Skip to main content



Alexander v. CIGNA Corporation

991 F. Supp. 427 (D. N.J. 1998)

CONTRACTS; FIDUCIARY DUTY; FRAUD—A truthful statement of the present intention of a party to a contract with regard to future acts is not a foundation upon which a promissory estoppel claim may be built. Fiduciary duties in ordinary commercial business transactions arise only where there is a confidential relationship between the parties, such as where one party has the power and opportunity to take advantage of the other because of the other’s susceptibility or vulnerability.

A large insurance company started a program whereby independent insurance agents agreed to write virtually all property and casualty business through the insurance company in exchange for higher commissions and enhanced profit-sharing. The program required the agents to give up their contracts with other standard insurers, making them totally dependent on the insurance company. The main contract entered into, known as a Full Service Agency Agreement, contained a merger clause explicitly nullifying all prior oral and written agreements between the agency and the insurance company. In 1990, the insurance company informed all the agents that it was terminating the program, and offered them a transition agreement to enable them to write policies for other insurers until the program ended. The transition agreement contained a merger clause identical to the one in the Agreement and expressly voided the Agreement. Numerous independent insurance agencies in New Jersey, all of which signed the transition agreement, sued the insurance company claiming the termination was unilateral and resulted in severe damage to their businesses. They claimed the insurance company told them that if they did not sign the transition agreement, the insurance company would enforce the exclusivity clause in the Agreement and cut their commissions and other benefits. The agents also claimed that during the transition phase, the insurance company refused to underwrite new business or provide competitive pricing for existing business. The agents alleged fraud, breach of fiduciary duty, promissory and equitable estoppel, negligent misrepresentation, breach of contract, and reformation.

The elements of common law fraud in New Jersey are: (1) a material misrepresentation of a past or present fact; (2) made with knowledge of its falsity; (3) with the intent that the other person rely on it; (4) reasonable reliance; and (5) damages. Statements as to future or contingent events, statements of opinion, and simple puffery are not misrepresentations, even if they turn out to be wrong. The United States District Court found that the insurance company’s statements regarding the duration of the program, or any expectations of success the insurance company expressed, were not fraudulent, but simply predictions of future events, and that the agents failed to show that their signatures were obtained by fraud or willful misrepresentation by the insurance company.

Fiduciary duties are not imposed in ordinary commercial business transactions, but only when there is a confidential relationship with a fiduciary, i.e., a person with a duty to act primarily for the benefit of another. The dominant theme of New Jersey case law is that fiduciary relationships arise where one party has the power and opportunity to take advantage of the other because of the other’s vulnerability. In granting summary judgment to the insurance company, the District Court found that the insurance company and its agents had an ordinary contractual relationship similar to that of a company and distributor, and that no fiduciary duties existed between them.

The District Court cited Third Circuit precedent holding that a truthful statement of the present intention of a party with regard to future acts is not the foundation upon which a promissory estoppel claim may be built. Although promissory estoppel requires that a clear and definite promise be made with an expectation of reliance, the Court found that the facts failed to establish that the insurance company made any such promises. Since the insurance company expressed only opinions or expectations, summary judgment was granted in favor of the insurance company. While equitable estoppel requires a showing of material misrepresentation, reasonable and justified reliance thereon, and damages, the Court again granted summary judgment against the agents because they failed to show material misrepresentations of any presently existing facts.

The District Court also found in favor of the insurance company on the negligent misrepresentation claim because the agents failed to show either: (1) negligence on the part of the insurance company in making statements, or (2) justifiable reliance on the insurance company’s statements. The Court found the insurance company’s statements to be “nothing more than predictions of the future and mere opinion rather than statements of fact.” As to the breach of contract claim, the Court found that the insurance company’s statements were insufficient to create a binding obligation or raise any other genuine issues of material fact.

Finally, reformation is permissible when there has been a unilateral mistake accompanied by fraud, or a mutual mistake with regard to the terms of an agreement. If there is a unilateral mistake accompanied by fraud, a plaintiff must show by clear and convincing evidence that the mistake relates to a material feature of the contract, and is so great that to enforce the contract would be unconscionable. However, the Court stated that the agents in this case failed to present any evidence, much less clear and convincing evidence, that there was anything unconscionable in enforcing the agreements as written, or that they reasonably relied on statements that were contrary to any express language in the agreements. The District Court dismissed this claim against the insurance company, leaving none of the agents’ claims for a jury.


MEISLIK & MEISLIK
66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 • info@meislik.com