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The Georgia Court of Appeal upholds denial of coverage because insurance brokers lacked the agency to accept premium payments



In American Reliable Insurance Company v. Lancaster the Georgia Court of Appeals reversed the denial of a property insurer's summary assessment proposal regarding the insurer's denial of a fire loss claim. The basis for the denial was that the policyholders had not paid the insurance premium. The policyholders, Charlie and Wanda Lancaster, claimed that for several years they had paid their insurance premiums to their insurance agent Macie Yawn. In October 2014, American Reliable sent a notice of renewal to Lancasters informing them that premium payments must be made directly to the insurer. After receiving no payment from Lancasters, American Reliable sent them a cancellation notice in December 201

4 and again notified them that payments would be made directly to the insurer. Lancasters denied having received either message from American Reliable, but the record contained a receipt for mailings.

After Lancaster's home fire in 2015, American Reliable denied coverage on the grounds that the policy had been canceled for non-payment of premiums. In the subsequent coverage measure, the court denied American Reliables' draft summary judgment and ruled that there was a factual question about the actual and obvious authority of the insurance agent, Yawn. On appeal, the Court of Appeal found that the trial court erred in ruling that there was a factual issue concerning Yawn's agency. Specifically, the Court of Appeal ruled that the minutes showed that American Reliable had terminated Yawns' agency for accepting insurance premiums and that Lancaster was notified of the termination in the notice of renewal and cancellation. In addition to finding that Yawn was not a real agent, the court held that Yawn had no apparent authority, as the notices sent to Lancasters stated that the premium payment would be paid to American Reliable, not to the agent. [19659003] The decision in Lancaster illustrates that relations between insurance intermediaries and brokers are not uniform. One size does not fit all. Policyholders should therefore never assume that their insurance brokers have agency status for accepting premiums or notices commissioned by insurers. Although insurance agents and brokers may have such an agency – as Yawn did when the Lancasters made their first premium payment under the US Reliable Policy – it is important for policyholders to confirm that status and, more importantly, to follow the insurance policy and insurer instructions to pay premiums, announce claims and other important insurance measures. Although most insurance agents and brokers competently assist their clients with interactions between insurance companies, other agents do not do so with the appropriate degree of attention to detail, to the detriment of the policyholder. Worse, there are many cases where brokers refuse liability when the broker failed to perform the requested measures on behalf of a policyholder. In these cases, many brokers will claim that they did not act as the insurer's agent. Consequently, policyholders should confirm important insurance events, such as payment of premiums and notification of claims, directly with the insurer.


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