Specific terms override general terms and insurers bound by agents (US)

Patrick Bracher, Norton Rose Fulbright

The Washington Supreme Court found that an insurance company was bound by its agent’s written representations that a particular corporation was an additional insured under a policy even though the printed words in the certificate of insurance said the addition was not binding.

A mobile telephone operator and a contractor together erected a cell phone tower on a rooftop in New York City which caused damage to the building for which they were sued. The contractor was required by the contract to take out an insurance policy against the damage and the policy automatically covered an additional insured if the contractor was required to add the third party (the mobile telephone operator) to its policy. The certificate of insurance added the holding company and its subsidiaries as additional insureds. The holding company was not party to a contract with the contractor but was sued in the damages claim. It sought cover from the insurer on the basis that it was mentioned as an additional insured in the certificate of insurance. The certificate contains standard pre-printed disclaimers saying that the certificate was for information only and was non-binding. The disclaimers purported to disclaim every bit of information provided by the certificate.

The court held that an insurer is bound by an agent’s authorised or apparently authorised representation whether it is transmitted via a letter, email, certificate of insurance or something else. Insurance companies act through, and are bound by, the representations of their agents made with actual or apparent authority.

Secondly, the disclaimers were general boilerplates whereas the certificates were specifically written for the deal. The basic rule of interpretation is that the specific prevails over the general, otherwise all the certificates would do would be to set a trap for the certificate holder. Not all disclaimers are ineffective if couched in this way but if they completely and absolutely contradict other parts of the policy, the specific parts will be enforced.

The insurers were obliged to indemnify the holding company.

The case is T-Mobile USA Inc. v Selective Insurance Company of America.

First published by: Financial Institutions Legal Snapshot