to apply.
Section 35-41-1-1(b) of the Indiana Code sets forth the circumstances under which a
person may be convicted under Indiana law. The most common of these
circumstances is when either the conduct that is an element of the offense,
the result that is an element, or both, occur in Indiana. I.C.
§ 35-41-1-1(b)(1). Because the claims assert that GARCOs conduct took place in
this state, these Indiana statutes are applicable to the plaintiffs claims against GARCO.
It was error to grant summary judgment for GARCO on the ground
the statutes were inapplicable.
Unlike GARCO, which operates in Indiana, if Guffey violated the same statutesby the
dissemination of the allegedly fraudulent materials, the making of allegedly false or misleading
written statements, and/or by deception that knowingly or intentionally caused pecuniary lossit was
only by acts in South Carolina or a few other southern states, but
not Indiana. With regard to Guffey, both the conduct and the result
of any wrongdoing occurred outside of Indiana. Thus, the Indiana statutes in
question do not apply and do not support plaintiffs claims against Guffey.
We note that the same would be true under an accomplice theory of
liability, for even if Guffey aided and abetted GARCO in criminal activity in
Indiana, Guffey himself would be liable under the criminal law of Indiana only
if his conduct occurred in Indiana. As Indiana Code section 35-41-1-1(b)(4) points
out, accomplice liability is available only where conduct occurring in Indiana establishes complicity
in the commission of . . . an offense in another jurisdiction that
also is an offense under Indiana law. The plaintiffs have not alleged
that Guffey and GARCO conspired to violate the statutes, and that issue is
not preserved. Guffey was properly granted summary judgment as to Counts III,
IV, and V.
Count VI: North Carolina Unfair Trade Practices
In this count, the plaintiffs seek damages against both GARCO and Guffey under
North Carolinas general unfair trade practices provisions as well as under the unfair
trade practices provisions of North Carolinas insurance laws. Unlike the other plaintiffs,
Allen is a resident of North Carolina and sold Flex II annuities in
that state. The Supreme Court of North Carolina has held that there
is no private cause of action for unfair trade practices under the insurance
laws of North Carolina. Pearce v. Am. Defender Life Ins. Co., 343
S.E.2d 174, 179 (N.C. 1986). Rather, a private remedy is available, if
at all, only through an action under the states general unfair trade practices
provisions. Id. Non-consumer insurance relationships are subject to pervasive and intricate
regulation in North Carolina, and are therefore beyond the scope of the states
general unfair trade practices provisions. It appears unlikely that the plaintiffs could
have maintained an action under North Carolinas general unfair trade practices law.
The primary purpose of North Carolinas general unfair trade practices provisions is to
protect consumers, although in limited situations businesses are protected as well. Dalton
v. Camp, 548 S.E.2d 704, 710 (N.C. 2001). The plaintiffs certainly are
not consumers per se. They were engaged in selling, not purchasing, these
insurance products. The situations in which the courts of North Carolina have
held that business activities are beyond the scope of these statutory provisions have
often been those wherein the party allegedly violating the provisions was already subject
to pervasive and intricate regulation under other statutory schemes. Skinner v. E.F.
Hutton & Co., Inc., 333 S.E.2d 236, 241 (N.C. 1985) (securities transactions beyond
scope of the provisions); see also Bache Halsey Stuart, Inc. v. Hunsucker, 248
S.E.2d 567, 570 (N.C. Ct. App. 1978) (commodities transactions beyond scope of the
provisions). Accordingly, summary judgment for GARCO and Guffey on this count was
Count VII: South Carolina Unfair Trade Practices
The plaintiffs seek damages against both GARCO and Guffey under South Carolinas general
unfair trade practices provisions as well as under South Carolinas Insurance Trade Practices
Act. In South Carolina, all unfair trade practices regarding the insurance business
are regulated by the Insurance Trade Practices Act, and are therefore exempt from
the coverage of the states general unfair trade practices provisions. Trs. of
Grace Reformed Episcopal Church v. Charleston Ins. Co., 868 F. Supp. 128, 130-31
(D.S.C. 1994). Relying upon the general purposes of the insurance laws of
South Carolina, as well as upon the Insurance Commissioner of South Carolinas statutory
authority to enforce its provisions, the trial court determined that the Insurance Trade
Practices Act does not support a private cause of action. Although this
Court is aware of no case that deals explicitly with that issue, a
recent decision of the Court of Appeals of South Carolina at least implicitly
supports a private cause of action for violations of the Insurance Trade Practices
Act. In Cox v. Woodmen of the World Ins. Co., 556 S.E.2d
397 (S.C. Ct. App. 2001), the court, without comment, allowed a private cause
of action against out-of-state defendants under the act. Nor does the statute
granting enforcement authority to the Commissioner explicitly preclude a private cause of action.
S.C. Code Ann. § 38-3-110 (Law Co-op. 2000). And the Supreme
Court of South Carolina has recognized a private cause of action for wrongful
termination of an agency agreement under section 38-37-940(2) of the states insurance laws.
Dixon v. Nationwide Mut. Ins. Co., 316 S.E.2d 376, 377 (S.C. 1984).
For these reasons, we conclude that the Insurance Trade Practices Act does
support a private cause of action. The presence or absence of reasonable
reliance by the plaintiffs presents genuine issues of material fact as to whether
the actions of GARCO and/or Guffey constituted unfair and deceptive acts and practices.
Accordingly, summary judgment on this count was not appropriate.
Count VIII: Civil Conspiracy
Allegations of conspiracy sound in tort. For the reasons applicable to the
plaintiffs fraud claim, South Carolina law governs this claim as well. Unlike
criminal conspiracy, [t]he gist of a civil conspiracy is not the unlawful agreement,
but the damage resulting from that agreement. 16 Am. Jur. 2d, Conspiracy,
§ 53 at 279 (1998). For that reason, we believe the place
where the injury occurred is both the last event and also a significant
contact. To prevail on a claim of civil conspiracy in South Carolina,
one must prove that a combination of two or more parties joined for
the purpose of injuring the plaintiff thereby causing him special damage. Future
Group, II v. Nationsbank, 478 S.E.2d 45, 50 (S.C. 1996). As the
trial court correctly noted, the plaintiffs have failed to allege that Guffey and
GARCO joined for the purpose of injuring the plaintiffs. Accordingly, judgment for
Guffey and GARCO on this count was appropriate.
Count IX: Tortious Interference with a Business Relationship
In this count, the plaintiffs allege that Guffey interfered with the business relationship
the plaintiffs had with GARCO and with annuity holders who were customers of
the plaintiffs by moving some of the accounts the plaintiffs had placed with
GARCO to a different life insurance company. The plaintiffs claim that they
were damaged by this transfer. Plaintiffs have not alleged, however, that GARCO
was in any way responsible for the transfer. But even if the
movement of the accounts is conceived to be outside South Carolina (where the
owners of the accounts presumably reside), its effect on the plaintiffs was felt
in that state. It is less clear what lex loci delicti would
require for such a tort, but the business relationship between the plaintiffs and
their customers was centered in South Carolina, and its disruption, to the extent
it has a locus, took place there. Even under the Restatement, as
elaborated above, South Carolina law applies to this claim against Guffey. In
South Carolina, to establish an action for intentional interference with a contractthe rough
equivalent of tortious interference with a business relationshipthe plaintiff must prove: (1) the
existence of the contract; (2) the wrongdoers knowledge of the contract; (3) the
intentional procurement of its breach; (4) the absence of justification; and (5) resulting
damages. Todd v. S.C. Farm Bureau Mut. Ins. Co., 336 S.E.2d 472,
473 (S.C. 1985). Because genuine issues of material fact exist as to
whether Guffeys moving the accounts constituted an unjustified intentional procurement of a breach
of the contract between the plaintiffs and GARCO that resulted in damages to
the plaintiffs, summary judgment for Guffey on this count was not appropriate.
Summary judgment for GARCO on this count, however, was appropriate because the plaintiffs
have not alleged that GARCO was in any way responsible for the transfer.
Count X: Negligence
This count alleges that Guffey was directly negligent in preparing and presenting materials
to the plaintiffs that failed to disclose the existence of the Flex IIs
front-end load. Because Guffey was allegedly acting within the scope of his
agency relationship, the count also seeks damages against GARCO on a theory of
vicarious liability. Because this is a tort claim, South Carolina law applies
to the claim against Guffey for the reasons explained under Count II.
As to GARCO, section 174 of the Restatement provides that when questions of
vicarious liability arise, [t]he law selected by application of the rule of §
145 determines whether one person is liable for the tort of another person.
Restatement (Second) of Conflict of Laws § 174 (1971). Thus, South
Carolina law applies to the claim against GARCO as well.
Before the plaintiffs can establish vicarious liability, however, they must prove that Guffey
was negligent. To do so under South Carolina law, the plaintiffs must
show: (1) a duty of care owed by the defendant to the plaintiff;
(2) breach of that duty; and (3) damages resulting from the breach. Arthurs
v. Aiken County, 551 S.E.2d 579, 582 (S.C. 2001). In South Carolina,
a claim for negligence will be barred on principles of comparative fault only
if the plaintiffs negligence is greater than that of the defendant. Nelson
v. Concrete Supply Co., 399 S.E.2d 783, 784 (S.C. 1991). If there
is more than one defendant, the plaintiffs negligence is compared to the combined
negligence of all the defendants. Id. As explained above, the plaintiffs
acknowledge that they never read the Flex II policies. As such they
appear to bear some responsibility for their failure to discern the existence of
the front-end load. However, the relative fault of the parties is a
matter for the trier of fact. Because genuine issues of material fact
exist as to the extent to which Guffey, GARCO, and/or the plaintiffs acted
negligently, summary judgment for GARCO and Guffey on this count was not appropriate.
Count XI: Indemnification
The plaintiffs claim that under common law principles they are entitled to indemnification
by GARCO and Guffey for all the costs they have incurred as a
result of GARCOs and Guffeys allegedly fraudulent acts. The trial court granted
summary judgment for GARCO, but not Guffey, on this count. Thus, the
plaintiffs claim against Guffey remains in the trial court. As to GARCO,
this count is based on the agency relationship between GARCO and the plaintiffs.
Although a provision of the contract between the parties provides for the
indemnification of GARCO by the plaintiffs, there is no provision for indemnification of
the plaintiffs by GARCO. Accordingly, to the extent there is a claim
for indemnity, it arises as a matter of law from the relationship of
the parties and not from the contract. For essentially the same reasons
applied in Count I to Guffey, South Carolina law applies to this claim
South Carolina has long recognized the principle of equitable indemnification. Town of
Winnsboro v. Wiedeman-Singleton, Inc., 414 S.E.2d 118, 120 (S.C. 1992). Moreover, it
has been many years since the Supreme Court of South Carolina first announced
that [t]he principal impliedly agrees to indemnify his agent against liability for loss
incurred in consequence of acts done in pursuance of the agency, Gwathmey v.
Burgiss, 82 S.E. 394, 396-97 (S.C. 1914), a sentiment shared by sections 439
and 458 of the Restatement (Second) of Agency. Nonetheless, South Carolina actions
for equitable indemnification, like those in most jurisdictions, are subject to the proviso
that no personal negligence of the plaintiff may have contributed to the injury
for which that plaintiff seeks indemnification. Atl. Coast Line R.R. Co. v.
Whetstone, 132 S.E.2d 172, 176 (S.C. 1963). Whether the plaintiffs bear some
responsibility for their failure to discern the existence of the front-end load is
for the trier of fact. Accordingly, summary judgment for GARCO on this
count was not appropriate.
Count XII: Accounting
The trial court denied summary judgment to GARCO on this count, so the
plaintiffs claim against GARCO remains in the trial court. As to Guffey,
the trial court granted summary judgment in his favor, finding that he was
not a proper party against whom to seek an accounting. In their
brief before the Court of Appeals, the plaintiffs concede as much, and we
agree. As to Guffey, the judgment of the trial court is affirmed.
We affirm in part, reverse in part, and remand this action to the
trial court for proceedings consistent with this opinion. In sum, we conclude
that summary judgment for defendant GARCO was appropriate on counts VI, VIII, and
IX of the plaintiffs complaint, and for defendant Guffey on counts III-VI, VIII,
and XII. As to defendant GARCO, counts I-V, VII, X, XI, and
XII remain viable at the trial court level. As to Guffey, counts
I, II, VII, and IX-XI remain viable. This case is remanded for
further proceedings consistent with this opinion.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
Plaintiff Thomas G. Allen is a resident of North Carolina. Plaintiffs
Joe M. Gilstrap, Thomas G. Grier, James H. Nelson, Donald K. Owens, Richard
K. Patierno, Richard K. Patierno, Jr., Silvine M. Patierno, and John M. Stone
are residents of South Carolina.
This is not a claim that termination of the agency breached an
implied covenant of good faith. Such a claim in Indiana would face
case law to the effect that employment at will agreements carry no such
implied covenant. See, e.g., N. Ind. Pub. Serv. Co. v. Dabagia, 721
N.E.2d 294, 300 (Ind. Ct. App. 1999), trans. denied. If anything, an
independent agent would seem less entitled to special treatment than an employee who,
like a consumer, may have little practical ability to negotiate the terms of
For an interesting display of varying points of view as to where
choice of law stands today and where it should go, see Symposium: Preparing
for the Next CenturyA New Restatement of Conflicts? 75 Ind. L.J. 399 (2000).
state interests analysis, South Carolina clearly has the strongest interest
in maintaining the integrity of its insurance markets. To the extent choice
of law should be informed by the result the choice produces, we perceive
no clear effect on the result in this case, though one may unfold
as the facts develop. South Carolina also emerges victorious under Section 148
of the Restatement (Second) of Conflict of Laws, which specifically addresses claims of
fraud and misrepresentation. According to it, where, as in the present case,
the alleged misrepresentations and the reliance upon them occur in different states, the
following factors must be considered to determine which state has the most significant
relationship to the occurrence and the parties: (a) the place, or places, where
the plaintiff acted in reliance upon the defendants representations; (b) the place where
the plaintiff received the representations; (c) the place where the defendant made the
representations; (d) the domicile, residence, nationality, place of incorporation and place of business
of the parties; (e) the place where a tangible thing which is the
subject of the transaction between the parties was situated at the time; and
(f) the place where the plaintiff is to render performance under a contract
which he has been induced to enter by the false representations of the
defendant. Restatement (Second) of Conflict of Laws § 148 (1971). With
regard to GARCO, contacts (a), (b), and (f) clearly point to South Carolina,
and only contact (c) points unequivocally to Indiana. Contact (d) is evenly
divided between the two, and contact (e) is largely irrelevant to this action.
As comment j to section 148 points out, when contacts (a), (b),
and (f) are all in the same state, that state will usually be
the state of the applicable law. Id. at cmt. j. With
regard to Guffey, all the section 148 factors support the application of South