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Muse Apartments, LLC v. Travelers Casualty and Surety Co.

United States District Court, W.D. Washington, Seattle

December 22, 2014



ROBERT S. LASNIK, District Judge.

This matter comes before the Court on "Plaintiff's Motion for Partial Summary Judgment re: Agency" (Dkt. #86) and defendant's "Cross-Motion for Summary Judgment" (Dkt. #99). Summary judgment is appropriate if, viewing the evidence in the light most favorable to the nonmoving party, "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); L.A. Printex Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir. 2012). Having reviewed the memoranda, declarations, and exhibits submitted by the parties, [1] the Court finds as follows:

On May 13, 2009, KC McNamara of Bell-Anderson Agency, Inc., sent an email to Richard Dance of 1031 ECI, LLC:

Hello Richard,

My name is KC McNamara with Bell-Anderson Insurance. I represent a number of companies with great programs for real estate exchangers and wanted to offer that to you, and see if you would have some interest in seeing some different options for renewal. If so, please give me a call and we can talk further.
Best regards,
KC McNamara Bell-Anderson Agency, Inc.

Decl. of K.C. McNamara (Dkt. #100), Ex. A. Mr. Dance indicated an interest in hearing about fidelity and errors and omissions policies that were available. Id . Through a process having an unfortunate resemblance to the game "Whisper Down the Lane, " Mr. Dance's request for a specific type of insurance coverage was passed up a chain of insurance agencies and came back with a policy issued by defendant Travelers Casualty and Surety Company of America that did not provide the coverage Mr. Dance had requested. The question raised by the cross-motions for summary judgment is whether Travelers can be held responsible for any negligence on Bell-Anderson's part.[2] The short answer under Washington law is "yes."

In his search for a fidelity policy, Mr. Dance provided Mr. McNamara with an application packet. Decl. of Kevin Grove (Dkt. #102) at ¶ 3. The packet was routed through American E&S Brokers to Universal SRV Agency, Inc., which passed it on to Travelers. Decl. of K.C. McNamara (Dkt. #100) at ¶ 5; Decl. of Kevin Grove (Dkt. #102) at ¶ 6. There is no indication in the record that Mr. Dance knew that American E&S or Universal SRV Agency had any role in the transaction. The proposal that came back to Mr. McNamara from Travelers did not cover theft of client property, but when it was conveyed to Mr. Dance, he was assured that the policy "insures against loss resulting directly from theft of client money or property by an identified employee or owner of the insured." Decl. of Kevin Grove (Dkt. #102), Ex. B; Second Decl. of K.C. McNamara (Dkt. #101), Ex. 7; Decl. of D. Richard Dance (Dkt. #26), Ex. C.

During the relevant time period, Bell-Anderson Agency, Inc., was designated as Travelers' appointed agent with the State of Washington's Office of Insurance Commissioner. Decl. of Stephanie L. Grassia (Dkt. #27), Ex. I. The "Agency Contract" between Travelers and Bell-Anderson authorized Bell-Anderson to "solicit applications for policies and bind, execute and service policies and endorsements" for bond, commercial property-casualty (excluding National Accounts), and personal property-casualty policies. Decl. of Stephanie L. Grassia (Dkt. #87), Ex. B. Travelers does not dispute that Bell-Anderson was authorized to solicit and sell the policy at issue here. Rather, it argues that Bell-Anderson did not exercise that authority in this case and was instead pursuing its own business interests and/or acting as 1031 ECI's agent.

Plaintiff argues that, under Chicago Title Ins. Co. v. Wash. State Office of the Ins. Comm'r, 178 Wn.2d 120 (2013), the kind of transaction-by-transaction analysis urged by Travelers is unnecessary because an insurance agent with authority to solicit and sell policies binds the insurer whenever it acts within the scope of that authority. In Chicago Title, the insurer's authorized agent violated Washington's anti-inducement statutes in a number of ways, including "wining and dining" potential clients. The Office of Insurance Commissioner ("OIC") sought to hold the insurer liable for the unlawful solicitations of its agent. After establishing that the agent had the authority to solicit business on behalf of the insurer and that the agent had, in fact, engaged in solicitation (178 Wn.2d at 134-35), the Washington Supreme Court held that, because the agent was doing exactly what the insurer had appointed it to do, the insurer was responsible for any unlawful solicitation (178 Wn.2d at 135). The court was unimpressed by Chicago Title's argument that, because its contract with the agent limited the agent's ability to market or solicit on the insurer's behalf, the agent's acts were outside the scope of its authority and did not bind the insurer. Quoting Pagni v. N.Y. Life Ins. Co., 173 Wash. 322, 349-50 (1933), the Supreme Court found that:

an insurance company is bound by all acts, contracts, or representations of its agent, whether general or special, which are within the scope of his real or apparent authority, notwithstanding they are in violation of private instructions or limitations upon his authority, of which the person dealing with him, acting in good faith, has neither actual nor constructive knowledge.

178 Wn.2d at 136 (emphasis in Chicago Title). Where the governing statutes and regulations allow an agent to solicit business and sell policies on the insurer's behalf, "the principal cannot excuse itself from vicarious liability through an undisclosed private arrangement that purports to restrict that authority." Id . If that were not the case, the regulatory standards regarding agency in the insurance context "would be defeated" because "an insurer could gain the benefits of appointing an agent... while waiving any attendant liability through contract." Id.

Travelers argues that Chicago Title does not apply because Bell-Anderson did not solicit business on Travelers' behalf in this case. This argument is based on the following facts: (1) Mr. McNamara and Mr. Dance both considered Bell-Anderson to be 1031 ECI's broker, not Travelers' agent; (2) Travelers had contact with, and paid a commission to, only Universal SRV Agency; (3) the industry, represented through the expert opinion of Neal Bordenave, would consider Bell-Anderson to be 1031 ECI's agent in the circumstances presented here; and (4) case law ...

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