Can Insurance Company Be Responsible For The Wrongs Of An Agent

The above is a question most insurance lawyers will ask themselves when investigating a case.

An insurance company cannot escape liability by showing that it did not authorize the specific wrongful act.  This is made clear in two Texas Supreme Court opinions.  One is styled, Celtic Life Insurance Co. v. Coats, and it was issued in 1994.  The other is styled, Royal Globe Insurance Co. v. Bar Consultants, Inc., issued in 1979.

As the Celtic court stated:

In determining a principal’s vicarious liability, the proper question is not whether the principle authorized the specific wrongful act; if that were the case, principals would seldom be liable for their agents’ misconduct.  Rather, the proper inquiry is whether the agent was acting withing the scope of the agency relationship at the time of the act …  The misrepresentation in the present case was made in the course of explaining the terms of the policy — a task the jury specifically found to be within the scope of the agent’s authority.  Thus, Celtic cannot escape liability on the basis that it did not authorize particular representations concerning the policy.

We all hope that legal issues ultimately make sense.  As stated in the opinion, the Texas Supreme Court found that the jury finding was just and proper and upheld the decision.  A reading of the statement above should also make good sense.