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A federal appeals court has largely rescinded a nearly $2.4 million jury award a former Zurich Insurance Group Ltd. executive had won in a compensation dispute, stating the trial court judge’s jury instructions were in error.
James Walsh, who had been hired by Schaumburg, Illinois-based Zurich American Insurance Co. in 1996 and promoted to regional sales manager in 1999, focused on selling various types of coverage to car dealers, according to Wednesday’s ruling by the 1st U.S Circuit Court of Appeals in Boston in James Walsh v. Zurich Insurance Co. et al.
Mr. Walsh’s dispute centered on two compensation plans that awarded him incentive pay based on certain types of new business brought into the company, according to the ruling.
In the first, he was given the opportunity to manage a new market for Zurich under a deal with Norcross, Georgia-based Automobile Protection Corp. where, instead of selling service contracts and other auto-related insurance only through car dealers, he would sell their products more broadly through channels including telemarketing and credit unions, according to the ruling.
He reached an August 2008 compensation agreement with the company as to how much he would receive in incentive pay. But instead, a February 2009 plan was substituted and he received $77,000, or less than one-tenth the amount he would have received under the original agreement.
In 2010, in another deal involving Cincinnati-based Great American Insurance Co., Zurich refused to pay Mr. Walsh $101,000 based on new business with the insurer, according to the ruling.
On Oct. 29, 2010, he said he would be leaving the insurer in 30 days, and was terminated later that day.
Mr. Walsh filed suit against the insurer, charging breach of contract, among other charges, and seeking more than $14 million in damages. A jury in U.S. District Court in Concord, New Hampshire, found Zurich had breached its employment agreements with Mr. Walsh and awarded him double damages and attorneys fees, which totaled nearly $2.4 million.
Zurich appealed, and a three-judge panel of the 1st Circuit held the trial court judge had issued incorrect jury instructions with respect to the Automobile Protection deal.
“Throughout the trial, Zurich’s counsel argued that, even if the August 2008 plan was a binding agreement, the company was free to reduce Walsh’s incentive for the APCO deal pursuant to the language giving management discretion on whether to pay incentive” and to limit it in unique situations, said the ruling.
“The district court erred by, in effect, directing the jury to find a breach if it found the August 2008 Plan to be a binding, enforceable agreement,” said the ruling.
“Instead, the court should have instructed the jurors that, because the plan expressly gave Zurich discretion to limit incentive pay, they must go on to determine whether the company reasonably and in good faith exercised that authority — i.e., whether the particular changes to Walsh’s compensation package in February 2009 satisfied the implied contractual covenant of good faith.”
The appeals court vacated the $1.6 million award in connection with the APCO deal, as well as attorney’s fees in the case. It upheld the $202,000 award on the Great American claim.
The panel remanded the case but concluded, “Both parties would be well advised to consider settlement.”
A federal court has affirmed a jury’s hostile work environment verdicts against a nursing home in a case where a worker’s co-workers posted an Instagram photo comparing her to a chimpanzee from “Planet of the Apes,” but cut its punitive damages award to $50,00 from $250,000.