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State court hears appeal in Nationwide Insurance case
By Marc Kovac
COLUMBUS
The Ohio Supreme Court is considering whether a Youngstown-area insurance agent should receive millions in damages in a contract dispute with the company she formerly represented.
Justices had oral arguments Wednesday in the case of Christine Lucarell v. Nationwide Mutual Insurance, with business groups keeping a close eye on the outcome.
Quintin Lindsmith, representing the company, asked the state’s high court to declare “loud and clear” you cannot get punitive damages for breach-of-contract claims.
“The 7th District [Court of Appeals] made two big blunders here, I say respectfully to the court,” he said, adding, “I think, quite frankly, the trade associations – there are six of them there – speak very well and articulately about the economic threat to contracts if in fact bargaining parties who enter into agreement now don’t know if tort concepts can come into contract claims.”
But Randy Hart, representing Lucarell, said other court precedent upholds his client’s case.
“We agree that a general rule in the state of Ohio has been for a long time that you cannot get punitive damages off of a breach-of-contract claim,” he said. “Not in dispute and not something that you’re going to hear me try to argue about. ... It’s not a change in the law, it’s not a change in anything that this court has ever done. ... What we’re suggesting is that the court was right.”
According to documents, Lucarell signed a contract in 2005 to become a Nationwide independent contractor exclusive agent, receiving a $260,000 loan from an affiliate bank to establish her own agency.
Through the program, if she met certain property and casualty insurance product sales goals – about $1.2 million in premiums over a three-year period – the loan would be waived wholly or in part.
In her court filings, Lucarell noted she earned “approximately $400,000” during her first year of operation, received several awards from the company for her performance and was “on track” to reach the minimum production plan requirements.
The company countered that, after opening her office, Lucarell “began to complain to Nationwide that production requirements to which she had agreed were too high.”
The company subsequently altered her agreement and provided additional funding for her to develop a business plan.
Lucarell, in documents, said the company required her and other agents to sign off on the agreement modifications, with the threat of termination if they did not.
Lucarell also said in documents the modified agreement “was designed to fail,” that Nationwide had underreported her actual performance results, and the company “drastically” increased her production requirements.
Nationwide countered in its filings the company “gave Lucarell hundreds of thousands of dollars in cash grants – not loans – to support her agency.
Although the modified AE agreement required Lucarell to spend the cash infusions on her business, the record showed she instead spent lavishly on personal expenses, including a second home, new cars, an RV and a hot tub.
Meanwhile, she stopped paying rent on her office, missed every payment on her loan and ceased paying federal withholding taxes.”
In April 2009, the company placed Lucarell on probation. She canceled her independent-contractor agreement in July of that year, according to documents.
Lucarell later sued Nationwide, alleging breach of contract, fraud and invasion of privacy. Nationwide filed a counterclaim.
A trial court jury awarded her $42.8 million, but a Mahoning County Common Pleas Court judge reduced that to nearly $14.2 million.
The 7th District Court of Appeals further reduced the total to about $2.4 million, with calls for further trial court proceedings.