Home Materials, Inc. v. Auto Owners Ins. Co., 39207

• Decision Date: 10 February 1983
• Docket Number: No. 39207,39207
• Citation: 300 S.E.2d 139,250 Ga. 599
• Parties: HOME MATERIALS, INC., et al. v. AUTO OWNERS INSURANCE COMPANY et al.
• Court: Georgia Supreme Court

Page 139

300 S.E.2d 139

250 Ga. 599

HOME MATERIALS, INC., et al. v. AUTO OWNERS INSURANCE COMPANY et al.

No. 39207.

Supreme Court of Georgia.

Feb. 10, 1983.

Rehearing Denied Feb. 22, 1983.

J. Carol Sherwood, Jr., McLane, Dover, Sherwood & Shelton, Valdosta, for Home Materials, Inc., et al.

William U. Norwood, III, Thomasville, O. Wayne Ellerbee, Valdosta, for Auto Owners Ins. Co., et al.

CLARKE, Justice.

This appeal attacks the constitutionality of OCGA § 33-24-45(e) (Code Ann. § 56-2430.1) and raises a question of whether a dual agent's representation to one of its principals binds the other.

The statute in question imposes a lesser duty on an insurer dealing with an entity other than a natural person. Although Home Materials contends that this is a denial of equal protection, the trial court found the statute constitutional. We agree.

The case was tried before the court without a jury on stipulated facts. Included in the stipulation were the facts that McAllister was the dual agent of both insured and insurer, and that he represented to the insured that its insurance was renewed. The trial court held that this representation did not bind the insurer. We disagree.

Home Materials, Inc. has insured a fleet of vehicles with Auto Owners Insurance Company under a commercial fleet insurance policy since April 27, 1977. The policy was recommended and procured by McAllister as agent for both Home Materials and Auto Owners. McAllister has acted as agent of Auto Owners since 1976 pursuant to a written agency contract.

The last policy of Home Materials with Auto Owners was to expire of its own terms in April, 1980. In January, 1980, Auto Owners sent a questionnaire to McAllister which was to be forwarded to and completed by Home Materials. Several memos were sent to McAllister as a follow-up. On February 19, 1980, Auto Owners informed McAllister that because of lack of information Home Materials' policy would not be renewed.

McAllister contends that it obtained the completed questionnaire from Home Materials and forwarded it to Auto Owners sometime between February 15 and February 21, 1980. McAllister has no evidence of the mailing, and Auto Owners never received the questionnaire. McAllister never informed Home Materials that the policy would not be renewed and never billed Home Materials for any coverage after April 27, 1980.

In July, 1980, the president of Home Materials was involved in an accident in a vehicle owned by Home Materials. Two passengers in the vehicle died as a result of the accident. The driver and another passenger were injured. Following the accident, McAllister tendered to Auto Owners the premium for the insurance which had expired in April. Auto Owners denied coverage. In addition to the other stipulated facts were the salient facts that at all times McAllister represented to Home Materials that it had coverage under the policy and that McAllister was a dual agent of both Home Materials and Auto Owners. ¹

1. The first question deals with the constitutionality of OCGA § 33-24-45(e) (Code Ann. § 56-2430.1). Home Materials alleges that the code section denies equal protection to insureds other than natural persons. The statute provides that no insurers shall fail to renew a policy unless it sends a written notice of non-renewal to the insured. However, the statute defines "policy" as a policy insuring a natural person or persons. OCGA § 33-24-45(b)(2) (Code Ann. § 56-2430.1). Home Materials contends that this constitutes a denial of equal protection to corporations. "Under the equal protection guarantee of our State Constitution (Code Ann. § 2-203), classification in legislation is permitted when the classification is based on rational distinctions, and the basis of the classification bears a direct and real relation to the object or purpose of the legislation." Cannon v. Georgia Farm Bureau Mutual Ins. Co., 240 Ga. 479, 482, 241 S.E.2d 238 (1978). See also State Farm Mutual Automobile Insurance Co. v. Five Transportation Co., 246 Ga. 447, 271 S.E.2d 844 (1980); C & S National Bank v. Mann, 234 Ga. 884, 218 S.E.2d 593 (1975). There is a rational distinction between the notice of requirement as to individual and corporate insureds. An assumption may be made that a corporate insured is more sophisticated in its various business activities than is an individual insured. The mere fact that the technical requirements of incorporation have been followed is evidence of this. Thus the justification for imposing the additional burden of a written notice of intention not to renew upon the insurer may not be present when the insured is a corporation rather than an individual. Disparate treatment of individual and corporate insureds is not a violation of equal protection in that it bears a real relation to the object of the legislation, which is to protect unsophisticated and more likely unwary insureds by assuring that insurance remains in effect.

Georgia law has long recognized the rationality of distinguishing between natural persons and corporations in restricting business activity. Cf. OCGA § 7-4-6 (Code Ann. § 57-118).

2. We turn now to the question of the binding nature of McAllister's representations. The stipulated facts reveal that McAllister was a dual agent and that the representations were made to one principal without the express authority or knowledge of the other. The principal to whom the representations were made relied upon them to its detriment.

Before examining the effect of the duality of the agency, we look first to the extent to which an agent may generally bind its principal. By statute, a principal is bound by all acts of its agent within the scope of his authority. OCGA § 10-6-51 (Code Ann. § 4-302). The principal is also bound when the agent lacks express authority but is possessed of apparent authority. "The authority of an agent in a particular instance ... may be established by the principal's conduct and course of dealing, and if one holds out another as his agent, and by his course of dealing indicates that the agent has certain authority, and thus induces another to deal with his agent as such, he is estopped to deny that the agent has the authority which, as reasonably deducible from the conduct of the parties, the agent apparently has." Equitable Credit Corp. v. Johnson, 86 Ga.App. 844, 847, 72 S.E.2d 816 (1952). An estoppel is worked against the principal to deny authority if it appears that the third party dealt with the agent in reliance upon the authority apparently conferred upon it by the principal. Interstate Financial Corp. v. Appel, 134 Ga.App. 407, 215 S.E.2d 19 (1975). Under some authorities an agent's representation to a third party would be binding upon the principal even if in making the representations the agent were guilty of negligence or misconduct. See...