In this week's Alabama Law Weekly Update, we bring you a case from the Alabama Supreme Court addressing the apparent authority of an agent to bind a principal to a claim under a general-liability insurance contract.
Southern Cleaning Service, Inc. v. Essex Insurance Co., [11410870, May 20, 2016] – So. 3d – (Ala. 2016) (Substantial evidence exists that there is a genuine issue of material fact that agent acted with apparent authority of the principal).
In Southern Cleaning Service, Inc. v. Essex Insurance Co., Southern Cleaning Service, Inc. ("SCSI") claimed that Essex Insurance Co. ("Essex") was contractually obligated to provide coverage to SCSI under a general-liability insurance policy stemming from a slip-and-fall accident at a Winn-Dixie grocery store in Montgomery. The trial court granted Essex's motion for summary judgment that it was not obligated to provide coverage to SCSI because SCSI failed to timely notify Essex of the claim as required by the terms of the policy. On appeal, SCSI argued that it satisfied the notice requirement because it notified Alabama Auto Insurance Center ("AAIC"), an independent insurance agent who issued the policy for Essex. The Alabama Supreme Court reversed the trial court and held that a genuine issue of material fact existed as to whether AAIC had apparent authority to receive notice of the claim for Essex.
Under the terms of the policy, SCSI was obligated to notify Essex of a claim as soon as practical. Upon learning of the claim, SCSI notified AAIC of the claim in writing. However, Essex was not notified of the claim by AAIC until more than a year after SCSI first notified AAIC. The terms of the contract stated that AAIC was an independent contractor and not an agent of the insurer, and thus, was not an agent of Essex. SCSI argued that AAIC had apparent authority to receive notice on behalf of Essex. Even if a third-party is not actually an agent of the principal, the actions of the principal may impute apparent authority to the third-party to act on the principal's behalf.
The Alabama Supreme Court noted that substantial evidence existed that AAIC acted with apparent authority because: (i) all communications concerning the policy from Essex were routed through AAIC; (ii) the policy identified AAIC as "agent" and only provided AAIC's contact information; and (iii) the policy did not provide directions on how to provide Essex with notice of a claim. The court emphasized that these facts do not irrefutably create apparent authority for AAIC to receive notice on behalf of Essex, but held that it is substantial evidence that apparent authority may have existed. Therefore, the Alabama Supreme Court reversed the entry of summary judgment and remanded the case to the trial court.