Golden Rule Insurance Co. v. Tomlinson
335 P.3d 1178
Kan.2014Background
- Denney applied for individual health insurance through broker/agent Dirk McClary; McClary submitted applications to multiple insurers and ultimately submitted one to Golden Rule without disclosing Denney's preexisting digestive condition.
- Denney did not review or sign the Golden Rule application before submission; McClary received a commission from Golden Rule and used Golden Rule’s online portal to submit the application and to set up electronic premium withdrawal.
- Golden Rule issued the policy, later investigated after Denney sought preapproval for surgery, denied coverage based on the undisclosed preexisting condition, and offered an exclusionary rider; Denney refused and Golden Rule canceled the policy.
- Denney filed a complaint with the Kansas Insurance Department; the Department found Golden Rule violated K.S.A. 40-2404(9)(d) and (f) and ordered relief; district court affirmed, Court of Appeals reversed on agency grounds, and the Kansas Supreme Court granted review.
- The Supreme Court evaluated whether McClary was Golden Rule’s agent (and within scope of authority), whether Golden Rule committed unfair claim settlement practices under subsections (d) and (f), and whether the Department’s remedy was authorized.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McClary was Golden Rule’s agent | Dept./Denney: appointment, contract, use of company portal, commissions and conduct show principal-agent relationship | Golden Rule: McClary was an independent broker; contract disclaims agency; broker represents insured | Court: Substantial evidence supports that McClary was Golden Rule’s agent (soliciting agent) and had authority to submit applications |
| Scope of McClary’s authority to bind Golden Rule | Dept./Denney: contract language, appointment, portal and commission show actual authority to obtain and submit applications | Golden Rule: McClary sold for multiple companies and lacked exclusive authority to select insurer | Court: Contract and appointment gave McClary actual authority to solicit/submit applications — within scope of soliciting agent authority |
| Whether Golden Rule violated K.S.A. 40-2404(9)(d) (refusing to pay without reasonable investigation) | Dept./Denney: Golden Rule failed to investigate the agency relationship and refused payment, effectively stonewalling | Golden Rule: Conducted a 4-month investigation that was prompt and reasonable | Held: Violation of (d) affirmed — failure to investigate agency relationship made refusal gross and flagrant |
| Whether Golden Rule violated K.S.A. 40-2404(9)(f) (not attempting in good faith to settle when liability reasonably clear) | Dept./Denney: company did not attempt fair prompt settlement | Golden Rule: investigation showed efforts to investigate and no clear liability | Held: Violation of (f) reversed — liability was not reasonably clear given genuine agency dispute |
Key Cases Cited
- Earth Scientists v. United States Fidelity & Guar., 619 F. Supp. 1465 (D. Kan. 1985) (defines soliciting agent and distinguishes soliciting agent from general agent)
- Pettijohn v. The Saint Paul Fire & Marine Ins. Co., 164 P. 1096 (Kan. 1917) (historical example of soliciting agent authority in Kansas caselaw)
- Rosedale Securities Co. v. Home Ins. Co., 243 P. 1023 (Kan. 1926) (definition of insurance broker and broker-as-agent-of-insured principle)
- Eikelberger v. Insurance Co., 190 P. 611 (Kan. 1920) (licensing is a permitting process and does not alone define agent powers)
- Barbara Oil Co. v. Kansas Gas Supply Corp., 827 P.2d 24 (Kan. 1992) (agency is a question of law; existence depends on competent evidence)
- Damon's Missouri, Inc. v. Davis, 590 N.E.2d 254 (Ohio 1992) (broker may become agent of insurer upon notice or acceptance of application)