Insurer has no duty to cover claim after agent pocketed premiums
The insured paid their property insurance premium directly to their insurance agent who failed to deliver the payment to the insurer.
The Georgia Court of Appeals recently reversed a lower court’s ruling and dismissed a lawsuit filed by insureds seeking $200,000 in claims for a policy canceled when the insureds’ agent was arrested for pocketing their premiums.
Homeowners Charles and Wanda Lancaster say that when it came time to renew their farm owner’s policy with American Reliable Insurance Co. in December 2014, they made premium payments directly to their insurance agent, Macie Anedra Yawn, who was the sole proprietor of the Charles Robinson Insurance Agency in Georgia.
The Lancasters home was destroyed by a fire in May 2015, six months from the date they paid their premium to Yawn. The Lancasters filed a claim, and American Reliable denied the claim, stating that the policy had been canceled because the premium was not paid when the renewal time arrived.
In December 2015, investigators for the Georgia Insurance Department’s fraud division ordered the arrest of Yawn for ten counts of insurance fraud. She was sentenced to ten years of probation in 2018 and assessed and fined more than $4,000.
The Lancasters filed a suit against American Reliable and Yawn in Bleckley County Superior Court, and American Reliable filed a motion for summary judgment. That motion was denied, with the judge finding that there were genuine issues as to whether Yawn was an agent of American Reliable.
The appellate panel said that an independent insurance agent is not considered an agent for an insurer unless the insurer granted the agent the authority to bind coverage or represented to a policyholder that the agent represented the insurer. The panel found that the Lancasters submitted no evidence that Yawn was an employee or an authorized agent of American Reliable.
The court noted that instead, the record showed that American Reliable had rescinded any authorization that it may have assigned Yawn to act as an agent. Also, the renewal notice that American Reliable mailed to the Lancasters “stated on the front page that it was a direct bill, rather than an agency bill, policy. Both of these facts indicate that there was no principal/agent relationship.
Even though the Lancasters argued that they did not read the renewal notice or the statement that they must pay American Reliable directly, the insurer entered U.S. Postal Service receipt notices into evidence, showing that it had sent a proper notice to the couple.
The court said that there was no insurance policy in place at the time the fire destroyed the Lancaster home, so the breach of contract and bad faith claims should be dismissed.
Records from the Georgia Department of Insurance show that Macie Anedra Moore (Yawn’s maiden name) had been a registered agent for 21 carriers, but American Reliable was not among those carriers.
Editor’s Note: The common law doctrine, codified in Georgia law at O.C.G.A. §§ 51-2-1 through 51-2-5.1, requires that in order to impute negligence from one to another, the relationship must be that of principal and agent. This is very commonly seen in the employer-employee relationship. O.C.G.A. § 51-2-2 requires that the agent/employee must be acting within the course and scope of his employment when the tort occurs to hold the principal/employer liable.
This case is a reminder to insureds to read an insurance policy from front to back, as a failure to read and be aware of a contractual provision does not change the contract.
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