The Supreme Court of Washington, in response to a question certified to it by the U.S. Court of Appeals for the Ninth Circuit, has ruled that an insurance company was bound by its agent's written representation – made in a certificate of insurance – that a particular corporation was an additional insured under an insurance policy where the agent acted with apparent authority, even though the agent's representation was inconsistent with the policy and the certificate of insurance disclaimed the certificate's ability to "amend, extend or alter the coverage afforded by" the policy.
The Case
An agent for Selective Insurance Company of America issued a certificate of insurance to "T-Mobile USA Inc." rather than to T-Mobile Northeast. The certificate of insurance stated that T-Mobile USA was an "additional insured" under a policy issued to a contractor with respect to certain areas of coverage. The agent signed the certificate as Selective's "Authorized Representative."
The certificate was issued on an industry-standard form and included a preprinted industry standard disclaimer that noted that it was "issued as a matter of information only" and that it conferred "no rights upon the certificate holder," did not "affirmatively or negatively amend, extend or alter the coverage afforded by the" insurance policy, and did not constitute "a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder."
Eventually, the owner of the property on which the contractor had performed construction work sued the contractor and T-Mobile USA, rather than the T-Mobile entity with which the contractor actually had a contract, T-Mobile Northeast.
Selective declined T-Mobile USA's tender, reasoning that the certificate of insurance had been issued in error and was not binding, and T-Mobile USA sued.
The dispute reached the Ninth Circuit, which certified the following question to the Supreme Court of Washington:
Under Washington law, is an insurer bound by representations made by its authorized agent in a certificate of insurance with respect to a party's status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?
The Washington Supreme Court's Decision
The court answered the certified question in the affirmative.
In its decision, the court reasoned that Selective was an insurance company, that it had an agent, and that the agent had acted with apparent authority when it issued the certificate to T-Mobile USA.
In these circumstances, the court held, under Washington law, Selective was bound by the representations its agent made in the certificate of insurance.
The court rejected Selective's argument that its agent's representation should not bind it because T-Mobile USA's alleged reliance on the representation was unreasonable given that T-Mobile USA knew that it was not a party to a contract with the contractor and, therefore, not an additional insured under the contractor's insurance policy.
The court pointed out that the Ninth Circuit had determined that Selective's agent had acted with apparent authority, which necessarily determined that T-Mobile USA's belief that the agent was authorized to issue a certificate naming it as an additional insured was "objectively reasonable." In the court's opinion, T-Mobile USA's "objectively reasonable belief that the agent had authority to issue the certificate" necessarily made its reliance on that certificate reasonable.
Next, the court ruled that the certificate's preprinted disclaimers were ineffective to avoid the additional insured statement because "they were general boilerplate" and "general in nature" while the additional insured statement "had been specifically written into the certificate" and made a discrete representation that "T-Mobile USA Inc." was included as an additional insured.
Finally, the court rejected the argument that holding Selective to the representation of its agent would conflict with public policy, declaring that the state's public policy "actually compel[led] the opposite conclusion" because insurers acted through, and were bound by, the representations of their agents made with actual or apparent authority.
The case is T-Mobile USA, Inc. v. Selective Ins. Co. of America, No. 96500-5 (Wash. Oct. 10, 2019). Attorneys involved include: Kelly H. Sheridan, Corr Cronin LLP, Michael A. Moore, Corr Cronin LLP, for Plaintiffs. Jeffrey Stuart Tindal, Betts Patterson & Mines, Michael J. Marone, McElroy Deutsch Mulvaney & Carpenter LLP, Daniel L. Sayer, Betts, Patterson & Mines, AS, for Defendants. Linda Bloom Clapham, Carney Badley Spellman, AS, Michael Barr King, Carney Badley Spellman PS, John M. Lebsack, White and Steele, P.C., Dmitry B. Vilner, White and Steele, P.C., as Amicus Curiae on behalf of American Property Casualty Insurance Association. Franklin Dennis Cordell, Gordon Tilden Thomas & Cordell LLP, Gregory David Pendleton, Gordon Tilden Thomas & Cordell, Todd Christopher Hayes, Harper Hayes PLLC, as Amicus Curiae on behalf of Associated General Contractors of Washington.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].