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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. Based on several recent Indy Star articles, I would agree that being a case worker would be really hard. You would see the worst of humanity on a daily basis; and when things go wrong guess who gets blamed??!! Not biological parent!! Best of luck to those who entered that line of work.

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  3. Don't believe me, listen to Pacino: https://www.youtube.com/watch?v=z6bC9w9cH-M

  4. Law school is social control the goal to produce a social product. As such it began after the Revolution and has nearly ruined us to this day: "“Scarcely any political question arises in the United States which is not resolved, sooner or later, into a judicial question. Hence all parties are obliged to borrow, in their daily controversies, the ideas, and even the language, peculiar to judicial proceedings. As most public men [i.e., politicians] are, or have been, legal practitioners, they introduce the customs and technicalities of their profession into the management of public affairs. The jury extends this habitude to all classes. The language of the law thus becomes, in some measure, a vulgar tongue; the spirit of the law, which is produced in the schools and courts of justice, gradually penetrates beyond their walls into the bosom of society, where it descends to the lowest classes, so that at last the whole people contract the habits and the tastes of the judicial magistrate.” ? Alexis de Tocqueville, Democracy in America

  5. Attorney? Really? Or is it former attorney? Status with the Ind St Ct? Status with federal court, with SCOTUS? This is a legal newspaper, or should I look elsewhere?

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