Chicago Title Insurance v. Office of the Insurance Commissioner
178 Wash. 2d 120
Wash.2013Background
- Chicago Title Insurance Co. (CTIC) appointed Land Title Insurance Co. (a UTC not licensed to underwrite) as its issuing agent in four Washington counties; CTIC conducted no direct operations there.
- Washington law requires title insurers to maintain or retain agents with local title plants and defines an "agent" as one appointed to solicit insurance applications.
- OIC found widespread industry practice of unlawful inducements (gifts/entertainment exceeding $25) to real estate middlemen and investigated CTIC and Land Title; CTIC later stipulated that Land Title violated the inducement rule.
- CTIC refused an OIC consent order imposing a fine and compliance plan; OIC brought disciplinary proceedings against CTIC for vicarious liability for Land Title’s inducements.
- Administrative law judge granted CTIC summary judgment (no vicarious liability); OIC review judge, superior court, and ultimately the Washington Supreme Court held CTIC vicariously liable under statute and common law implied authority.
Issues
| Issue | Plaintiff's Argument (OIC) | Defendant's Argument (CTIC) | Held |
|---|---|---|---|
| Whether statutory agency appointment makes solicitation (and related inducements) within agent's authority such that principal is vicariously liable | The insurance code makes solicitation an inherent power of an appointed agent; regulations bar inducements "directly or indirectly," so insurer is liable for agent's inducements | The statute merely labels the relationship "agent" but does not define scope; contractual limits and lack of CTIC control negate vicarious liability | Held: Yes — statutory definition of agent includes solicitation; CTIC is liable for Land Title’s solicitation-based inducements. |
| Whether, apart from statute, common-law agency (implied/inherent authority) makes CTIC liable for Land Title’s unlawful inducements | Even without statute, granting authority to sell implies authority to take customary steps to effect sales; industry practice made inducements customary, so CTIC is liable | CTIC lacked the right to control Land Title’s marketing; parties contracted to limit agency scope, so common-law vicarious liability should not apply | Held: Yes — implied/inherent authority applies because solicitation and customary marketing steps (even unlawful ones) were necessary/incidental to Land Title’s role as CTIC’s general agent. |
| Whether CTIC’s lack of active control over Land Title’s marketing defeats vicarious liability (right-to-control test) | Right-to-control is an alternative test mainly used in tort; here unlawful acts fall within statutory and implied authority so control test unnecessary | Right-to-control controls vicarious liability; CTIC never exercised or retained control over marketing, so it should not be liable | Held: Court did not rely on right-to-control; statutory and implied-authority bases suffice to impose liability. |
| Whether OIC engaged in de facto rulemaking in adjudication (APA challenge) | The OIC properly enforced a duly promulgated rule (former WAC 284-30-800) under delegated authority | CTIC argued OIC was effectively making new rules via adjudication without notice-and-comment | Held: OIC followed APA procedures when adopting the rule; no impermissible de facto rulemaking occurred. |
Key Cases Cited
- First Am. Title Ins. Co. v. Dep't of Revenue, 144 Wn.2d 300 (recognizing UTCs and distinguishing agency/principles in title context)
- Pagni v. N.Y. Life Ins. Co., 173 Wash. 322 (a principal is bound by acts of an agent within real or apparent authority despite secret limitations)
- Nat'l Fed'n of Retired Persons v. Ins. Comm'r, 120 Wn.2d 101 (definition and scope of "solicit" in insurance context interpreted broadly)
- Miller v. United Pacific Casualty Ins. Co., 187 Wash. 629 (agent acting as insurer’s alter ego can bind insurer when insurer can do business only through agent)
- Debentures, Inc. v. Zech, 192 Wash. 339 (implied authority includes acts reasonably necessary to exercise granted powers)
- Lien Ho Hsing Steel Enter. Co. v. Weihtag, 738 F.2d 1455 (9th Cir.) (acts of those who solicit bind the insurer despite contrary waivers)