The Washington State Supreme Court has reaffirmed that insurance companies are totally responsible for the acts of their agents.
The case, which has been closely watched by the insurance industry, dealt with probes by Washington and other states in 2005 into alleged illegal kickbacks related to a super-heated housing market. While the specific case dealt with title insurance, it is being interpreted as broad enough to apply to property casualty, life and health insurance as well.
“The ruling is a big win for consumers,” said Insurance Commissioner Mike Kreidler. “If you allow someone to do business on your behalf, it only stands to reason that you can be held responsible for what they do.”
That decision held that, “an insurance company is bound by all acts, contracts, or representations of its agent, whether general or special, which are within the scope of his real or apparent authority, notwithstanding they are in violation of private instructions or limitations upon his authority, of which the person dealing with him, acting in good faith, has neither actual nor constructive knowledge.”
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Since the case dealt with alleged illegal inducements to get business by a title insurance agent, the decision also stated that, “Similarly, OIC enjoys broad authority to define unfair or deceptive trade practices.”
The case, Chicago Title Insurance Company v. Washington State Office of the Insurance Commissioner, dealt with a title insurance agent who was found to have given real estate agents, builders and mortgage lenders free meals, donations for a golf tournament, monthly advertising and Seattle Seahawks playoff game tickets, according to the charges.
It identified a number of potential violators and honed in on Chicago Title and its agent, Land Title Insurance Company, for alleged violations of the state’s insurance laws in 2006 and 2007. Shortly after the investigation was launched, Chicago Title agreed that its agent had violated anti-inducement statues.
Kreidler’s office then went to Chicago Title with a consent order requiring Chicago Title to agree to a fine of $114,500 and to enter into a compliance plan that required semi-annual audits and other corrective actions.