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INSURANCE & APPARENT AUTHORITY - SOUTHERN CLEANING SERVICES, INC. V. ESSEX INS. CO.

Southern Cleaning Services, Inc. v. Essex Ins. Co., [Ms. 1140870, Feb. 19, 2016, as modified on denial of rehearing May 20, 2016] __ So. 3d __ (Ala. 2016). If a person buys insurance through an independent agent and the insurer puts the independent agent’s name and address on the policy, this may constitute substantial evidence that the insurer gave the independent agent the apparent authority to receive claims on the policy. A claim in this case was presented to the independent agent, but it was not forwarded to the insurer, which did not receive actual notice of the claim until 15 months after the injury. Essex denied coverage due to untimely notice, and when the defendants sued Essex to provide coverage, the trial court entered a summary judgment for Essex. The Supreme Court reverses that summary judgment, holding that, because Essex placed the independent agency’s name and contact information on the policy and did not place contact information for itself on the policy, there was substantial evidence that it cloaked the independent agency with apparent authority to receive the notice of claim.

This opinion recites several important principles concerning apparent authority. First, citing Protective Life Ins. Co. v. Atkins, 389 So. 2d 117, 119 (Ala. 1980), the Court, at Ms. *17, reiterates “a contract placing limits on an agency relationship ‘does not affect third persons relying upon the agent’s apparent authority without notice of his limitations.’” Second, citing Gray v. Great American Reserve Ins. Co., 495 So. 2d 602, 607 (Ala. 1986) and Malmberg v. American Honda Motor Co., 644 So. 2d 888, 891 (Ala. 1994), the Court reiterates at Ms. *17 that “[t]he doctrine of apparent authority is based upon the actions of the principal, not those of the agent; it is based upon the principal’s holding the agent out to a third party as having the authority upon which he acts, not upon what one thinks an agent’s authority might be or what the agent holds out his authority to be.” Third, quoting North River Insurance Co. v. Overton, 59 So. 3d 1, 6-7 (Ala. 2010), the Court (at Ms. *19-20) again explains that pursuant to § 8-2-8, Ala. Code 1975, “[u]nder Alabama law, notice given to the insurance agent is imputed to the agent’s insurer, and the agent’s knowledge obtained while acting within the scope of his authority is presumed to have been communicated to the insurer.”

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