October 18, 2021

Volume XI, Number 291

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October 18, 2021

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Georgia Court of Appeals Upholds Denial of Coverage Because Insurance Broker Lacked Agency to Accept Premium Payment

In American Reliable Insurance Company v. Lancaster, the Georgia Court of Appeals reversed the denial of a property insurer’s summary judgment motion concerning the insurer’s denial of a fire loss claim.  The basis of the denial was that the policyholders had failed to pay the policy premium.  The policyholders, Charlie and Wanda Lancaster, claimed that they had paid their policy premiums for several years to their insurance agent, Macie Yawn.  In October 2014, American Reliable mailed a renewal notice to the Lancasters notifying them that premium payments had to be made directly to the insurer.  After it did not receive payment from the Lancasters, American Reliable sent them a cancellation notice in December 2014, again notifying them that payments be made directly to the insurer.  The Lancasters denied having received either notice from American Reliable, but the record included a receipt for certificate of mailing.

After the Lancaster’s home burned down in 2015, American Reliable denied coverage on the grounds that the policy had been cancelled for nonpayment of premium.  In the subsequent coverage action, the trial court denied American Reliable’s motion for summary judgment, ruling that a factual issue existed as to the actual and apparent agency of the insurance agent, Yawn.  On appeal, the Court of Appeals found that the trial court erred in deciding that there was a factual issue concerning Yawn’s agency.  Specifically, the Court of Appeals ruled that the record showed American Reliable had terminated Yawn’s agency to accept policy premiums, and that the Lancaster’s received notice of that termination in the renewal and cancellation notices.  In addition to determining that Yawn was not an actual agent, the Court held that Yawn did not have apparent agency, because the notices sent to the Lancasters stated that the premium payment was to be paid to American Reliable, not to the agent.

The decision in Lancaster illustrates that insurer-broker agency relationships are not uniform.  One size does not fit all.  Policyholders should therefore never assume that their insurance broker has agency status to accept premiums or notices on behalf of insurers.  Although insurance agents and brokers may have such agency – as Yawn did when the Lancasters made their first premium payment under the American Reliable policy – it is important for policyholders to confirm that status and, more importantly, to follow instructions in the insurance policy and from the insurer for paying premiums, providing notice of claims, and other significant policy actions.  Although most insurance agents and brokers competently assist their clients with insurer interactions, other agents do not do so with an appropriate degree of attention to detail, to the detriment of the policyholder.  Worse, there are numerous instances of brokers refusing responsibility when the broker failed to carry out requested actions on behalf of a policyholder.  In these instances, many brokers will assert that they were not acting as the insurer’s agent.  Accordingly, policyholders should confirm important policy events, such as payment of premiums and notice of claims, directly with the insurer.

Copyright © 2021, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume X, Number 310
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About this Author

Lawrence J. Bracken II Insurance Attorney Hunton Andrews Kurth Atlanta, GA & New York, NY
Partner

Larry Bracken has more than 30 years of experience litigating and investigating insurance coverage, class action, technology, environmental and commercial matters.

Larry has represented clients in federal and state courts throughout the United States in a broad range of cases, particularly the litigation of insurance coverage disputes, class actions and other cases involving allegations of unfair trade practices, ...

404-888-4035
Michael S. Levine Insurance Lawyer Hunton Andrews Kurth
Partner

Mike has more than 20 years of experience litigating insurance disputes and advising clients on insurance coverage matters.

Mike Levine is a partner in the firm’s Washington, DC office and a member of the firm’s Insurance Recovery team. Mike’s policyholder representation focuses on:

  • Property damage and business interruption claims, including COVID-19 losses
  • Event cancellation insurance counseling
  • Representations and warranties coverage
  • ...
202 955 1857
Rachel E. Hudgins Associate Insurance Lawyer
Associate

Rachel represents clients in complex insurance coverage and bad faith litigation.

Rachel has litigated hundreds of insurance coverage and bad faith claims in state and federal courts across the country brought under a spectrum of insurance policies issued to individuals, public and private corporations, and government entities. Rachel’s success comes from cases ranging from the ordinary, such as storm-damaged properties, phishing-related data breaches, and wrongful employment termination, to the extraordinary, such as livestock deaths, grand jury investigations, parasailing-related...

404-888-4110
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