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Certification from United States Court of Appeals v. Selective Insurance Company of America

Supreme Court of Washington, En Banc

October 10, 2019

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT IN T-MOBILE USA INC, a Washington corporation, Plaintiff-Appellant,
v.
SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant-Appellee.

          GORDON McCLOUD, J.

         The Ninth Circuit has asked this court whether an insurance company is bound by its agent's written representation-made in a certificate of insurance-that a particular corporation is an additional insured under a given policy. The question arises in a case where: (1) the Ninth Circuit has already ruled that the agent acted with apparent authority, but (2) that agent's representation turned out to be inconsistent with the policy and (3) the certificate included additional text broadly disclaiming the certificate's ability to "amend, extend or alter the coverage afforded by" the policy.

         Under this state's law, the answer is yes: an insurance company is bound by the representation of its agent in those circumstances. Otherwise, an insurance company's representations would be meaningless and it could mislead without consequence.

         Factual and Procedural History

         At the heart of this case are two T-Mobiles: T-Mobile USA and T-Mobile Northeast (T-Mobile NE). They are distinct legal entities.[1] T-Mobile USA, Inc. v. Selective Ins. Co. of Am., 908 F.3d 581, 583 n.1 (9th Cir. 2018).

         T-Mobile NE wanted to construct a cell phone tower on a rooftop in New York City. Id. at 583-84. It engaged the services of a contractor to help it do so. Id.; see also 3 Excerpts of Record (ER) at 499-516 (agreement). The contract between T-Mobile NE and the contractor required the contractor to obtain a general liability insurance policy, to annually provide T-Mobile NE "with certificates of insurance evidencing [that policy's] coverage," and to name T-Mobile NE as an additional insured under the policy. 3 ER at 504-05. T-Mobile USA was not a party to the contract, id. at 503, but was nonetheless aware of it and approved the contract as to form, id. at 516.

         The contractor obtained the required insurance policy from Selective Insurance Company of America. T-Mobile USA, 908 F.3d at 583; see also 3 ER at 518-639 (policy). The policy was-and remains-a claims-made policy. 3 ER at 532. It provided that a third party would automatically become an additional insured under the policy if the contractor and the third party entered into their own contract and that contract required the contractor to add the third party to its insurance policy as an additional insured. T-Mobile USA, 908 F.3d at 583. T-Mobile NE therefore became an additional insured under the policy by virtue of its contract with the contractor. T-Mobile NE and the contractor worked together to build the cell phone tower on the New York City rooftop. Id. at 584.

         Because T-Mobile USA did not have a contract with the contractor, it did not automatically become an additional insured under the policy. Nonetheless, over the course of approximately seven years, Selective's agent issued a series of certificates of insurance, including the one underlying this dispute, to "T-Mobile USA Inc., its Subsidiaries and Affiliates" that stated that those entities were "included as an additional insured [under the policy] with respect to" certain areas of coverage. 2 ER at 132 (certificate at issue); see also 3 ER at 642-52; 4 ER at 833 (other certificates). The agent signed those certificates as Selective's '"Authorized Representative."' 4 ER at 827.

         The agent explained that it "began issuing the T-Mobile Additional Insured [certificates of insurance] because [the contractor] informed us that its agreements with T-Mobile required that T-Mobile be named as an additional insured under [the contractor's] insurance policies and that T-Mobile qualified as an additional insured per the standard terms of Selective's policies for that reason." Id. Selective never objected to the agent's issuance of the certificates. Id. at 826 (declaration of agent's principal).

         Given those facts, the Ninth Circuit held that the agent acted with apparent authority in issuing the certificate at issue, which "clearly lists T-Mobile USA as an additional insured under the policy."[2] T-Mobile USA, 908 F.3d at 586 n.5.

         But the certificate was issued on an industry-standard form and included preprinted industry-standard disclaimers. 2 ER at 132; Br. of Amicus Curiae Am. Prop. & [Cas.] Ins. Ass'n at 4 (explaining this). It stated in bold capital letters that the certificate "is issued as a matter of information only and confers no rights upon the certificate holder," "does not affirmatively or negatively amend, extend or alter the coverage afforded by the" insurance policy, and "does not constitute a contract between the issuing insurer(s), authorized representative or producer, and the certificate holder." 2 ER at 132 (formatting omitted). It also stated in bold, "If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. ... A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsements)." Id. (boldface omitted).

         Eventually, the owner of the New York City rooftop on which T-Mobile NE and the contractor had constructed the cell phone tower sued the contractor and T-Mobile in federal district court in New York for damages associated with the construction. T-Mobile USA, 908 F.3d at 584 & n.4. But the owner sued T-Mobile USA, not T-Mobile NE. Id.

         T-Mobile USA and the contractor each tendered the building owner's claim to Selective. Id. at 584. Selective accepted the contractor's tender but rejected T-Mobile USA's tender. Id. at 584-85.

         Following T-Mobile USA's motion for summary judgment in the New York litigation, the building owner amended its complaint, naming T-Mobile NE (and dropping T-Mobile USA) as the defendant. 4 ER at 678. Because Selective had not accepted T-Mobile USA's tender, though, T-Mobile USA incurred expenses defending itself up to that point of the New York litigation.

         T-Mobile USA, which is headquartered in Washington, sued Selective in King County Superior Court. T-Mobile USA, 908 F.3d at 585. It "assert[ed] claims for breach of contract, declaratory judgment, common law insurance bad faith, common law attorney's fees, and violation of consumer fraud statutes." Id. All of those claims were based on the fact that Selective failed to recognize T-Mobile USA as an additional insured. Id.

         Selective, which is headquartered in New Jersey, removed the case to federal district court.[3] Id.

         After discovery, Selective moved for summary judgment, "requesting that T-Mobile USA's claims be dismissed in their entirety because ... the 2012 [certificate of insurance] could not confer coverage on T-Mobile USA." Id. The district court granted the motion and dismissed all of T-Mobile USA's claims. Id.

         T-Mobile USA appealed on several grounds. The Ninth Circuit certified only the following question to this court:

"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?"

Id. at 588. The Ninth Circuit noted that "T-Mobile USA does not contend that the [certificate of insurance] is relevant to interpreting the Policy. Rather, T-Mobile USA contends that Selective is bound by [the agent's] representation in the [certificate of insurance] that T-Mobile USA is an additional insured." Id. at 585.

         DISCUSSION

         A certified question presents a question of law. RCW 2.60.020; RAP 16.16. This court "consider[s] the legal issues presented based on the certified record provided by the federal court." Wright v. Lyft, Inc., 189 Wn.2d 718, 722, 406 P.3d 1149 (2017) (citing Bradburn v. N. ...


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