Opinion ID: 1633715
Heading Depth: 1
Heading Rank: 3

Heading: did ray have either actual or apparent authority to issue a certificate of insurance exceeding the policy limits?

Text: Under the terms of the master policy, Ray may have had actual authority to issue a certificate of insurance in excess of $50,000.00. As noted already, the master policy provided: The Company shall have the right to cancel any insurance on the life of the Debtor in excess of those amounts listed in the Amount of Insurance paragraph contained in this Policy, within thirty days after receipt at the Home Office of the Company, Jackson, Mississippi, of written notice of the granting of such insurance. Such cancellation shall be given by written notice to the Creditor. (R. 116) (Emphasis added.) Again, this language appears to contemplate that a policy in excess of $50,000.00 may be actually placed in effect by the agent before notice is given to the Company that such coverage is being granted. John Emory, Senior Vice-President and Secretary of Malta Life Insurance Company, testified that, while Malta liked for the bank to clear it with the Company before writing a policy in excess of $50,000.00, the bank sometimes wrote policies over $50,000.00 without clearing it. He explained, however, that the master policy allowed Malta 30 days after receipt of such a policy within which to cancel the excess amount. Whether or not Ray had actual authority to issue a policy in excess of $50,000, it cannot be seriously contended that he lacked apparent authority. He had already issued one policy to Washington in excess of $50,000.00, and Malta had ratified the excess coverage. It is true that Ray testified that he issued the policy covering the August, 1982 loan for $53,048.16 only after contacting an officer of Malta by phone for approval. He stated that he did not obtain approval from Malta to issue a policy covering the April 13, 1983 loan, and that he made it clear to Washington that it would be difficult to obtain coverage on that loan. This testimony would be persuasive if Ray had issued a conditional receipt, instead of a Certificate of Insurance. But the fact remains that a Certificate of Insurance was issued, and the credit life premium was charged and added to the amount of Washington's loan. In Southern United Life Insurance Company v. Caves, 481 So.2d 764 (Miss. 1985), we rejected the insurance company's argument that its agent, a bank officer licensed to write policies of credit life insurance, had no binding authority to waive a condition of insurability. There, the agent issued a certificate of credit life insurance to Caves, even though the agent knew that Caves had previously suffered a serious heart attack. The certificate of insurance contained a condition that the insured must be in insurable health at the time it was written, and made reference to the master policy which provided that only the president, vice president, secretary or assistant secretary of the insurance company had authority to waive the conditions of the policy. The master policy provided that if the company should find an applicant to be an uninsurable risk, according to its under-writing standards, it could decline the insurance within 31 days from the time the certificate was received by the company. Caves died of a heart attack approximately three weeks after issuance of the certificate. The heart attack was associated with his pre-existing heart condition. After notification of Caves' death, the insurance company conducted an investigation into Caves' medical history and, finding that he had not been in insurable health at the time the certificate was issued, rejected a claim for payment under the policy. In an action brought by Caves' estate against the insurance company, the trial court granted summary judgment in favor of the estate on the issue of liability. A jury awarded punitive damages against the insurance company for bad faith refusal to pay the claim. On appeal, this Court affirmed, both as to liability and as to punitive damages. The Court considered Miss. Code Ann. § 83-17-1 (1972), which provides in part: Every person who solicits insurance on behalf of any insurance company, or who takes or transmits, other than for himself, an application for insurance or a policy of insurance, ... or who shall receive or deliver a policy of insurance of any such company, .. . or receive, collect, or transmit any premium of insurance, ... or do or perform any other act or thing in the making or consummation of any contract of insurance for or with any such insurance company, other than for himself, ... shall be held to be the agent of the company for which the act is done or the risk is taken, as to all the duties and liabilities imposed by law, whatever conditions or stipulations may be contained in the policy or contract. Finding section 83-17-1 to be applicable, the Court stated: It is wholly admitted that [the agent] accepted payment of the premium knowing of the serious pre-existing condition of the insured which she failed to communicate to the company. As a matter of law, this knowledge was imputed to the principal, Southern United [Life Insurance Company]. The condition of insurability was effectively waived and the acts are binding upon the company. 481 So.2d at 767. In the instant case, it is admitted that the agent bank accepted payment of the credit life premium and issued a policy of insurance, knowing that it was for an amount in excess of the limit stated in the policy. We see no distinction between the agent's waiver of the limitation on amount of coverage in the instant case and the agent's waiver of the condition of insurability in Caves. The facts in Gulf Guaranty Life Insurance Company v. Middleton, 361 So.2d 1377 (Miss. 1978), are similar to those in the instant case. There, Gulf Guaranty Insurance Company issued to Citizens Bank of Columbia, Mississippi, a master insurance policy authorizing the bank to issue policies of credit life insurance to certain of the bank's debtors. The master policy, by endorsement, contained a provision that the maximum amount of insurance on the life of any one debtor from age 15 to 55, inclusive, was $20,000.00. From age 56 to 60 the maximum was $10,000.00. On October 23, 1975, Middleton, who was at that time 57 years of age, was issued a credit life certificate in the amount of $10,000.00 through Gulf Guaranty. Middleton at that time had other loans with the bank with credit life insurance written through Gulf Guaranty, making a total of $19,050.00 credit life insurance through Gulf Guaranty. This total was $9,050.00 in excess of the maximum amount authorized under the master policy. On six occasions prior to the issuance of the October, 1975 certificate, the bank had issued to Middleton certificates of insurance through Gulf Guaranty which together resulted in an amount of insurance in excess of Gulf Guaranty's policy limits. In none of those six instances did Gulf Guaranty refuse or reject the excess coverage. On October 24, 1975, one day after issuance of the $10,000.00 certificate, Middleton died. Gulf Guaranty paid $9,050.00 on Middleton's debts and offered to pay an additional $950.00 plus the unearned premium from the $10,000.00 certificate, but this offer was refused. Middleton's estate brought suit against Gulf Guaranty, Citizens Bank, and the bank officer who was general agent for Gulf Guaranty. After a bench trial, judgment was entered against Gulf Guaranty for the $10,000.00 plus interest on $9,050.00. (Presumably, interest was not assessed on the $950.00 which Gulf Guaranty had offered to pay, but which had been refused.) On appeal, this Court affirmed the judgment against Gulf Guaranty. The Court rejected Gulf Guaranty's argument that there could have been no ratification of the issuance of the $10,000.00 certificate, since it had not received a copy of the certificate and had no knowledge of its existence at the time of the insured's death. The Court stated: Ratification here is not based upon the issuance of this certificate, but stems from [Gulf Guaranty's] ratification and approval with knowledge of the facts, of the six instances of excess insurance over a period of three years as shown in this case without objection on account thereof and its acceptance of the benefit, the premiums therefrom. 361 So.2d at 1382. The Court emphasized that in insurance agency relationships, general laws of agency apply. The Court also stated: The power of an agent to bind his principal is not limited to the authority actually conferred upon the agent, but the principal is bound if the conduct of the principal is such that persons of reasonable prudence, ordinarily familiar with business practices, dealing with the agent might rightfully believe the agent to have the power he assumes to have. The agent's authority as to those with whom he deals is what it reasonably appears to be. So far as third persons are concerned, the apparent powers of an agent are his real powers. Id. at 1383 (quoting Steen v. Andrews, 223 Miss. 694, 78 So.2d 881 (1955) (emphasis added). Based on the above-cited authority, we believe the conclusion is inescapable that Eddie Ray had apparent authority to issue a certificate of insurance exceeding the policy limits. Malta furnished the bank with blank Certificates of Insurance bearing the Malta logo. The bank regularly issued policies of credit life insurance through Malta using these forms. The bank had previously issued policies in excess of $50,000.00 on several occasions. It had issued Washington himself a prior policy in excess of $50,000.00. Under these circumstances, a person of reasonable prudence might rightfully believe that the bank had the authority to grant coverage on behalf of Malta for an amount in excess of $50,000.00. Where an officer of the bank, an authorized agent of Malta, accepted a premium for credit life insurance, issued a Malta Life Insurance Company certificate of insurance, and delivered a copy of the certificate to the debtor, his actions should be binding on Malta. We therefore affirm the chancellor's holding that the credit life policy issued effective April 15, 1983, was in full force and effect at the time of Washington's death. AFFIRMED. DAN M. LEE, P.J., and PRATHER, SULLIVAN and PITTMAN, JJ., concur. ROY NOBLE LEE, C.J., HAWKINS, P.J., and BLASS and ROBERTSON, JJ., dissent.