447 P.3d 1257
Utah Ct. App.2019Background
- Pacific Life appointed R. Scott National, Inc. (RSN) in 2009 to solicit and procure applications for Pacific life insurance and annuity products; RSN employees received compensation from Pacific.
- Retirees LaMar and LaRene Drew were solicited by RSN employees to buy two $1.5M life policies with the stated plan to resell on the secondary market; RSN advised them to use a reverse mortgage to fund premiums.
- The Drews paid over $300,000 in premiums, could not resell the policies, the policies lapsed, and the Drews lost most of their savings.
- The Drews sued Pacific, claiming Pacific was vicariously liable for RSN employees’ tortious misrepresentations; parties filed cross-motions for summary judgment.
- The district court granted summary judgment for Pacific, concluding (without resolving agency) that RSN employees acted outside the scope of authority; the Drews appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an agency relationship existed between Pacific and RSN | RSN and its employees were Pacific producers and thus agents because they were compensated by Pacific | Pacific argued RSN acted as independent brokers, not agents | Agency existed: Insurance Code treats producers compensated by insurer as producers for insurer (agents) |
| Whether RSN employees acted within scope of authority when they misrepresented policy suitability/resale prospects | RSN was authorized to solicit and describe policies; misrepresentations were incidental to solicitation and benefited Pacific | Pacific relied on contract limits (solicit only, not bind, and must meet customer needs) to argue employees exceeded authority | Held within scope: solicitation/representations about policy characteristics (including resaleability) fall within ordinary scope despite contractual prohibitions |
| Whether statutory/regulatory framework imposes per se insurer liability for agent acts | Drews: statutory language and agency principles make insurer liable for acts within agent's actual/apparent authority | Pacific: statutory reading would create per se agency and strict liability for insurer | Court: statute creates a rebuttable presumption and aligns with common-law agency; it does not impose strict liability but supports vicarious liability when acts are within scope |
| Proper remedy on summary judgment given undisputed material facts | Drews sought partial summary judgment on vicarious liability | Pacific sought summary judgment dismissing vicarious liability | Court reversed district court and remanded with instruction to enter partial summary judgment for the Drews on vicarious liability |
Key Cases Cited
- Wardley Better Homes & Gardens v. Cannon, 61 P.3d 1009 (Utah 2002) (principle: principal liable for agent torts within scope of authority)
- Bodell Constr. Co. v. Stewart Title Guar. Co., 945 P.2d 119 (Utah Ct. App. 1997) (distinguishes acts outside expressly limited authority)
- Zions First Nat'l Bank v. Clark Clinic Corp., 762 P.2d 1090 (Utah 1988) (agents may perform acts incidental to delegated authority)
- Burlington Indus., Inc. v. Ellerth, 524 U.S. 742 (U.S. 1998) (employee lies to customer to make a sale can be within scope because it benefits employer)
- Vina v. Jefferson Insurance Co., 761 P.2d 581 (Utah Ct. App. 1988) (broker vs. agent analysis under prior statutory regime)
- M.J. v. Wisan, 371 P.3d 21 (Utah 2016) (scope of authority can be decided as a matter of law when facts undisputed)