Missouri court rejects implied covenant of good faith and fair dealing and other common law claims by terminated insurance agent
In Bishop v. Shelter Mutual Insurance Co. (Mo. App. 3/31/04), the plaintiff had an insurance agency contract that was terminable at will. Affirming summary judgment for the company, the Missouri Court of Appeals rejected claims of violation of the covenant of good faith and fair dealing, tortious interference with contract, and intentional infliction of emotional distress.
A written agency agreement provided that the plaintiff’s status was that of an “independent contractor,” that the “insurance business,” including all applications, current policies, and renewals, belonged solely to the company, and that “This Agreement may be terminated by either [Plaintiff or Defendant] at any time upon written notice to the other party.”
The court distinguished cases involving “franchisees and those operating under distributorship agreements” as involving special considerations — a “large investment of capital, time, and effort” such that”[i]f the franchisor is totally free to terminate and deny renewal of a franchise after a relatively short duration, the franchisee is significantly disadvantaged because the equity built up in the franchisee’s business is jeopardized.”
While “a covenant of good faith and fair dealing is present in every contract,” and will be implied if not expressed, it cannot be breached “where the contract expressly permits the actions being challenged, and the defendant acts in accordance with the express terms of the contract.”
Missouri employment at-will doctrine expressly prohibits any consideration of the implied covenant of good faith and fair dealing . . . when an employer is sued for terminating the employee. This follows because the implied covenant cannot be used to contradict or override the express employment terms contained in a contract, i.e., that an employee can be terminated for any cause. When a contract does not provide a definite period for employment and fails to include provisions related to reasons for termination, the good faith and fair dealing covenant cannot be implied to supersede the express agreement that the employee can be fired without cause.
We pause to acknowledge that the employment relationship here is not that typically found in at-will cases. The agency contract provided that Plaintiff was an independent contractor, but the relationship could be terminated upon written notice. Such agreements have been characterized as agency contracts “terminable at will.” . . . . In such situations, whether labeled an independent contractor or employee, the relationship and termination of it is governed by general principles enunciated in the at-will doctrine cases. . . .
On this record, Shelter’s reason for terminating Plaintiff’s terminable at-will agency contract, even if in bad faith or under false pretenses, is irrelevant since the termination did not violate a statute or public policy. . . . Although Plaintiff claims that Defendant acted in bad faith in breaching many contract provisions, the entire basis of his cause of action is that he was wrongfully terminated. The employment at-will doctrine cannot be so easily subverted. . . .
We turn now to Plaintiff’s remaining two points. In deciding Point I, we characterized Plaintiff’s claim as one essentially alleging a wrongful discharge. That characterization applies equally to Plaintiff’s claims of tortious interference and intentional infliction of emotional distress. It would subvert the law of this state to allow Plaintiff’s claims for termination under the guise of tortious interference or emotional distress.
States vary considerably on such issues of employment at will and exceptions thereto. Missouri is among the more conservative.
Note it was not entirely frivolous to argue the insurance agency was more analogous to a franchise or distributorship than to employment. Independent contractor agents often do have significant “investment of capital, time, and effort” and “equity built up” (customer good will and renewals). But this argument’s not a winner in Missouri. Agents have a major hurdle in making such an argument in that the company view is that good will and renewals belong to the company, not the agent, and probably have language in their agency agreement to back this up.
