Sixth Circuit Dismisses Agent’s Fraud Claims against Nationwide

Nemier v. Nationwide Mutual Insurance Company (United States Court of Appeals for the Sixth Circuit, January 13, 2012)

The plaintiff, an agent of defendant Nationwide, brought an action against Nationwide for fraud and breach of contract based on Nationwide’s issuance of a loan to the plaintiff to open an office under a new initiative which Nationwide allegedly promised would be successful. The District court granted summary judgment in favor of Nationwide because Nationwide did not intend to break promises or deceive the plaintiff. The Sixth Circuit upheld the ruling.

The plaintiff was a long time owner of a Nationwide insurance agency in Michigan when Nationwide started a new national initiative to be more competitive which encouraged agents to open satellite offices. The plaintiff expressed interest in opening a satellite office and a Nationwide business consultant prepared a business plan in a new area for her. The consultant  predicted that the office would have positive cash flow, while another Nationwide employee warned the plaintiff that there had been problems rolling out the new initiative.

The plaintiff took out a loan from Nationwide to open the new office, allegedly relying on the consultant’s studies and her past success. The loan would not have to be repaid if the plaintiff met certain sales targets. The plaintiff opened the new office and later learned that Nationwide was selling insurance directly to residents in the area where the plaintiff opened the office and that a Nationwide subsidiary was selling similar insurance at a lower price. Moreover, the new Nationwide initiative was unsuccessful and made its rates less competitive than before. The plaintiff closed her satellite office and missed her sales targets, and later resigned from Nationwide.

The plaintiff alleged three theories of fraud, all of which the court denied. First she claimed Nationwide fraudulently induced her to borrow money by promising more competitive rates in the area. The court found that the statements made by Nationwide were not promises and were not intended to be broken by Nationwide at the outset.

The plaintiff also claimed that Nationwide’s projections for the plan in the area were dishonest. The court found that this was not fraudulent because Nationwide did not know that the projections would be wrong.

Last she alleged that Nationwide acted fraudulently because it did not tell her that Nationwide was going to sell insurance directly or that other agents were unable to meet loan-waiver targets. The court also found this argument unconvincing as Nationwide had no obligation to share such information because this does not constitute knowledge that the plaintiff would naturally rely upon and because both parties were sophisticated business people. Moreover, the court noted that the plaintiff knew that Nationwide could make business decisions adverse to her interests.

The court denied the plaintiff’s breach of contract claim because it should have been aimed at a Nationwide subsidiary and not Nationwide itself.  

For a copy of the decision click here

Jonathan Kuller and Anthony Golowski

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