Michigan Court of Appeals; Docket #359291; Published
Judges Hood, Swartzle, and Redford; Authored by Judge Swartzle
Official Michigan Reporter Citation: Forthcoming; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Insurance Agents (Duty to Insured)
SUMMARY:
In this unanimous, published decision authored by Judge Swartzle, the Court of Appeals reversed the trial court’s denial of Defendant Hartford Accident and Indemnity Company’s (“Hartford”) motion for summary disposition, in which it sought dismissal of Plaintiff Ahmed Al-Hajjaj’s action for No-Fault PIP benefits. At issue was whether an independent insurance agency, Golden Insurance Agency, LLC (“Golden”), was acting as an agent of Al-Hajjaj (insured), or Hartford (insurer), when it facilitated Al-Hajjaj’s purchase of a Hartford commercial automobile insurance policy. The Court of Appeals ultimately held that Golden was an agent of Al-Hajjaj with respect to the transaction, despite (1) 2018 amendments to Chapter 12 of the Insurance Code which the Court noted might, under certain circumstances (none present in this case), abrogate the common law principle that an independent insurance agent is an agent of the insured, not the insurer, and (2) a standard independent insurance agent contract between Golden and Hartford.
Ahmed Al-Hajjaj inquired with Sam Saeidi of Golden Insurance Agency, LLC about purchasing insurance for his business’s vehicles. Golden was an independent insurance agency which sold insurance policies for ten different insurers—including Hartford, pursuant to standard insurance agent contract it had in place with Hartford—and after fielding Al-Hajjaj’s inquiry, Saeidi recommended that he purchase a commercial automobile insurance policy from Hartford. Saeidi and Al-Hajjaj filled out the policy, but the application misspelled the name of Al-Hajjaj’s business and misrepresented the nature of Al-Hajjaj’s work. Hartford issued the policy upon receipt of the application, but later, when Al-Hajjaj was injured in a motor vehicle accident, Hartford sought to rescind the policy based on the misrepresentations in Al-Hajjaj’s application. Al-Hajjaj proceeded to file suit against Hartford, and Hartford moved for summary disposition, arguing that Al-Hajjaj committed fraud in procuring the policy, and, furthermore, that it was immaterial whether Al-Hajjaj or Saeidi were responsible for the misrepresentations, because Al-Hajjaj signed the application. In response, Al-Hajjaj argued that Saeidi—and by extension, Golden—were agents of Hartford with respect to the subject transaction, and that the failure to correct misinformation in the application was imputed to Hartford. Al-Hajjaj’s argument was two-fold: first, he argued that a 2018 amendment to Chapter 12 of the Insurance Code abrogated the common law principle that an independent insurance agent is an agent of the insured, not the insurer, and second, he argued that the contract between Golden and Hartford established that Golden was acting as Hartford’s agent in procuring the policy for Al-Hajjaj. The trial court ultimately agreed with Al-Hajjaj , and denied Hartford’s motion.
The Court of Appeals reversed the trial court’s denial of Hartford’s motion, holding, first, that while the 2018 amendments to Chapter 12 of the Insurance Code might abrogate the common law principle that an independent insurance agent is an agent of the insured under specific circumstances, those circumstances were not featured in this case. Based on the language of the amendments, the only scenario in which the common law principle might be abrogated is where “the insured and the insurer each have their own contractual agents, and those agents in turn have a contractual relationship with each other.” This case presented an entirely different scenario, and thus the 2018 amendments to Chapter 12 did not operate to establish Golden as Hartford’s agent—not Al-Hajjaj’s—with respect to the subject transaction.
“A close reading confirms that the circumstance described in subsection (2) is a narrow, specific one—namely, where the consumer (insured) and insurance company (insurer) each have their own agent, and these two agents in turn have a written contractual relationship with each other. This arrangement is common in the wholesale-insurance sector, but the pre-2018 version of Chapter 12 made such agent-to-agent negotiations arguably unlawful. See MCL 500.1207(3) (pre-2018 PA 449) (prohibiting ‘an agent’ from ‘reward[ing] or remunerate[ing] any person for . . . acting in any other manner as an agent’).
When the insured and the insurer each have their own contractual agents, and those agents in turn have a contractual relationship with each other, it is not even clear to this Court that the common-law principle that an independent-insurance agent is the agent of the insured comes into play. To the extent that the principle might come into play in the circumstance set forth in MCL 500.1211(2), then our Legislature has abrogated that principle with its enactment of 2018 PA 449.
. . .
In sum, Al-Hajjaj correctly points out that our Legislature appears to have abrogated the common law when it enacted 2018 PA 449, though this is a Pyrric victory for him, as the abrogation is rather narrow and does not apply to the circumstance here, where Al-Hajjaj sought an insurance policy through Golden, an independent-insurance agent, and not through an agent-to-agent transaction. Accordingly, unless Golden and Hartford somehow contracted around the common-law principle, the principle would apply here. We turn next to this contractual question.”
Next, the Court of Appeals held that the standard independent insurance agent contract between Golden and Hartford did not operate to establish Golden as Hartford’s agent with respect to the transaction. The Court noted that while independent insurance agents typically contract with multiple different insurers for whom they can offer and sell policies, they are still deemed to be acting as agents of the insured when they do so, absent exceptional language in which they contract around the common law principle. There was no such language in this policy, and thus Golden was held to be an agent of Al-Hajjaj when it sold him the Hartford policy.
“This principle makes sense in the context of an independent-insurance agent, who can offer a single customer an array of options from any of the insurers with which the agent has contracted. A customer can approach an independent-insurance agent and expect to comparison shop between all the available insurers, unlike when a customer goes to a captive-insurance agent, who has but one insurer to offer. An independent-insurance agent who had to balance fiduciary duties of loyalty between competing insurers would effectively be frozen into inaction by a web of crossing and conflicting duties and interests. Instead, in recognition of the materially different circumstances faced by a customer who deals with an independent-insurance agent versus a captive-insurance agent, our courts have concluded that an independent-insurance agent owes its primary fiduciary of loyalty to the customer.
Here . . . Golden owed its primary fiduciary duty of loyalty to Al-Hajjaj as its customer, rather than to Hartford as one of the ten insurers for which it placed policies. While Golden had a contractual duty to Hartford, this did not override or undermine the primary common-law duty that Golden owed to the insured, i.e., Prime Transportation Service, LLC. Given this, Golden was not acting as Hartford’s agent with respect to the insurance application that Golden submitted on behalf of Prime Transportation Services, LLC.”
