Court Opinion

ID: 9604520
Source: CourtListenerOpinion
Date Created: 2023-08-22 02:23:02.362038+00
Date Added: 2024-06-11T09:11:38.040181
License: Public Domain

JOHNSTONE, Justice,
dissenting.
I agree with the majority that Maresca was an agent of PALIC and NIS notwithstanding the attempt to disavow Maresca’s agency status in the agreement between Maresca and NIS. However, while KRS 304.9-020 makes Maresca an agent for PALIC and NIS, it does not establish the scope of Maresca’s authority as the companies’ agent. “[A] statute making an insurance solicitor the agent of the insurer does *135not define the extent of the agent’s powers or the scope of his authority.” 16 Apple-man, Insurance Law and Practice § 8697. While the majority pays lip service to this point, it ignores a long and heretofore uninterrupted line of cases that make a clear distinction between general agents and soliciting agents.
As explained in Prudential Insurance Company of America v. Jenkins, Ky., 290 Ky. 802, 162 S.W.2d 791, 795 (1942):
A general agent of an insurance company is generally one who is authorized to accept risks, agree upon and settle the terms of the insurance contracts, issue policies by filling out blank instruments which are furnished him for that purpose, and to renew policies already issued, as distinguished from a soliciting agent who merely procures applications, forwards them to some other officer by whom the policies are issued, collects the premiums and delivers the policies. An agent may be a general agent as to his powers, although he represents the company only in a particular locality or within a limited territory, and in the latter aspect is called a local agent.
Id. at 795.
Because Kentucky makes this distinction between general and soliciting agents, the majority’s reliance on Celtic Life Insurance Company v. Coats, 885 S.W.2d 96 (Tex.1994), is misplaced. At the beginning of its discussion of the case, the Celtic court stated, “In the context of life, health, and accident insurance, the Texas Insurance Code makes no distinction between recording agents and soliciting agents.... Rather, agents are defined generally.” Celtic, 885 S.W.2d at 98. From there, the Celtic court, like the majority, relied on common-law rules of agency to determine that the insurer was liable for the misrepresentations of its agent. Id. at 99.
In relying on Celtic, the majority errs in concluding that the scope of Maresca’s authority is fixed upon the determination of his agency status under the statute, which is consistent with the law of Texas. Rather, under the law of Kentucky, we must look to Maresca’s agreement with PALIC and NIS to determine the scope of his actual authority. See Continental Casualty Company v. Neikirk, Ky., 312 Ky. 577, 229 S.W.2d 58, 60 (1950). The pertinent part of this agreement states:
If this application is approved and I receive a license to represent any insurance company on whose behalf ... (NIS) markets or administers business ... I understand that I will act as an independent contractor, not an employee or agent of NIS or any insurance company NIS represents.... I understand I will be vested of all commissions, according to the then prevailing scale of commission then in effect as long as I continue to service business in a manner satisfactory to NIS and I continue to be the designated broker of record and hold a valid insurance license.... As acknowledgment of my responsibility to each person to be insured through any coverage marketed or administered by NIS, I agree to fully explain to such persons all benefits, limitations and exclusions that pertain to any coverage I solicit. This explanation will occur prior to or concurrently with the solicitation and completion of any required individual enrollment material.
Thus, the agreement makes Maresca a soliciting agent rather than a general agent.
The rule in this Commonwealth has long been that “where limitations on the soliciting agent’s authority are contained in the application, the insured is bound to take notice thereof and he cannot hold the company bound for acts of the agent beyond such limitations .... ” Metropolitan Life Insurance Company v. Tannenbaum, Ky., 240 S.W.2d 566, 570 (1951).
The application signed by Karen contained the following paragraph:
*136I, on behalf of the Applicant-Sponsor, its Eligible Employees, and their dependents, understand the Licensed Broker who solicited this Application and Subscription Agreement, or the person on whom we relied to explain any insurance coverages, limitations or exclusions represented by insurance we are seeking under this Agreement was acting as an Independent Contractor and not as a Broker of PALIC or NIS. Furthermore, the person who solicited this Agreement or upon whose explanation of coverages and benefits we relied is in fact our Broker for purposes of this Agreement. We understand as an Independent Contractor and as our Broker that person has no right to bind this coverage, or alter terms or conditions of any Policies or any Enrollment Card or to waive any requirements of PALIC or NIS, or to adjust any claims for benefits under this insurance for which we are applying.
As already noted, KRS 304.9-020 made Maresca an agent of both PALIC and NIS. Thus, that part of the application stating that Maresca is D & B’s agent has no effect. This includes that part of the application that purports to make Maresca D & B’s agent for purposes of explaining the coverage and benefits of the agreement. However, that part of the application stating that Maresca had “no right to bind this coverage, or alter terms or conditions of any Policies or Enrollment Card or to waive any requirements of PALIC or NIS, or to adjust any claims for benefits under this insurance for which we are applying,” is consistent with his status as a soliciting agent, and, thus, was effective notice to Karen of the limitations on Maresca’s authority.
The question then becomes whether Maresca’s alleged torts were committed while he was acting in the scope of his authority as a soliciting agent for PALIC and NIS. Clearly, they were not.
The majority is careful to note that “[tjhis is a case in which affirmative misrepresentations about coverage are alleged, not simply the failure to advise a potential insured about optional coverages.” The majority must make this distinction because as a general rule under Kentucky law an insurer and its agents owe no duty to advise an insured. Trotter v. State Farm Mutual Automobile Insurance Company, 297 S.C. 465, 377 S.E.2d 343, 347 (App.1988); see also Mullins v. Commonwealth Life Insurance Company, Ky., 839 S.W.2d 245 (1992), which cited Trotter extensively with approval. However, the majority’s careful distinction is without a difference.
The alleged affirmative misrepresentation in this case was Maresca’s claim that the PALIC policy offered better coverage than D & B’s then-existing health insurance plan at a cheaper price. Assuming that this assertion somehow goes beyond mere puffing, it still does not fall within the scope of Maresca’s authority as a soliciting agent for PALIC and NIS. Generally, the scope of the authority of a soliciting agent is limited to procuring policies, forwarding them to another officer who is responsible for approving and/or issuing the policy, collecting premiums, and delivering policies. Jenkins, 162 S.W.2d at 795. However, in this case, the agreement between Maresca and PALIC and NIS also expressly authorized Maresca to explain the benefits, limitations, and exclusions contained in the insurance policies he solicited. Thus, these duties also fell within the scope of Maresca’s authority.
Unfortunately, Maresca’s very general qualitative assertions that the PALIC policy was better than D & B’s then-existing health insurance plan did not fall within the scope of Maresca’s authority to explain the benefits, limitations, and exclusions of the particular PALIC policy in question. Rather, for an affirmative misrepresentation to be a breach of Maresca’s duty to explain, the misrepresentation would have to be in the nature of a quantitative mis*137representation of the coverage provided by the PALIC policy.
For example, in Celtic, supra, the insurance agent represented to the potential insured that the coverage benefits for psychiatric care contained in the policy he was soliciting was equal to or better than the $20,000 coverage provided by the potential insured’s current policy. Celtic, 885 S.W.2d at 97. The policy in question stated that psychiatric benefits under the policy were limited to $10,000. Id. When questioned about the limitation, the agent represented to the potential insured that the limitation only applied to out-patient psychiatric care. Id. The agent’s affirmative representation as to the amount of coverage for psychiatric benefits contained in the policy in question was false. His affirmative representation made in response to a direct question concerning the effect of the stated $10,000 limitation for psychiatric benefits contained in the policy in question, was also false.
The agent in Celtic made false and quantifiable misrepresentations as to the coverage provided by the policy in question. His comparative claim that the coverage afforded by the policy he was soliciting was better than or equal to the potential insured’s current policy merely served as a springboard for his affirmative misrepresentation as to the amount of coverage provided. The comparison made by the agent in Celtic went far beyond a mere assertion that one policy was better than the other; rather, the agent’s comparison included an affirmative and quantifiable misrepresentation as to the amount of coverage provided for psychiatric care by the policy the agent was soliciting.
In the case at bar, Maresca’s claim that the PALIC policy offered better coverage at a cheaper price than D & B’s then-existing health plan cannot be construed as an affirmative and specific misrepresentation that the coverage provided by the PALIC policy for work-related injuries was better than the coverage for work-related injuries provided by D & B’s then-existing health plan. Maresca never claimed that the PALIC policy provided coverage for work-related injuries. Karen never asked Maresca whether the PALIC policy provided coverage for work-related injuries. Further, she never inquired as to the meaning or the purpose of the optional Occupational Coverage rider in question. Maresca’s alleged failure to explain the Occupational Coverage rider to Karen is an act of omission that is not, and cannot be, an affirmative misrepresentation made by Maresca that falls within the scope of his authority as a soliciting agent for PALIC and NIS.
The majority opinion turns on the fact that “[t]his is a case in which affirmative misrepresentations about coverage are alleged .... ” Thus, whether Maresca ever explained the significance of the Occupational Coverage rider, or even mentioned the rider to Karen, is immaterial to whether PALIC and NIS can be held vicariously liable for Maresca’s acts. Moreover, it is undisputed that when Maresca attempted to explain to Karen that she could purchase the Occupational Coverage rider for an additional $15.00 per month, she interrupted Maresca and told him that she did not want it. However, the majority opinion conveniently ignores that fact in its zeal to reach the desired conclusion that Maresca affirmatively misrepresented the coverage of the policy. There is simply no evidence in the record to support the conclusion that Maresca affirmatively misrepresented the coverage for work-related injuries provided by the PALIC policy.
Stephan and Karen Roethke’s plight is compelling. While they have my sympathy, I cannot in good conscience go along with the majority and ignore the law in order to provide them with a potential remedy.
COOPER and GRAVES, JJ., join this dissenting opinion.