Home / Fulltext Opinions / Supreme Court of Virginia / SIMBECK, INC. v. DODD SISK WHITLOCK CORP. et al.





January 8, 1999
Record No. 980355





John E. Wetsel, Jr., Judge
Present: All the Justices

This appeal involving the trucking insurance
business is limited to consideration of the following issue: Did
the trial court err in setting aside the jury’s verdict for
punitive damages? We conclude that the court was correct, and
will affirm.

Appellant Simbeck, Inc., filed a motion for
judgment, twice amended, against appellees Dodd Sisk Whitlock
Corp. and James H. Dodd seeking compensatory and punitive damages
for alleged wrongful business practices in connection with
procuring insurance coverage for plaintiff’s trucking business.
Plaintiff operates trucks nationwide from its base in Winchester.
The corporate defendant is an insurance agency in Louisa
employing the individual defendant, an insurance agent.

The plaintiff sought recovery against
defendants on numerous theories. Following many pretrial rulings,
the case was tried to a jury in September 1997 on allegations
that defendants were guilty of tortious interference with a
business expectancy and breach of fiduciary duties.

During the three-day trial, the jury found in
favor of the plaintiff and awarded compensatory damages of
$30,000 against both defendants. The trial court reduced this
amount to $12,328, the amount of the ad damnum. The
jury also awarded punitive damages against the corporate
defendant in the sum of $17,700 and against the individual
defendant in the sum of $60,000.

The defendants filed motions to set aside the
verdicts. Following argument of counsel, the trial court, in a
detailed written opinion, denied the motion to set aside the
compensatory damage verdict and granted the motion to set aside
the punitive damage verdict. The court memorialized these rulings
in a November 1997 judgment order, from which we awarded the
plaintiff this appeal, limited to the foregoing issue.

When a plaintiff’s verdict has been set aside
by the trial court, the verdict is not entitled to the same
weight upon appellate review as one that has received the trial
court’s approval. But in considering the facts under these
circumstances, the appellate court will accord the plaintiff
benefit of all substantial conflicts in the evidence and all
reasonable inferences that may be drawn from it. Commercial
Bus. Sys.
v. Halifax Corp., 253 Va. 292, 296, 484
S.E.2d 892, 894 (1997).

We shall summarize the pertinent evidence, much
of which was conflicting, in accord with the foregoing
principles. In July 1994, plaintiff entered into "an
insurance relationship" with the defendants (collectively,
the defendant) for defendant to "write" plaintiff’s
business insurance coverage. As the result of defendant’s
efforts, plaintiff entered into a series of insurance contracts
with several insurers to provide liability insurance, physical
damage insurance, and related coverages (hereinafter, the
insurance policy) necessary to conduct plaintiff’s business. The
policy remained effective for a period of one year, commencing
July 20, 1994.

Defendant was "the retail producer or the
seller of insurance" to the plaintiff, the insured. Also
involved in this type of transaction were "intermediaries or
wholesalers which were in between the retail insurance producers
and the insurance companies." The wholesaler in this
transaction was W. E. Love & Associates, Inc., a North
Carolina broker, with whom defendant had a written brokerage

In early July 1995, as the insurance policy was
"coming due for renewal," plaintiff, through its
president Ronald Simkhovitch, sought renewal coverage with a
number of companies, including Service Insurance Agency, a
Richmond "retail insurance agency" and competitor of
defendant. Simkhovitch "indicated that he would like to do
business with" Service. Greg Pohler, the owner of Service,
was aware that defendant had obtained "a quote" for a
renewal premium from "Occidental Insurance Company."
Service then proceeded to obtain a premium quotation from

Because defendant was first in obtaining a
"quote" for plaintiff from Occidental, however,
"professional courtesy" in the industry entitled
defendant to a "10-day hold" on its Occidental
quotation. This means that Service, the competing agency, could
not write the renewal policy with Occidental until defendant
released the "quote" that it previously had obtained
for plaintiff from Occidental. Plaintiff’s insurance policy was
to expire July 20, 1995. This was two days before expiration of
defendant’s ten-day hold period on the Occidental quotation.

Defendant refused to release the
"quote" to Service unless Service agreed to give
defendant 50 per cent of its commission and unless plaintiff
executed a promissory note payable to defendant, to be personally
guaranteed by Simkhovitch, in the sum of $84,000 bearing 10 per
cent interest payable over a 30-day period. Plaintiff had been
regularly late in submitting premium payments to defendant and
owed defendant thousands of dollars, the exact sum being
undetermined at that time.

Service agreed to share its commission with
defendant but plaintiff refused to execute the note. Because
plaintiff apparently would not be able to obtain insurance
coverage, and thus would lack "operating authority," it
began "slowing down its operations" on July 19. But at
5:17 p.m. on the 19th, Liberty Mutual Insurance Company, one of
the insurers plaintiff had contacted, notified plaintiff it was
providing the necessary insurance coverage effective
July 20. Thus, plaintiff did not suspend its operations.

Defendant James Dodd, called by plaintiff as an
adverse witness, testified defendant’s refusal to release the
"quote" unless plaintiff executed the note was an
effort to put "the squeeze" on plaintiff. Dodd
explained that his use of the "squeeze" term as it
applied to plaintiff meant he was trying "to get our money
that was owed us."

Expert testimony offered by the plaintiff
established that defendant’s conduct was "totally
improper," and a deviation of established custom and
practice in the trucking insurance industry. The witness also
indicated that defendant owed fiduciary duties as insurance
broker to its insured, the plaintiff, which were breached.

On appeal, the plaintiff contends the trial
court erred in setting aside the punitive damage award and in
entering judgment for compensatory damages only. The plaintiff
dwells on the elements of causes of action for tortious
interference with a contract and breach of fiduciary duty. Then,
plaintiff argues it "introduced testimony of the intentional
and improper interference" by defendant with plaintiff’s
"contractual relationships." It says the evidence
supports the conclusion that the defendant’s
"interference" prevented Service Insurance Agency from
entering into "the prospective contract" with the
plaintiff and likewise prevented the plaintiff from obtaining
insurance coverage through Service. Plaintiff notes that Dodd
admitted his actions were meant to put the "squeeze" on
plaintiff "despite the fiduciary duty" he owed

Finally, briefly addressing the law on punitive
damages, the plaintiff contends defendant’s conduct was "not
only malicious but it borders on extortion." Plaintiff
argues a jury question was presented whether defendant’s conduct
was "wilful or wanton as to show a conscious disregard for
others." It contends the trial court, in deciding the issue
as a matter of law, "deprived the jury of its responsibility
to analyze the facts and its verdict should be reinstated."
We do not agree.

The broad rule governing the award of punitive
damages, the purpose of which is not so much to compensate the
plaintiff but to punish the wrongdoer and to warn others, is that
such damages may be recovered only when there is misconduct or
actual malice, or such recklessness or negligence as to evince a
conscious disregard of the rights of another. Hamilton Dev.
v. Broad Rock Club, Inc., 248 Va. 40, 45, 445
S.E.2d 140, 143 (1994). Accord Webb v. Rivers,
256 Va. ___, ___, ___ S.E.2d ___, ___ (1998); Smith v. Litten,
256 Va. ___, ___, ___ S.E.2d ___, ___ (1998). Under the
allegations in this case of interference with a business
expectancy and breach of fiduciary duty, however, punitive
damages may be awarded only if the acts are done with malice or
wantonness. Smith v. Litten, 256 Va. at ___, ___
S.E.2d at ___. See Worrie v. Boze, 198 Va.
533, 543, 95 S.E.2d 192, 200 (1956).

Awards of punitive damages are not favored
generally because they are in the nature of a penalty and should
be assessed "only in cases involving the most egregious
conduct." Bowers v. Westvaco Corp., 244 Va.
139, 150, 419 S.E.2d 661, 668 (1992). This is not a case
involving egregious conduct.

Of course, the jury’s finding of compensatory
damages, confirmed by the trial court, is a determination that
defendant was guilty of both tortious interference with a
prospective contract and a breach of fiduciary duty. The
plaintiff established the elements of the former cause of action,
i.e., that plaintiff had a contract expectancy of which
defendant knew; that defendant intentionally interfered with the
expectancy by using improper means or methods; and that plaintiff
suffered loss. See Maximus, Inc. v. Lockheed
Info. Management Sys. Co.
, 254 Va. 408, 414, 493 S.E.2d 375,
378 (1997).

The plaintiff’s losses resulting from its
"slowing down of operations" on July 19 were reflected
in the compensatory damage award. But awarding plaintiff damages
for interference with a contract expectancy and for breach of
fiduciary duty does not ipso facto support an award
of punitive damages, as the plaintiff seems to argue. Rather, as
we have said, under these circumstances there must be malicious
or wanton conduct.

According the plaintiff benefit of all
substantial conflicts in the evidence and all reasonable
inferences that may be drawn from it, we conclude the trial court
correctly ruled there was no evidence of acts done with malice or
wantonness. As the trial court noted, the defendant violated
unwritten trade customs or ethical practices in the trucking
insurance business in an effort to make the plaintiff pay a debt
owed to defendant. The defendant requested plaintiff to execute a
note for an underlying debt and refused to release an insurance
"quote," both of which were lawful acts, in an effort
to make plaintiff pay defendant the sum it owed. If Simkhovitch
had executed the note, plaintiff would have suffered no loss.

The plaintiff argues the amount of the note,
$84,000, "bore no resemblance to the amount demanded by
[defendant] for payment. In fact, it was admitted by the
[defendant] at trial that the debt paid was approximately
$25,000." This is not an accurate summary of the evidence.

Instead, the evidence shows that, based upon
defendant’s records, defendant reasonably believed plaintiff owed
it more than $76,000 when the note was presented for
Simkhovitch’s signature. Because of the provisions of the
brokerage agreement between defendant and W. E. Love, the North
Carolina broker, defendant was liable to Love for plaintiff’s
insurance premiums, whether or not plaintiff paid defendant. At
the time the note was presented for signature on July 18, 1995,
the amount due defendant could only be estimated because no
policy audits had been conducted, and because plaintiff, without
defendant’s knowledge, had made some premium payments directly to
Love and Love had not credited defendant’s account. Thus,
defendant was confronted not only with large sums due it from
plaintiff, but also with a possible debt due from defendant to
Love on account of plaintiff’s failures. In a letter attached to
the note, however, defendant said the amount was only "an
estimated figure" and that when "we get the exact
amount and audits are completed, we can then give credits
. . . ."

In August 1995, defendant sued plaintiff in the
Circuit Court of Louisa County for approximately $76,000 for
unpaid premiums due on the 1994-1995 insurance policy. Following
completion of the audits and when the exact amount due was
determined, the Louisa action eventually was settled for $25,000
in July 1996.

In sum, an accurate and complete review of the
evidence shows that defendant’s attempt to collect a debt due it
by plaintiff by putting "the squeeze" on plaintiff was
not malicious or wanton, but merely an act of commercial
"hard ball." Consequently, we hold the trial court did
not err in concluding that, while defendant’s violations of trade
standards were the basis of both the tortious interference and
breach of fiduciary duty rights of action, such violations were
insufficient as a matter of law to justify imposition of punitive

Thus, the trial court acted properly in setting
aside the punitive damage verdict, and the judgment below will be