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Company not bound by defiant agent's actions

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A trial court erred in finding that a company was bound by its insurance agency's acts even though the agency acted against the company's wishes, the Indiana Court of Appeals ruled today.

Lupke Rice Insurance Agency sued former client Maxitrol to recover workers' compensation insurance premiums the agency paid on behalf of Maxitrol to insurance providers EBI Cos. and Royal Sun Alliance. Audits by the insurers found Maxitrol improperly classified some workers and owed additional premiums. Lupke Rice paid those premiums against the wishes of Maxitrol, which challenged the adjustment to their premiums. Lupke Rice agent Stanley Rice never told Maxitrol the company paid the premiums until after Maxitrol ended its workers' compensation insurance with Lupke Rice.

Maxitrol and Lupke Rice didn't reach an agreement on the unpaid adjustments and Lupke Rice sued Maxitrol for the nearly $64,000 in premium adjustments. The trial court found in favor of Lupke Rice, ruling Maxitrol was bound by Lupke Rice's acts, and that Maxitrol ratified the agency's payment of the adjusted premiums.

In Maxitrol Co. v. Lupke Rice Insurance Agency, Inc., No. 02A03-0905-CV-216, Maxitrol argued it's not liable for the adjusted premiums because Lupke Rice disregarded its instructions not to pay them. The Indiana Supreme Court has said that a principal is bound by the acts of a general agent if the agent acted within the ordinary and usual business scope in which it was employed, even if the agent violated private instructions of the principal. If either an innocent principal or a third party must suffer due to the betrayal of an agent's trust, then the loss should fall on the principal as the party who is most at fault because it put the agent in the position of trust.

But the rationale behind the rule doesn't apply in the instant case, wrote Senior Judge John Sharpnack.

"Here, we have a disobedient agent seeking reimbursement rather than an innocent third party seeking to enforce an agent's representations," he wrote. "Further, where a principal has instructed an agent not to do something, and the agent disobeys the principal, the agent is clearly more at fault than the principal. The rule was not intended to protect a disobedient agent."

The trial court also erred in ruling that Maxitrol ratified Lupke Rice's payments to Royal Sun Alliance. To hold a principal liable on grounds of ratification - explicit or implicit - it must be shown the principal ratified upon full knowledge of all material facts, or that he was willfully ignorant. Maxitrol didn't know Lupke Rice paid the RSA the premium adjustments and didn't learn about them until more than a year after the last payment was made.

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  1. Future generations will be amazed that we prosecuted people for possessing a harmless plant. The New York Times came out in favor of legalization in Saturday's edition of the newspaper.

  2. Well, maybe it's because they are unelected, and, they have a tendency to strike down laws by elected officials from all over the country. When you have been taught that "Democracy" is something almost sacred, then, you will have a tendency to frown on such imperious conduct. Lawyers get acculturated in law school into thinking that this is the very essence of high minded government, but to people who are more heavily than King George ever did, they may not like it. Thanks for the information.

  3. I pd for a bankruptcy years ago with Mr Stiles and just this week received a garnishment from my pay! He never filed it even though he told me he would! Don't let this guy practice law ever again!!!

  4. Excellent initiative on the part of the AG. Thankfully someone takes action against predators taking advantage of people who have already been through the wringer. Well done!

  5. Conour will never turn these funds over to his defrauded clients. He tearfully told the court, and his daughters dutifully pledged in interviews, that his first priority is to repay every dime of the money he stole from his clients. Judge Young bought it, much to the chagrin of Conour’s victims. Why would Conour need the $2,262 anyway? Taxpayers are now supporting him, paying for his housing, utilities, food, healthcare, and clothing. If Conour puts the money anywhere but in the restitution fund, he’s proved, once again, what a con artist he continues to be and that he has never had any intention of repaying his clients. Judge Young will be proven wrong... again; Conour has no remorse and the Judge is one of the many conned.

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