A recent Washington state Supreme Court ruling holding insurersbroadly accountable for the actions of their agents is just anotherway insurers can find themselves in hot water in the state, anattorney says.

"It is not a stretch to say this case will apply to all actsundertaken by an agent on behalf of an insurer as long as there isa reasonable belief that their acts or omissions lie within thescope of the authority they receive from the insurer," says DavidP. Rossmiller, a lawyer with Dunn Carney Allen Higgins & TongueLLP, Portland, Ore.

The case in question is, Chicago Title Insurance Company v.Washington State Office of the Insurance Commissioner.

It dealt with a title insurance agent who was found to have given real estate agents, builders and mortgagelenders free meals, donations for a golf tournament, monthlyadvertising and Seattle Seahawks playoff game tickets, according tothe charges.

The 7-2 decision Aug. 1 by the Washington state Supreme Court isimportant not so much because it changes the law but because itgives existing agency law the "broadest possible interpretation itcould have," Rossmiller says.

And while it only applied to the actions of a title insurer, "itis definitely going to be applied to be more broadly than justthat," Rossmiller contends. It will be applied to property, tocasualty, to life, and even to health insurance, he says.

This expansion of policyholder remedies is consistent with otheractions involving insurer liability in Washington state in recentyears, he notes.

The most important example is the area of insurer bad-faith. Ina decision a couple of years ago, the court held that if an insurerincorrectly denies the duty to defend, even if the insurer had agood argument for doing so, this constitutes bad faith and theinsurer is barred from asserting defenses to indemnity, Rossmillersays.

He also notes that the state legislature has enacted severalstatutory bad-faith laws over the last six years, and the stateSupreme Court "generally has given these a broad reading."

Until this case, the issue of how much liability an insurer hasfor the acts of an agent was "left on the backburner," hestates.

"This case "creates new ways for insurers to get into trouble inWashington, and there are already a lot of ways to get intotrouble," Rossmiller says.

In this case, the court says that any act within the impliedscope of agency is also the responsibility of the insurer,Rossmiller explains.

"As long as the person dealing with the agent has reason tobelieve that an action is authorized, then the insurance company isresponsible," Rossmiller says.

He adds that the action doesn't have to be actually authorizedby contract between the agent and the insurer.

"As long as it appears to a customer or third party to be withinthe reasonable scope of their authorization, whatever the agent hasdone to the third party, the insurer is responsible, the courtsaid," Rossmiller says.