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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. Access to the court (judiciary branch of government) is the REAL problem, NOT necessarily lack of access to an attorney. Unfortunately, I've lived in a legal and financial hell for the past six years due to a divorce (where I was, supposedly, represented by an attorney) in which I was defrauded of settlement and the other party (and helpers) enriched through the fraud. When I attempted to introduce evidence and testify (pro se) in a foreclosure/eviction, I was silenced (apparently on procedural grounds, as research I've done since indicates). I was thrown out of a residence which was to be sold, by a judge who refused to allow me to speak in (the supposedly "informal") small claims court where the eviction proceeding (by ex-brother-in-law) was held. Six years and I can't even get back on solid or stable ground ... having bank account seized twice, unlawfully ... and now, for the past year, being dragged into court - again, contrary to law and appellate decisions - by former attorney, who is trying to force payment from exempt funds. Friday will mark fifth appearance. Hopefully, I'll be allowed to speak. The situation I find myself in shouldn't even be possible, much less dragging out with no end in sight, for years. I've done nothing wrong, but am watching a lot of wrong being accomplished under court jurisdiction; only because I was married to someone who wanted and was granted a divorce (but was not willing to assume the responsibilities that come with granting the divorce). In fact, the recalcitrant party was enriched by well over $100k, although it was necessarily split with other actors. Pro bono help? It's a nice dream ... but that's all it is, for too many. Meanwhile, injustice marches on.

  2. Both sites mentioned in the article appear to be nonfunctional to date (March 28, 2017). http://indianalegalanswers.org/ returns a message stating the "server is taking too long to respond" and http://www.abafreelegalasnswers.org/ "can't find the server". Although this does not surprise me, it is disheartening to know that access to the judicial branch of government remains out of reach for too many citizens (for procedural rather than meritorious reasons) of Indiana. Any updates regarding this story?

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