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JOHN J. MCGONAGLE v. UNION FIDELITY CORPORATION AND UNION FIDELITY LIFE INSURANCE COMPANY AND FIRST GENERAL INSURANCE COMPANY (03/31/89)

filed: March 31, 1989.

JOHN J. MCGONAGLE, JR. AND CAROLYN M. VELLA, HIS WIFE, APPELLEES,
v.
UNION FIDELITY CORPORATION AND UNION FIDELITY LIFE INSURANCE COMPANY AND FIRST GENERAL INSURANCE COMPANY, APPELLANTS



Appeal from the Order of the Court of Common Pleas of Bucks County, Civil Division at No. 82-8784-15-6.

COUNSEL

Mark S. Dichter, Philadelphia, for Union Fidelity, appellants.

Stephen B. Harris, Warrington, for appellees.

Kelly, Popovich and Hoffman, JJ. Kelly, J., joins and files a concurring statement.

Author: Popovich

[ 383 Pa. Super. Page 224]

This case involves an appeal from the order (later reduced to judgment) of the Court of Common Pleas of Bucks County denying a motion for judgment n.o.v. by the defendants.*fn1 We reverse.

[ 383 Pa. Super. Page 225]

An appeal from the denial of a judgment n.o.v. requires that we examine the evidence, together with all reasonable inferences to be derived therefrom, in a light most favorable to the verdict-winner. See Dallas v. F.M. Oxford, Inc., 381 Pa. Super. 89, 552 A.2d 1109 (1989). So viewed, the evidence reveals that John J. McGonagle, Jr., was hired by Union Fidelity Life Insurance Company as an Associate Counsel for Regulatory Affairs in April of 1980.

Union Fidelity Life Insurance Company was in the forefront of mass-marketing insurance via direct mail. It was a subsidiary of Union Fidelity Corporation, as were American Patriot Health Insurance Company and First General Insurance Company. All were owned by Filmways, Incorporated of California (Filmways).

In October of 1980, the plaintiff learned that the position of general counsel was to become vacant. He approached John M. Cooney to ask to be considered for the post. Cooney was the president of the insurance subsidiaries and the holding company, Union Fidelity Corporation. Because Cooney had "confidence" in the plaintiff, he was named acting general counsel. With the promotion, the plaintiff's responsibilities increased, i.e., he was both an attorney and a manager for the organization. The plaintiff's rise in the corporate structure accelerated with his designation as general counsel two months later. By February of 1981, he was elevated to a vice-presidential post with Union Fidelity Life Insurance Company and he was named to the board of

[ 383 Pa. Super. Page 226]

    directors. In the middle of March and the beginning of April of the same year, the plaintiff was named vice-president of First General Insurance Company and American Patriot Health Insurance Company. The job function and responsibilities were consistent with those performed at Union Fidelity Life Insurance Company, except no accompanying pay increase followed.

During the first three months of 1981, it was brought to the plaintiff's attention that Union Fidelity Life Insurance Company was not complying with various state insurance regulations. It appears that policies were about to be distributed ("mailed") in Utah when the plaintiff concluded that they were in contravention with that State's insurance specifications. The executive vice-president in charge of marketing, a Mr. Garvey, was advised of the situation. He summoned the plaintiff and other officials to his office to discuss the matter. Garvey was "quite significant" in the company's hierarchy in that his orders carried the weight of a directive from Cooney.

The plaintiff described Garvey at this meeting as "absolutely livid" over the prospect that the mailings might have to be stopped. Garvey told those present:

If the matter were not resolved, Garvey threatened to "start firing people until he covered enough salary to cover the dollars that he was losing on the sale . . . ." When asked by Garvey to authorize the mailings to Utah, considered by the plaintiff to be "illegal", McGonagle refused.

Other questionable insurance practices surfaced in New York, Minnesota, Connecticut and Pennsylvania. In the case of Pennsylvania and Utah, the plaintiff made the decision to cease the issuance of policies against applications he felt would be labelled as "illegal" by those jurisdictions. He did so even though he believed a delay in the issuance of the policies would have financial repercussions to Union Fidelity Life Insurance Company. Additionally,

[ 383 Pa. Super. Page 227]

    the plaintiff decided that a continuation of Union Fidelity Life Insurance Company's practice of not honoring CAT scan claims would expose it to "unfair claims" charges, and, as a result, the procedure should cease.

The plaintiff never learned if or how the "policy-filing-problems" were resolved because on the 29th of April, 1981, he was called into Cooney's office and was told: "I want your resignation. It want you out of here." The plaintiff was "absolutely stunned" and inquired why he was being asked to leave. Cooney responded:

I've had complaints from some of my officers about the quality of work in your department and the way you work with them . . . .

Also, Cooney informed the plaintiff:

You're good enough that when Combined takes over I'll never be able to get rid of you and they will be happy with you here.

To put matters in perspective as to the role of "Combined" in this scenario, one needs to be made cognizant of the fact that Filmways, the parent company of Union Fidelity Corporation and its subsidiaries, had taken the initiative to divest itself of the insurance divisions and a processing center to cover its bank debts and to raise operating capital. In December of 1980, the plaintiff learned that the "buy-out" was to be accomplished by means of a stock-purchase-agreement between Filmways and Combined International Corporation.

In connection with the sale, Cooney and the Chairman of Filmways, Richard Bloch, established a "bonus pool" in which monies would be paid to Cooney and select members of his executive team (chosen by him) for services rendered. The amount to be paid was predicated upon the purchase price. "The higher the price, the more the bonus pool[.]"*fn2

[ 383 Pa. Super. Page 228]

The plaintiff also recounted how Cooney offered to rescind the dismissal if he could prove that the allegations of disenchantment from corporate personnel were "inaccurate". A meeting was set for 10:00 a.m. the next morning to evaluate the plaintiff's efforts. However, even after the plaintiff had spoken to the complainants, he was still perplexed as to the reasons for his firing, especially after Cooney advising him, at the end of February of 1981, that he would be made a vice-president, praised him at a luncheon with his colleagues as the "best person" for general counsel and presented him with an award acknowledging his corporate accomplishments. Other accolades were bestowed upon the plaintiff by Cooney, the substance of which need not be repeated except to note their contribution to the organization.

Against the background just painted, we are informed by the plaintiff of his arrival for the meeting with Cooney and being informed by the head of security that he was not allowed on the premises. As stated by the plaintiff:

I felt like I was under arrest. I mean I didn't believe this. I mean I left there the day before. I had an appointment with the President of the company at ten o'clock at his suggestion and I came -- was coming for the appointment and I'm stopped out in the lot like I'm going to mug somebody and I see people and, people knew this is the head of security.

The head of security doesn't come out and stop somebody just to have a cup of coffee because they are a threat. Then I'm to be brought in [the building] and I have to be ...


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