An insurance broker is a person who transacts insurance with, but not on behalf of, an insurer. An insurance agent transacts insurance with and on behalf of the insurer. In Pagel v. Ugly Monkey LLC, 49A02-1211-CT-903 (Ind. App. 09/10/2013), the Indiana Court of Appeals was asked to resolve a dispute between Century Surety Co. and its insured. The trial court had determined at summary judgment that insurance broker Dale Ueber, a/k/a Dale Uebersetzig, acted as the agent of Century when accepting notice of an occurrence and lawsuit from an insured, Camburad LLC, and that Century had a duty to defend Camburad and the nightclub Camburad operated.

Amber Pagel broke her ankle at an Indianapolis nightclub, The Ugly Monkey, on July 6, 2007. Doug Campbell, the registered agent for Camburad, was notified of the incident and promptly notified Ueber in Greenwood, Ind.

Campbell states he notified Century of the Pagel claim by mailing an ACORD form. He retained no documentary evidence of the notice and conducted no follow-up; Century denied receiving the notice.

On April 8, 2008, Pagel filed a negligence claim against The Ugly Monkey. Campbell notified Ueber of the lawsuit. No answer was filed in response to the complaint and Pagel eventually was granted a default judgment in the amount of $334,310.26 against The Ugly Monkey.

A litigant in a separate lawsuit also obtained a default judgment against The Ugly Monkey and subsequently initiated attempts to seize nightclub assets. Those proceedings, with the service of the Pagel default judgment, caused Campbell to investigate why no defense had been undertaken on Camburad's behalf.

Ueber contacted a Century representative, but ultimately Century denied the Pagel claim for alleged failure to satisfy the condition precedent of timely notice.

The controversy between the parties is a question of agency: whether Campbell's notice to Ueber constituted effective notice to Century.

An insurer's duty to defend does not arise until the insurer receives the foundational information designated in its insurance policy's notice requirements. The function of a notice requirement is to supply basic information to permit an insurer to defend against a claim. An insurer cannot defend a claim of which it has no knowledge and thus, until an insurer receives such enabling information, it cannot be held accountable for breaching the duty to defend its insured.

Pursuant to the policy, Camburad was required to give Century notice of an occurrence or offense which might result in a claim as soon as practicable and also give like notice of a lawsuit. Campbell, on behalf of Camburad, gave notice of the Pagel claim and lawsuit to Ueber. Ueber has contended that he gave notice of the initial claim to Century upon receipt of correspondence from Pagel's attorney; he has not made a similar claim with respect to timely notice of the lawsuit. Rather, Ueber explained that he placed subsequent communications in his office file, believing that he was "being carboned." Century did not receive actual contemporaneous notice of the lawsuit and has denied that timely notice was provided of the occurrence.

Camburad can only be entitled to summary judgment if the designated materials establish, as a matter of law, that Ueber accepted notice of the Pagel claim and lawsuit as an agent of Century.

An insurance agent or broker who undertakes to procure insurance for another is generally regarded as an agent of the proposed insured. However, when the broker makes an application for insurance and the insurance policy is issued, the broker is the agent of the insurer and can bind it within the scope of his authority.

Acts of an insurance agent—unlike acts of an insurance broker—are imputable to the insurer. Acts of an insurance broker—unlike acts of an insurance agent—are imputable to the insured.

A person may be an agent as well as a broker, and may at different times act in different capacities, sometimes representing the insurance applicant and at other times acting on behalf of the insurance company. Whether an insurance salesman is an agent of the insurance company is fact sensitive and requires a consideration of many factors, including the relation of the parties, their actions, usual course of dealing, any instructions given to the person by the company, the conduct of the parties generally, and the nature of the transaction.

The following facts were undisputed:

Ueber customarily procured personal insurance policies through several companies but did not typically procure commercial insurance policies.
Ueber obtained the commercial liability policy through the intermediary agency Specialty Brokerage Services.
Ueber had no direct contractual relationship with Century. He did not issue any check to Century. Premium financing for the policy was arranged through Specialty Brokerage Services.
Ueber was not aware of Century's procedures with respect to requisite notice.

The evidence of the relationship, conduct and course of dealing demonstrate that Ueber was not an actual agent of Century, and Century, as opposed to Camburad and The Ugly Monkey, was entitled to summary judgment on the claim of breach of a duty to defend because it never received notice of the suit.

A licensed insurance agent and broker does not have an agency relationship with the insurer as its agent. The insurer cannot be bound by the actions or failure to act of the broker. The broker who accepts a notice of loss from a client must immediately forward that notice to the insurer or advise the insured of its obligation to report the loss directly to the insurer. The broker's responsibility is to the insured and, as is made clear by this case, failing to fulfill that duty can exonerate the insurer and result in a serious and expensive claim to the broker for inaction that resulted in a six-figure default judgment.

Ueber's assumptions made an ugly monkey of himself and his business. He could not claim he saw nothing, heard nothing and, therefore, said nothing.

His error should be a warning to all insurance agents and brokers who, faced with a loss notice on a policy obtained as a broker, and avoid the problem faced by Ueber by sending a copy of the ACORD notice of loss to the insured, the intermediary brokerage, and the insurer with advice to the insured that all notices should go to the insurer Century at the address stated on the policy.

Related: Read " The Great Jewel Heist"

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