Modern Woodmen of America, a fraternal life insurance society, brought a declaratory judgment action seeking a declaration of its rights and obligations relating to a claim against it by an insured, Marjorie Crumpton, that she was defrauded by a Modern Woodmen insurance agent. Ms. Crumpton filed an answer and a counterclaim alleging that Modern Woodman was liable to her for the acts of its agent on the basis of fraud, breach of contract, breach of fiduciary duty, and negligence. She sought compensatory and punitive damages and attorney fees pursuant to OCGA § 13-6-11. We granted Modern Woodmen’s application for an interlocutory appeal from the trial court’s denial of its motion for summary judgment.
In 1987, Modern Woodmen issued a life insurance policy to Ms. Crumpton. The agent procuring the policy for Modern Woodmen was Joel Crumpton, Ms. Crumpton’s husband. 1 Without Ms. Crumpton’s knowledge or authorization, Mr. Crumpton fraudulently obtained two loans from Modern Woodmen against Ms. Crumpton’s policy, one in September 1989 for $406.94 and one in March 1990 for $243.49. In both instances, Mr. Crumpton, in his position as the procuring agent on the policy, fraudulently obtained the loan and the check for the loan amount issued by Modern Woodmen payable to Ms. Crumpton. Mr. Crumpton then forged his wife’s endorsement on both checks and converted the money to his own use. Modern Woodmen did not know about, approve, or ratify Mr. Crumpton’s fraudulent acts.
Ms. Crumpton testified by deposition that she had no knowledge of the loans against the policy and did not receive any correspondence from Modern Woodmen relating to the loans until after her divorce from Mr. Crumpton. She testified that, when she was mar *568 ried to Mr. Crumpton, he received all of the business correspondence from Modern Woodmen concerning the policy and that she relied on him to keep her informed. The Crumptons divorced in 1991, and Ms. Crumpton became aware of the loans in early 1992 when she received correspondence regarding the loans from Modern Woodmen. In mid-1992, Ms. Crumpton demanded the cash surrender value of the policy from Modern Woodmen but received only the cash value reduced by the amount the policy had been diminished by the unauthorized loans. Subsequently, Ms. Crumpton, through counsel, informed Modern Woodmen that the loans were unauthorized and that her endorsements on the checks were forged. She demanded that Modern Woodmen refund the cash value she lost as a result of the unauthorized loans and pay her additional sums including punitive damages for the tortious conduct of its agent. Shortly thereafter, Modern Woodmen filed the present declaratory judgment action in December 1992. Mr. Crumpton admitted in deposition testimony given in March 1994 that he fraudulently obtained the loans and forged his wife’s endorsement on the loan checks without her knowledge. He testified that until the latter part of 1992 he had denied forging the checks.
Modern Woodmen moved for summary judgment on the basis that it was not liable for the tortious acts committed by its agent, Mr. Crumpton, in fraudulently obtaining the unauthorized loans for his own benefit and forging Ms. Crumpton’s endorsement on the checks.
Generally, an employer may be held responsible for the tortious act of an employee where the act was “authorized by the employer prior to its commission, ratified [by the employer] after its commission, or committed within the scope of the employment. [Cit.]”
Sexton Bros. Tire Co. v. Southern Burglar Alarm Co. &c.,
Pursuant to OCGA § 51-2-2, an employer “shall be liable for torts committed by . . . his servant by his command or in the prosecution and within the scope of his business. . . .” However, “in determining the liability of the master for the negligent or wilful acts of a servant, the test of liability is, not whether the act was done during the existence of the employment, but whether it was done within the scope of the actual transaction of the master’s business for accomplishing the ends of his employment. [Cits.] If a servant steps aside from his master’s business to do an act entirely disconnected from it, and injury to another results from a doing of the act, the servant may be
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liable, but the master is not liable.” (Punctuation omitted.)
Wittig v. Spa Lady &c.,
Mr. Crumpton’s acts in fraudulently obtaining the unauthorized loans against the policy and in forging Ms. Crumpton’s endorsement on the checks were personal acts outside the scope of his employment with Modern Woodmen.
Wittig,
supra. Moreover, since there is no evidence that Modern Woodmen knew or should have known that Mr. Crumpton was likely to commit such acts, there is no basis for concluding that Modern Woodmen breached a duty to control the acts of its agent done outside the scope of employment. See
Ihesiaba v. Pelletier,
A different rule, however, applies to Ms. Crumpton’s action to the extent it seeks reimbursement based on breach of contract for the amount that her contracted-for benefits under the life insurance policy with Modern Woodmen were diminished by the unauthorized loans. “In an action on a contract of insurance, the insurance company is generally . . . estopped to deny liability on any matter arising out of the fraud, misconduct, or negligence of an agent of the company.”
Stillson v. Prudential Ins. Co. &c.,
Accordingly, the trial court correctly denied Modern Woodmen’s motion for summary judgment to the extent this issue was presented under Ms. Crumpton’s breach of contract claim.
We find no basis, however, for the award of attorney fees pursuant to OCGA § 13-6-11 based on a claim that Modern Woodmen acted in bad faith or was stubbornly litigious in relation to the breach of contract claim. There is no evidence that Modern Woodmen acted in bad faith concerning the transaction or dealings out of which the cause of action arose. As to the issue of stubborn litigiousness, since there was a bona fide controversy concerning the punitive damages and tort claims pursued by Ms. Crumpton, there is no basis for the award of attorney fees on this ground.
Ralston v. Etowah Bank,
Judgment affirmed in part and reversed in part.
Notes
Modern Woodmen contends that Joel Crumpton acted as an independent contractor rather than its employee, as claimed by Ms. Crumpton. We need not resolve this issue. For purposes of this appeal from the denial of its motion for summary judgment, Modem Woodmen concedes that we should assume Mr. Crumpton acted as its employee agent. Since we find no evidence in the present record that Mr. Crumpton also acted as Ms. Crumpton’s agent, we need not address Modem Woodmen’s enumerations and arguments relating to dual agents.