Attorneys for Appellees
Robert D. Epstein
Epstein & Frisch
Mark R. Smith
Smith Fisher Maas & Bishop
Appellant (Plaintiff below ),
CHRISTINA ISAAC and LORETTA DAVIS, Appellees (Defendants below ).
) Supreme Court No.
) Court of Appeals No.
July 23, 2001
Isaac had acquired insurance on a Pontiac Fiero through Gallants independent agent, Thompson-Harris
Company, in 1994. On the last day that that coverage was in
effect, Isaac traded the Fiero for a Pontiac Grand Prix. As explained
by the Court of Appeals in its opi
nion in this case:
To obtain the newly purchased car, the financing bank required Isaac to obtain full coverage on it. That same day, Isaac contacted Thompson-Harris to notify it that she was purchasing the new car, and to discuss enhancing the existing insurance policy to meet bank requirements. Isaac told a Thompson-Harris employee that she must obtain full insurance coverage as a condition to r eceiving a loan. She also told the employee at Thompson-Harris that her current coverage expires on December 3, 1994, the next day.
In response, the Thompson-Harris employee informed Isaac that b
ecause their agency was about
to close for the weekend, she would immediately bind coverage on the 1988
Grand Prix. They decided that Isaac would come in to Thompson-Harris on
Monday, December 5, 1994, to complete the paperwork and pay the down payment
on the premium. The employee also informed Isaac that the new coverage
on her Pontiac Grand Prix would include the same coverage existing from her
Pontiac Fiero, along with additional coverage to comply with conditions set by the
The next day, on December 3, 1994, a different employee completed the Personal
Policy Change Request. This form deleted the 1987 Pontiac Fiero from
Isaacs Policy and replaced it with the 1988 Pontiac Grand Prix. It
also added additional coverage to the policy as well as additional loss payee/lienholder.
The Personal Policy Change Request listed the Agency and Producer as Thompson-Harris,
and stated that the effective date of change was December 3, 1994.
Towards the bottom of the form, the Thom
pson-Harris employee typed [s]he will be
in at 9:00 a.m. Monday, 12/5/94, to [sic] down [sic] on renewal.
What is [sic] new rate? Thanks. (R. 380). This
form, which requested the listed changes, was faxed to Insurance Brokers of Indiana,
Inc., on December 3, 1994.
On December 4, 1994, while driving her Pontiac Grand Prix, Isaac co
another car in which Davis was a passenger. The next day, as
planned, Isaac went to Thompson-Harris and paid $133.00 down payment on the new
insurance policy. She also reported the accident. Thompson-Harris completed an Indiana
Operator's Vehicle Crash Report, which notified the State Police that Isaac had insurance
coverage at the time of the accident, on December, 4, 1994. Thompson-Harris
completed that form on behalf of Gallant. Later, on or about December
22, 1994, Gallant renewed Isaac's insurance policy, with an effective period of December
6, 1994 to June 6, 1995.
Gallant Ins. Co. v. Isaac, 732 N.E.2d 1262, 1265-66 (Ind. Ct. App. 2000)
(quotations in original). When Isaac submitted a claim to Gallant in respect
of the December 4 accident, Gallant took the position that no coverage was
in force on that date. As noted, the company sought a declaratory judgment
to that effect. Isaac and Davis (who had been a passenger in
the vehicle which collided with Isaacs) each sought summary judgment on that question,
which the trial court granted.
The Court of Appeals affirmed.
See Isaac, 732 N.E.2d 1270. In
doing so, it held that Thompson-Harris had inherent authority to bind Gallant, relying
on our decision in Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206, 1211
(Ind. 2000), rehg denied. While we agree with the result reached by
the trial court and Court of Appeals, we do so for reasons different
than those given by the Court of Appeals. We granted transfer to
explain why the concept of apparent authority, rather than the concept of inherent
authority discussed in Menard, is applicable in this case. Gallant Ins. Co.
v. Isaac, 741 N.E.2d 1259 (Ind. 2000) (table).
Menard, we also discussed a third form of agency relationship inherent
authority which is grounded in neither the principals conduct toward the agent
nor the principals representation to a third party, but rather in the very
status of the agent. Id. at 1211-12. The concept of inherent authority
originates from the customary authority of a person in the particular type of
agency relationship. Id. at 1211 (citing Cange v. Stotler & Co., 826
F.2d 581, 591 (7th Cir. 1987) (citing in turn Restatement (Second) of Agency
§ 161 cmt. b (1958))).
Because the agent at issue in
Menard was the president of the company,
we found the concept of inherent authority rather than actual or apparent
authority controlled our analysis. We said that the purchaser did not
negotiate and ultimately contract with a lower-tiered employee or a prototypical general or
special agent, with respect to whom actual or apparent authority might be at
issue. [The purchaser] dealt with the president of the corporation, whom [t]he
law recognizes ... [as one of] the officers [who] are the means, the
hands and the head, by which corporations normally act. Id. at 1212
(internal quotations and citations omitted).
Thompson-Harris, the insurance agency with which Isaac dealt in this case, was, in
our view, the prototypical general or special agent, with respect to whom actual
pparent authority might be at issue. Id. It was not
an agent with inherent authority, i.e., a person with a particular status like
president. Cf. id. (holding that the president of the company had inherent
authority); Fidelity Co. v. Carroll, 186 Ind. 633, 635-36, 117 N.E. 858, 859
(1917) (ruling that a corporations executive or administrative officers
may be termed
its inherent agencies); Community Care Centers, Inc. v. Indiana Dept of Pub. Welfare,
468 N.E.2d 602, 604 (Ind. Ct. App. 1984) (holding that the corporate attorney
did not have inherent authority to bind corporation), transfer denied; Burger Man, Inc.
v. Jordan Paper Prod., Inc., 170 Ind.App. 295, 311-13, 352 N.E.2d 821, 831-32
(1976) (When the president and general manager does an act within the domain
of the general objects or business of the corporation, and within the scope
of the usual duties of the chief officer, it will be presumed that
he had the authority to do it, and whoever would assert the contrary
must prove it.). The Court of Appeals erred in holding that Thompson-Harris
had inherent authority to bind Gallant.
This court last dealt with the question of apparent authority in the insurance
Pepkowski v. Life of Indiana Ins. Co., 535 N.E.2d 1164 (Ind.
1989). In that case, the question was whether an employee of the
plaintiffs employer who handled group health insurance for the employer had apparent authority
to bind the insurance company providing the group coverage. In finding the
employee not to have apparent authority, we described apparent authority as follows:
Apparent authority is the authority that a third person reasonably b elieves an agent to possess because of some manifestation from his principal. Warner v. Riddell Natl Bank, 482 N.E.2d 772, 775 (Ind. Ct. App. 1985)[, transfer denied.] See also Grosam v. Laborers Intl Union of N. Am., 489 N.E.2d 656, 658 (Ind. Ct. App. 1986)[, transfer denied.] The necessary manifestation is one made by the principal to a third party, who in turn is instilled with a reasonable belief that another individual is an agent of the principal. Swanson v. Wabash College, 504 N.E.2d 327, 332 (Ind. Ct. App. 1987); Storm v. Marsischke, 159 Ind.App. 136, 304 N.E.2d 840, 842 (1973); Kody Engg Co. Inc. v. Fox & Fox Ins. Agency Inc., 158 Ind.App. 498, 505-06, 303 N.E.2d 307, 311 (1973). It is essential that there be some form of communication, direct or indirect, by the principal, which instills a reasonable belief in the mind of the third party. Swanson, 504 N.E.2d at 332; Storm, 304 N.E.2d at 843. Statements or manifestations made by the agent are not sufficient to create an apparent agency relationship. Swanson, 504 N.E.2d at 332; Storm, 304 N.E.2d at 843.
Pepkowski, 535 N.E.2d at 1166-67.
Applying these principles to the case at hand, it seems to us that
the key is determi
ning whether Gallant made the necessary manifestation to instill a
reasonable belief in the mind of Isaac that Thompson-Harris had authority to transfer
the coverage from her Fiero to her Grand Prix and renew the policy.
There are several additional cases, some cited in Pepkowski, that help us
with this determination.
First, it is clear that the manifestations referred to in
Pepkowski need not
be in the form of direct communications, but rather the placing of the
agent in a position to perform acts or make representations which appear reasonable
to a third person is a sufficient manifestation to endow the agent with
apparent authority. Herald Telephone v. Fatouros, 431 N.E.2d 171, 175 (Ind. Ct.
App. 1982) (quoting Burger Man, Inc., 170 Ind.App. at 312, 352 N.E.2d at
Storm v. Marsischke explained that [s]uch a manifestation by the principal may be
where the principal clothes or allows a special agent to act
with the appearance of possessing more authority than is actually conferred. 159
Ind.App. 136, 138, 304 N.E.2d 840, 842-43 (1973) (citing Farm Bureau Mutual Life
Ins. Co. v. Coffin, 136 Ind.App. 12, 186 N.E.2d 180 (1962)). In
the Coffin case, an insured had called his auto insurers home office and
said that he wanted to transfer his insurance from a Chevrolet to a
Buick and increase his coverage. He was connected with one James R.
Pierson who told him that he had the coverage he sought as of
that moment. As it turned out, Pierson was not an insurance agent
but the Typing Supervisor in the Auto Underwriters Department. The insured subsequently
presented a claim, which the insurer denied on the basis that Pierson had
no authority to bind the company. The Court of Appeals held that
the insurer had clothed Pierson with apparent authority. [Insured] called the [insurers]
home office and stated that he wanted to transfer his insurance. Employees
of the [insurer] (principal) then connected [insured] (third party) with Pierson (apparent general
agent). 136 Ind.App. at 19, 186 N.E.2d at 184.
Old Line Auto. Insurors v. Kuehl, an insured had for some time
prior to the issuance of the auto insurance policy at issue in the
case dealt with the insurer through one Donald R. Crabb. He purchased
a policy on a Studebaker through Crabb. Crabb subsequently arranged the transfer
of the coverage of that policy from the Studebaker to a Dodge.
When the insurer sent the insured the policy, it did not tell the
insured that it would not be responsible for payments made to its agent
Crabb. The insured in fact paid his premiums to Crabb who, at
some point in time, failed to forward them to the insurer. When
this occurred, the insurer did not notify the insured that the policy was
cancelled. The insured subsequently presented a claim, which the insurer denied on
the basis that the policy had been cancelled. The Court of Appeals
held that [u]nder these circumstances we believe [the insured] was justified in believing
that Crabb, as the agent of [the insurer], had the authority to collect
the premiums due on the policy in question here. 127 Ind.App. 445,
455, 141 N.E.2d 858, 862 (1957).
In the case before us today, the undisputed facts show that when Isaac
first acquired the Gallant policy on her Fiero, a Thompson-Harris employee filled out
Gallants pre-printed insurance application form. After the pre-printed application form and a
pre-application checklist were signed by Isaac and the employee, the employee told Isaac
that her coverage with Gallant would be bound as of June 2, 1994.
The employee further told Isaac that she would receive the actual insurance policy
from Gallant in the near future. Isaac did in fact r
Indiana Personal Auto Policy No. IN 04151290 shortly thereafter. When one of
Isaacs premiums was not received on time, Gallant issued a written Notice of
Cancellation indicating that the policy would be canceled if the premium was not
received by a particular date. When payment was received before that date,
Insurance Premium Company, which received Isaacs premium payments on behalf of Gallant, issued
an Agent Notification of Reinstatement to Thompson-Harris and a reinstatement notice to Isaac.
While Gallant argues that some of the designated evidence raises an issue of
ncerning Thompson-Harriss actual authority to bind Gallant, the evidence appears to us
without dispute that Thompson-Harris had apparent authority to bind Gallant, e.g., Gallants dealings
with Isaac just recited contained the manifestations required under applicable case law to
cause Isaac reasonably to believe that Thompson-Harris had authority to bind Gallant.
We have already recounted under
Background, supra, Isaacs contacts with Thompson-Harris at the
time of the purchase of the Grand Prix and the accident. While
Gallant again argues that there are some factual disputes surrounding these events, the
evidence appears to us uncontroverted that no Thompson-Harris employee gave Isaac any indication
that coverage on the Grand Prix was not in force. Cf. Michigan
Mut. Ins. Co. v. Sports, Inc., 698 N.E.2d 834, 840 n.17 (Ind. Ct.
App. 1998) (If the third person knows, or in the exercise of reasonable
care should know, that the agent is exceeding the agent's actual authority, the
principal will not be bound), transfer denied.
Because we find that Thompson-Harris had apparent authority to bind Gallant with respect
to Isaac, we hold that it was appropriate for the trial court to
grant summary judgment to the plaintiffs on the question of whether Isaac had
coverage under the Gallant policy at the time of her accident.
SHEPARD, C.J., and DICKSON, BOEHM, and RUCKER, JJ., concur.