Broker is Not Agent of Insurer

Binder is Only Temporary Insurance

Insurance companies issue binders to provide temporary coverage to a potential insured. They are not insurance policies but only evidence that, if certain conditions are met, a policy will be issued. Many contain conditions requiring a full application and full payment of premium for a policy to be issued. Failure to comply results in the binder expiring and no policy is issued.

In Popham v. Landmark American BE-004 Insurance Company, Court of Appeals of Georgia, — S.E.2d —-, 2017 WL 950437 (March 9, 2017) a binder was issued but the premium was not delivered to the insurer as agreed and no policy was issued. Popham claimed he paid an agent timely and that was sufficient to cause a policy to be issued.

FACTS

Popham contacted independent insurance agent Steven Greenberg (“Greenberg”) to obtain a new commercial liability insurance policy for his tree removal business. After contacting several underwriters, Greenberg obtained an insurance quote for Popham from Tapco, an underwriter that had the authority to issue insurance policies on behalf of Landmark. Popham met with Greenberg on November 17, 2010 at which time Popham signed an application for insurance and paid a down payment on the premium to Greenberg. Popham received a certificate of insurance from Greenberg showing a policy effective date of November 17, 2010.

Tapco issued a binder to Popham stating that it would provide temporary insurance coverage until November 29, 2010, provided that Tapco “receive[d] a properly completed application and a premium payment within 12 days.” Per the terms of the binder, Popham’s failure to remit a completed application and the premium payment to Tapco by that date would nullify and void coverage. The language of the binder also provided that the binder “exists on its own terms and expires on its own terms. When a binder expires on its own terms, no coverage exists thereafter. Requirements for notice of cancellation to insureds do not apply to expired binder.”

On November 29, Popham met with Greenberg to make another premium payment, and Greenberg mailed a premium check and Popham’s insurance application to Tapco either that day or the following day. However, it is undisputed that Tapco did not receive the premium payment and the application by November 29, 2010.

On December 7, 2010, Tapco notified Greenberg that it had not received the application and premium check for Popham’s policy and that the binder was null and void. Two days later, on December 9, 2010, Tapco received Greenberg’s mailing containing the application and the premium check and deposited the check that day. The following day, Tapco informed Greenberg that additional application materials were required to issue the insurance policy and that the policy’s effective date would be December 9, 2010. Greenberg faxed the additional materials to Tapco, and Tapco, acting on behalf of Landmark, wrote an insurance policy for Popham with an effective date of December 9, 2010.

While decisions were being made on December 1, 2010, Popham was cutting trees when one man was seriously injured after a tree fell on him. The injured man brought suit against Popham in late 2011 and won a default judgment. Popham later filed an insurance claim with Landmark, which it denied, stating that no policy was in effect on the date of the accident.

As Popham has failed to bring forth sufficient evidence to support his claims, the court affirmed the trial court’s grant of summary judgment.

Popham claims the trial court erred because it did not find that Greenberg was acting as an agent for Tapco and/or Landmark, and that therefore genuine issues of fact exist as to whether an insurance contract between Popham and Tapco and/or Landmark was in effect at the time of the December 1, 2010, accident.

The plaintiff has the burden of bringing forth evidence establishing the existence of the agency relationship. Greenberg indicated in his deposition that he was acting as an agent for Popham in bidding out his request for liability insurance coverage to multiple underwriters, including Tapco.  Greenberg claimed that he did not have the authority to issue a binder or an insurance policy on behalf of Tapco or Landmark. Both Tapco and Landmark repeatedly denied that Greenberg had ever been their agent.

Importantly, the label or characterization of the relationship by the purported agent is not sufficient to show what actual authority the agent had been given by the purported principal. While Popham fixates on the use of the terms “agent” and “subagent” by Greenberg and his counsel, those statements do not speak to any authority on Greenberg’s part to bind Tapco or Landmark to an insurance policy, and the defendants unequivocally deny that Greenberg has this authority elsewhere in the record. Popham failed to bring forward evidence that Greenberg was expressly granted the authority to bind coverage on behalf of Tapco or Landmark. Greenberg acted as a broker, transacting insurance with, but not on behalf of an insurer.

Where the only evidence that a person is an agent of another party is the mere assumption that such agency existed, or an inference drawn from the actions of that person that he was an agent of another party, such evidence has no probative value and is insufficient to authorize a finding that such an agency exists. A certificate of insurance, standing alone, is insufficient to authorize a finding that the agency is the agent of the carrier.

Under Georgia law, an insurance binder is a contract for temporary insurance pending the issuance of a formal insurance policy, and both the binder and any subsequent insurance policy are governed by contract law. Parties to an insurance contract are bound by its plain and unambiguous terms and the court’s job is simply to apply the terms of the contract as written.

The insurance binder issued clearly stated that coverage under the temporary policy would be deemed null and void if payment of the premium was not received by Tapco by November 29, 2010.   As it is undisputed that the payment was not received by the deadline, applying the clear terms of the binder, it expired on its own terms, and there was no coverage under it thereafter.

Popham’s remaining enumerations of error regarding claims against Tapco and Landmark for bad faith, punitive damages, and attorney fees are mooted by the courts rulings that there was no policy in effect at the time of the injury. As we have upheld the trial court’s ruling that neither Tapco nor Landmark had a contract of insurance with Popham in effect on the date of the accident, no bad faith claim can be asserted against either defendant for failure to pay a claim arising from that accident. Similarly, awards of punitive damages and attorney fees are derivative of underlying claims, where those claims fail, claims for punitive damages and attorney fees also fail.

ZALMA OPINION

People tend to throw around the terms “agent” and “broker” when dealing with insurance. An insurance agent transacts insurance with and on behalf of an insurer while an insurance broker only transacts insurance with, but not on behalf of, an insurer. In this case Popham’s agent was unable to place his insurance with a company he represented the “agent” acting as a “broker” placed insurance with a company he does not represent and his actions or non-action had no effect on the insurer.

ZALMA-INS-CONSULT                      © 2017 – Barry Zalma

This article and all of the blog posts on this site summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.

Mr. Zalma is the first recipient of theLEGEND-TROPHY-2 first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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