Washington Supreme Court Holds That an Insurance Company Agent with Authority Can Bind the Insurance Company to Provide Coverage

From the desk of Kyle Riley: The Washington Supreme Court recently responded to a question certified by the Ninth Circuit Court of Appeals. The question was one of agency. Specifically, it was unclear whether, under the facts at hand, defendant Selective Insurance Company (“Selective”) was bound by its agent’s written representation made on a certificate of insurance that a particular corporation was an additional insured, particularly since the certificates of insurance included disclaimers that the certificates did not amend the policy.  

Case Pointer: In this matter from the Washington Supreme Court, the justices responded to a question certified by the Ninth Circuit Court of Appeals. At issue was the binding power of a written representation made by an agent of Selective Insurance Company on an entity that was never intended to be covered under a policy. The answer, it turned out, was clear—an agent with authority can bind the insurance company to cover the entity. 

T-Mobile USA, Inc. v. Selective Ins. Co. of Am., 194 Wn.2d 413 (Oct. 10, 2019). 

The underlying facts of the case involved a contract to construct towers on a New York City rooftop for T-Mobile. The construction later resulted in litigation and T-Mobile USA sought insurance coverage through Selective who insured the contractor at issue. Selective denied the tender of T-Mobile USA because they were not an additional insured on the policy. 

T-Mobile USA was later dropped from the suit, but it incurred significant expense defending itself up to that point. T-Mobile USA sued Selective for various claims related to Selective’s rejection of their tender. The district court dismissed the claims against Selective, but T-Mobile USA appealed. The Ninth Circuit certified the single, following question of law to the Washington Supreme Court: 

“Under Washington law, is an insurer bound by representations made by its authorized agent in a certificate of insurance with respect to a party’s status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?” 

The Ninth Circuit had already determined that the insurance agent for the contractor had acted with the apparent authority of Selective in issuing the certificates of insurance that identified T-Mobile USA as an additional insured. The contractor instructed the agent that its contract with T-Mobile required that it name T-Mobile as an additional insured. Over the course of seven years, the agent issued certificates of insurance identifying both T-Mobile USA and T-Mobile NE as additional insureds. However, the contract only required that the contractor name T-Mobile NE as an additional insured. Thus, the language of the policy did not provide coverage to T-Mobile USA. Furthermore, the certificate of insurance included a disclaimer stating that the certificate did not amend, extend, or alter coverage afforded by the policy.   

The Washington Supreme Court undertook a discussion of the topic. It noted first that Selective’s argument that T-Mobile USA unreasonably relied upon the agent’s representation was completely erroneous. The Ninth Circuit had already determined that the agent was acting with apparent authority, which necessarily established that T-Mobile’s belief that the agent was authorized to issue a certificate naming it as an insured was objectively reasonable. 

The certificates at issue contained conflicting language. The majority boilerplate phrases disclaimed all written-in, additional statements about coverage. However, the agent had specifically included a distinct representation that T-Mobile USA was an additional insured under the policy. Selective was up against a losing battle. The court noted the long-accepted rule that the specific prevails over the general. That the agent wrote “T-Mobile USA and its Subsidiaries […] is included as an additional insured” was specific enough to prevail over the general boilerplate language that would have rendered the entire certificate essentially pointless. 

Finally, the Washington Supreme Court undertook a discussion of Postlewait Constr. Inc. v. Great Am. Ins. Cos., 106 Wn.2d 96 (1986). In that case, two certificates of insurance were issued for policies covering construction cranes by the construction company’s broker (not an agent of the insurance company). In that context, the certificates were merely confirmation that a policy existed to cover the goods in question. Unfortunately, that case did not apply, as here, Selective’s own agent was the one issuing certificates listing T-Mobile USA as an additional insured. 

Ultimately, the Washington Supreme Court determined that an insurance company’s agent who makes an authoritative representation can bind the insurance company, even when that specific representation is accompanied by general disclaimers. Thus, insurance companies should review relevant certificates of insurance before rejecting a tender and evaluate whether they were issued by an agent with authority to bind the insurance company.