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Kunz v. Nield, Inc.

Supreme Court of Idaho

July 11, 2017

BRET D. KUNZ and MARTI KUNZ, Husband and Wife, Plaintiffs-Appellants,
NIELD, INC., dba INSURANCE DESIGNERS, an Idaho corporation, Defendants-Respondents.

         2017 Opinion No. 86

         Appeal from the District Court of the Sixth Judicial District of the State of Idaho, Bear Lake County. Hon. Mitchell Brown, District Judge.

         The judgment of the district court is affirmed. No attorney fees or costs on appeal are awarded to either party.

          Steven A. Wuthrich, Montpelier, attorney for appellant.

          Echohawk Law, Pocatello, attorneys for respondent. Joseph T. Preston argued.

          JONES, Justice.

         I. Nature of the Case

         This appeal arises from an agent contract (the "2009 Contract") entered into between Bret Kunz ("Bret") and Nield, Inc. ("N.I.") authorizing Bret to sell insurance on behalf of N.I. N.I. is owned by two brothers, Bryan Nield ("Bryan") and Benjamin Nield. A dispute arose concerning the method and type of compensation available to Bret under the 2009 Contract. Bret filed a complaint seeking, inter alia, a declaratory judgment interpreting the 2009 Contract. The district court held, inter alia, that the 2009 Contract did not provide for profit sharing as Bret claimed. Bret and his wife, Marti, (collectively, the "Kunzes") appeal.

         II. Factual and Procedural Background

         The crux of this appeal is whether Bret is entitled to profit sharing payments under the 2009 Contract, and if so, what percentage of the profit sharing should be distributed to him. Profit sharing is a unique type of commission that insurance agents earn by meeting certain goals.[1] If an insurance agent qualifies for profit sharing, the payment is made the year after it is earned. Ordinary insurance commissions, which are a percentage of the premiums for new and renewed policies, are paid monthly.

         The business relationship between Bret and N.I. began in 1996 when the parties entered into a written contract (the "1996 Contract") for Bret to sell insurance as a subcontractor for N.I. As a subcontractor for N.I., Bret worked under his brother Michael, who was also a subcontractor for N.I. and had been since 1982. Pursuant to a contract Michael signed with N.I. in 1982, he and N.I. split his book of business 50/50. While Bret's 1996 Contract was substantially similar to Michael's 1982 Contract, it did not contain a provision addressing the ownership of the book of business.

         Bret and Michael agreed that Michael would cover all of the overhead expenses and Bret would receive the entire 80% monthly commission to which he was entitled under the 1996 Contract. Michael did not make any money from Bret, but received profit sharing from sales attributable to Bret due to the fact that Michael owned 50% of the book of business. According to Bret's testimony, he did not expect to receive profit sharing under his 1996 Contract because that contract did not address the ownership of the book of business.

         On July 4, 2008, Michael died. Thereafter, the Kunzes purchased Michael's insurance agency and Michael's share of the business placed with N.I. from Michael's surviving spouse. Around October 2008, Bret and N.I. began to discuss the need for a new contract that would include an ownership provision similar to the ownership provision in Michael's 1982 contract. Bret testified that Bryan brought a draft of the 2009 Contract to his office that mirrored Michael's 1982 contract.

         Sometime around the end of October, or the beginning of November 2008, Bret signed a final version of the 2009 Contract. Bret testified that he did not review the 2009 Contract closely and was not aware that the language therein was different from the language in the draft contract. Bret testified that at the time he signed the 2009 Contract, Bryan mentioned that "they had some pretty good profit sharing checks with [Michael]." Bret also recalled that between November 2008 and February 2009, Bryan mentioned the profit sharing checks again, likely in an attempt to motivate Bret to sell more insurance.

         The pertinent provisions of the 2009 Contract are as follows:

(5) Responsibilities of Agent: The agent is a sub-contractor and as such has responsibility for all expenses related to his or her business. . . . Agent is to place all insurance business through company. Company has final underwriting authority for all business placed. . . . Agent is responsible for all premium and return commissions on business placed. When collections are not on time, deduction may be made from payment of commissions due. When the collection is completed the deducted commission will be paid.
(6) Responsibilities of Company: Company will maintain contracts with companies for placing of insurances. Company will do all billing and accounting functions (except collections). Agent is personally responsible for the collection of premiums and returned commissions on business placed. . . . [provide Bret with a commission check based on agreed percentages on the 15th of each month, and other functions based upon commission split and individual agreement].[2]
(7) Terms of Compensation: Agent will receive 80 percent of commissions received on insurance placed by agent with company. Company will receive 20 percent of commission placed by agent with company.
(8) Ownership: This is subject to change, but only as agreed between Company and Agent. The agent will own 50% of the book of business and the company will own 50% of the book of business.

         As previously mentioned, the crux of this appeal is whether Bret is entitled to profit sharing under the 2009 Contract. More specifically, the issue is whether Bret is entitled to profit sharing for business he wrote with Gem State Insurance Company ("Gem State"), Farmers Alliance Mutual Insurance Company ("Farmers Alliance"), Acuity Mutual Insurance Company ("Acuity"), and Allied Insurance Company ("Allied"). The following is a summary of payments that N.I. made to Bret, which the Kunzes allege were profit sharing payments. In 2009, Bret received his first alleged profit sharing check from N.I. for 2008 business done with Gem State. Bret's work in 2009 did not qualify for profit sharing; accordingly, he did not receive an alleged profit sharing check in 2010. In 2011, Bret received an alleged profit sharing check for 2010 business done with Gem State and Acuity. Bret testified that, at the time he received the check, he believed the amount he received was the appropriate percentage of the profit share. However, he did not have access to data to enable him to verify that he received the appropriate amount of the profit share. He did, however, have access to Gem State data because he had exclusive control over the Gem State book of business. In 2012, Bret received an alleged profit sharing check for 2011 work done with Gem State and Farmers Alliance. Bret testified that the profit sharing amount he received for Gem State business reflected a 50/50 split, but that the profit sharing for Farmers Alliance was less than 10% of the 80% he believed he was owed.

         Bryan testified that N.I. does not pay profit sharing or contingent commissions and characterized the payments made to Bret as bonuses. Notwithstanding the foregoing, Bryan conceded that N.I. paid Bret 50% of the profit sharing that N.I. received from Gem State. The district court concluded that the Gem State profit sharing agreement was an "individual agreement, " which Bryan described as follows:

Gem State is a separate issue by itself. . . . the whole book of business is totally separate from ours. Therefore anything that he would receive as profit sharing is paid directly to Bret from Gem State. . . . So based on the Gem State paying him, since we own 50 percent of his book of business, therefore we receive 50 percent of the profit sharing.

         On January 16, 2013, Bret sent Bryan a letter wherein he argued that the profit sharing split should be the same as the ordinary commission split, 80% to him, and 20% to N.I. In the letter, Bret conceded that the profit sharing split "was never addressed in the contract with [Michael] or me." On January 22, 2013, Bryan responded to Bret's letter and agreed that there was nothing in the 2009 Contract addressing the issue. Bryan explained that "[p]rofit sharing is a bonus based on loss ratios and book of business as you know. It is not based on commissions. The reason we have split profit sharing 50/50 is based on ownership, not commissions, and there are no guarantees on profit sharing." Nonetheless, Bryan included a check for 80% of the profit sharing for Gem State, which the district court concluded was a "one-time acquiescence and showing of good faith." Bryan testified that he gave Bret the 80% because it was "not worth the fight for a couple hundred dollars."

         In April 2013, Bret received a check from N.I. for $424 with the notation "Profit Sharing 2012." On April 17, 2013, Bret emailed Bryan asking for the "company [the profit sharing check] came from" and the split percentage. Additionally, Bret asked for information regarding the "profit sharing agreements with all of the companies." Bret testified that Bryan never responded to the email, but that he later learned the check was for business written with Acuity.

         After the initiation of this action, Bret learned the amount of profit sharing that N.I. received from Acuity between 2009 and 2013 and from Farmers Alliance between 2010 and 2014. Bret argued that he did not receive the profit sharing to which he was entitled, considering the amounts received by N.I. Bret testified that he believes profit sharing should be calculated as follows:

I would take the total written premium. So, for example, let's say the total written premium with Acuity was [$]200, 000. If I had wrote [$]100, 000 of that, then I would - - and let's say the total contingent payment was [$]10, 000, and my book of business would have been responsible for [$]5, 000 of that, then I would take 80 percent of that [$]5, 000.

Conversely, Bryan offered the following testimony to explain N.I.'s bonus structure:

[W]hat we do is get together and take any profits that we've earned. And if we decide to give out bonuses then we decide what - - we take and pay money to the company, see what is left, and determine what amount to pay for a bonus to whoever we feel it is necessary.

Bryan continued, explaining that N.I would not pay bonuses unless it received profit sharing ...

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