Medical Mutual Liability Insurance Society v. Mutual Fire, Marine & Inland Insurance

⁷⁰⁷ Liss, J., delivered the opinion of the Court. The immortal Bard said, “Friendship is constant in all other things Save in the office and affairs of love; Therefore all hearts in love use their own tongues; Let every eye negotiate for itself And trust no agent.” 1 The issue here is whether this admonition applies as well to affairs of the market place as to affairs of the heart. Appellant, Medical Mutual Liability Insurance Society of Maryland (hereinafter, Medical Mutual), sued B. Dixon Evander, individually (hereinafter, Evander), B. Dixon Evander and Associates, Inc., a corporation of the State of Maryland (hereinafter, Evander Associates), and The Mutual Fire, Marine and Inland Insurance Co., a body corporate of the State of Pennsylvania (hereinafter, Mutual Fire), for slander and libel. In its declaration the appellant alleged generally that it had been injured as a result of numerous false statements respecting the appellant’s business contained in a brochure prepared and published by Evander and Evander Associates while acting on their own behalf and as agents for Mutual Fire, appellee.

Mutual Fire filed a motion for summary judgment supported by affidavits asserting generally that Evander and his firm were not acting as appellee’s agents, servants and employees when the brochure was prepared and issued. Appellant filed an answer to the motion for summary judgment supported by affidavits and exhibits. The trial court (Brannan, J.) granted summary judgment for Mutual Fire and a motion for reconsideration was filed by the appellant. A hearing was held and, after hearing argument and considering memoranda filed by both parties, the trial court entered final judgment in favor of the appellee, dismissing it as a party to the action and permitted an ⁷⁰⁸ appeal pursuant to Rule 605 a, 2 Maryland Rules of Procedure.

It is from this judgment that this appeal was filed. The facts disclosed by the various motions, affidavits and exhibits in the case are in the main undisputed. Evander is a licensed surplus lines broker 3 authorized by the State of Maryland to place medical malpractice insurance with ⁷⁰⁹ Mutual Fire. He is also licensed as an insurance agent and is the executive officer of Evander Associates, which is a corporation licensed to procure insurance policies.

As a surplus lines broker, Evander placed medical professional liability insurance with the appellee, Mutual Fire. That type of insurance is on the list of surplus lines approved by the Maryland Insurance Commissioner. Evander had no express agency agreement, written or oral, with Mutual Fire. He was under no contractual obligation to place insurance with Mutual Fire and could place business with any insurer that would accept the risk.

After placing each risk with Mutual Fire, Evander filed with the Insurance Division of the Maryland Department of Licensing and Regulation a surplus lines affidavit, as required by the Surplus Line Insurance Law. Maryland Code (1957, 1976 Cum. Supp.) Art. 48A, § 185. Each affidavit certified that the statutory conditions authorizing the placement of such coverage with a nonadmitted insurer had been met.

These conditions included the requirement that no authorized insurer writing medical malpractice insurance in Maryland would accept the risk. Evander also filed copies of 45-day binders, as provided under section 191 of the Surplus Line Insurance Law. The binders were stamped to indicate that the insurance was issued by a nonadmitted insurer as required by section 186. Under section 191, copies of the binders were required to be filed and the original delivered promptly to the insured after placement of the insurance.

The names of Shand, Morahan & Company, Inc. (hereinafter, Shand, Morahan) as underwriting managers and Mutual Fire as carrier were printed at the top of each binder. The words B. Dixon Evander & Associates, Inc. were printed at the bottom of the binder. Copies of the declaration sheets of the actual policies were also filed by Evander with the Insurance Division. These sheets also were stamped to indicate that Mutual Fire was a nonadmitted insurer.

Evander’s duties as a surplus lines broker included the procurement of the actual policy from the insurer and the delivery of the policy to the insured. ⁷¹⁰ Mutual Fire’s name was printed at the top of each declaration sheet and at the bottom of the page the following statement appeared: “All claims to be reported directly to Shand, Morahan & Company, Inc., 801 Davis Street, Evanston, Illinois.” The signature of Evander appeared below the name of Shand, Morahan on a line designated “authorized representative.” Evander’s address was not listed. A review of the documents filed by Evander with the Insurance Division indicates that Evander, in his capacity as a surplus lines broker, after January of 1976, placed 369 medical professional liability policies with Mutual Fire on behalf of Maryland physicians. During this period, no other surplus lines broker placed medical malpractice insurance with Mutual Fire and Evander did not place malpractice insurance with any other surplus lines insurer. On August 5, 1975, Evander placed an advertisement in The Evening Sun in which he purported to list 133 “representing agents” of Mutual Fire.

A news story, which appeared several days later in the Sunpapers, indicated that a number of the agents listed had stated that they were not agents for Mutual Fire and that they had not authorized the use of their names. Mutual Fire in its affidavit stated that it had not given permission or authority to Evander to prepare and distribute any advertising materials on its behalf and that it never had any knowledge of the preparation of the advertisement nor had it ever ratified Evander’s conduct. Evander was prohibited by law, as a surplus lines broker, from preparing and issuing such advertisements, Code, Art. 48A, § 201 (b), and was specifically advised by Mutual Fire’s underwriting manager that he had no authority to prepare and distribute such materials. One year later, in the summer of 1976, Evander and his firm prepared and distributed a brochure which purported to compare the medical malpractice insurance coverage provided by appellant, Medical Mutual, with that provided by Mutual Fire, the appellee.

Evander admitted that he knew he had no authority to distribute such material on behalf of Mutual Fire; however, he prepared the brochure, ⁷¹¹ printed it, and distributed it in the name of his own company, Evander Associates. Evander Associates paid for the publishing of the brochure with its own funds. A separate page of the brochure stated that “The information contained herein was subject, in whole or in part, to the opinion of legal and accounting counsel.. . . Any incorrect or misleading statements contained herein are totally unintended and will be corrected upon written notice, containing the confirmable basis of the correction to: B. Dixon Evander and Associates, Inc., 2326 N. Charles St., Baltimore, Md. 21218, who are solely responsible for the preparation and contents contained herein.” It is this brochure which appellant contends contained allegedly slanderous and libelous statements for which it seeks compensatory and punitive damages from Evander, Evander Associates and Mutual Fire.

The sole issue presented by this appeal is whether the trial court erred in granting Mutual Fire’s motion for summary judgment on the grounds that there was no genuine dispute between the parties as to any material fact, and that as a matter of law Evander, individually, and Evander Associates, were not acting as agents for the appellee when they published the brochure containing the alleged defamatory statements. Summary judgment pursuant to Maryland Rule 610 is proper only where there is no dispute as to a material fact and the moving party is entitled to judgment as a matter of law. McDonald v. Burgess, 254 Md. 452 , 255 A. 2d 299 (1969); Horst v. Kraft, 247 Md. 455 , 231 A. 2d 674 (1967); Owens v. Simon, 245 Md. 404 , 226 A. 2d 548 (1967). The Court of Appeals, in Tellez v. Canton Railroad Co., 212 Md. 423, 430 , 129 A. 2d 809, 818 (1957), said: “The function of the summary judgment procedure is not to try the case or to decide issues of ⁷¹² fact.

It is merely to determine whether there is an issue of fact to be tried, and if there is none, to cause judgment to be rendered accordingly.” In Fenwick Motor Co., Inc. v. Fenwick, 258 Md. 134, 138 , 265 A. 2d 256, 258 (1970), the Court said: “In a summary judgment proceeding even where the underlying facts are undisputed, if those facts are susceptible of more than one permissible inference, the choice between those inferences should not be made as a matter of law, but should be submitted to the trier of fact.” Liebergott v. Investment Bldg., 249 Md. 584 , 241 A. 2d 138 (1968); Reeves v. Howar, 244 Md. 83 , 222 A. 2d 697 (1966); Mayor and City Council v. Allied Contractors, Inc., 236 Md. 534 , 204 A. 2d 546 (1964). The basic issue presented to the trial court by the motion for summary judgment was whether the various affidavits and exhibits in support of and in opposition to the motion were sufficient to raise a factual issue requiring a determination as to whether a principal-agent relation existed between Evander or Evander Associates and the appellee. One who moves for summary judgment has the burden of demonstrating clearly the absence of any genuine issue of fact and any doubt as to the existence of such an issue is resolved against the movant. Merchants Mortgage Co. v. Lubow, 275 Md. 208 , 339 A. 2d 664 (1975); Lynx, Inc. v. Ordnance Products, Inc., 273 Md. 1 , 327 A. 2d 502 (1974); Hill v. Lewis, 21 Md. App. 121 , 318 A. 2d 850 (1974).

The existence of an agency relationship is ordinarily a question of fact. P. Flanigan & Sons v. Childs, 251 Md. 646 , 248 A. 2d 473 (1967). The relation of principal and agent does not necessarily depend upon an express appointment and acceptance thereof, but it may be implied from the words and conduct of the parties and the circumstances. Heslop v. Dieudonne, 209 Md. 201 , 120 A. 2d 669 (1956).

The Court of Appeals has said in innumerable cases that “it is not for the court to determine the question of agency vel non, but if the ⁷¹³ testimony as to the fact of the agency tends to prove the existence of that relation, it should be submitted to the jury, who are the exclusive judges of its weight.” Levine v. Chambers, 141 Md. 336, 343 , 118 A. 798, 800 (1922). The issue to be here determined is whether the facts alleged create an inference that Evander was expressly or impliedly authorized to publish advertising materials on behalf of Mutual Fire, such as the brochure in question, or whether he was apparently authorized to do so — or to state it more simply, what was the nature and extent of the agency relation, if any, between Evander and Mutual Fire? The law is clear that where the alleged agency is dependent upon the acts of the parties, the burden of proof rests upon the person alleging the agency to show not only its existence but its nature and extent. F. Mechem, Law of Agency §§ 255, 281, 298, 316, 318, 1344 (2d ed. 1914); Blacker v. National Bank of Baltimore, 151 Md. 514 , 135 A. 383 (1926).

There must also be a showing not only that a person is an agent of his principal but that in the particular transaction he was acting within the scope of his employment and that the acts in question out of which the tort arose were within the scope of the agent’s authority. Colonial Building & Loan Ass’n, Inc. v. Boden, 169 Md. 493 , 182 A. 665 (1935); Deane v. Big Spring Distilling Co., 138 Md. 388 , 113 A. 891 (1921); Brager v. Levy, 122 Md. 554 , 90 A. 102 (1914). The Restatement (Second) of Agency § 254 (1958) states: “A principal is subject to liability for a defamatory statement by a servant or other agent if the agent was authorized, or if, as to the person to whom he made the statement, he was apparently authorized to make it.” Initially we observe that Evander’s relationship with Mutual Fire would not constitute Evander its general agent. The principal-agent relation is distinguished from that of master-servant in that an agent is employed to represent the principal in regard to contractual obligations with a third person; a servant is employed to render a service to, rather than for, the master, although it may occur that the service ⁷¹⁴ will involve relations with third persons.

A. & P. Co. v. Noppenberger, 171 Md. 378 , 189 A. 434 (1937); Mechem, supra, § 36. The theory of liability advanced by appellant as to general agency is based upon Evander’s acting as Mutual Fire’s agent in that he was exclusive dealer for its medical malpractice insurance in Maryland and that he issued 45-day binders to those purchasing the insurance. Code (1957, 1976 Cum. Supp.) Art. 48A, § 166 (a), subject to exceptions not here applicable, defines an agent as “a person appointed by an insurer (1) to solicit applications for insurance or annuities or to negotiate insurance on its behalf; and (2) if authorized to do so by the insurer, to effectuate and countersign insurance contracts.” An insurance “broker” or “solicitor,” on the other hand, is one who acts as a middleman between the insurer and insured, soliciting insurance with a company selected by the insured, or in the absence of a selection by the insured, with a company selected by the broker or solicitor.

Hankins v. Public Service Mut. Ins. Co., 192 Md. 68 , 63 A. 2d 606 (1949); American Casualty Co. v. Ricos, 179 Md. 627 , 22 A. 2d 484 (1941). Whether a person is a broker or an agent is determined not by what he is called but by what he does.

Moone v. Commercial Casualty Ins. Co., 350 Ill. App. 328 , 112 N.E.2d 626 (1953). 16 Appelman, Insurance Law and Practice § 8691, prescribes a precise test for determining whether or not one is a general agent: “That test is whether or not the agent has the power to bind the insurer by his contract of insurance, or to issue policies on his own initiative, or to accept risks, and if the agent has actual authority to do these things, he is a general agent; if he cannot place coverage in effect, but can merely initiate negotiations therefor, he is not a general agent.” Id. at 181. Continental Cas.

Co. v. Holmes, 266 F. 2d 269 (5th Cir. 1959), cert. denied, 361 U. S. 877 , 80 S. Ct. 140 , 4 L.Ed.2d 114 (1959); ⁷¹⁵ Smith v. Utah Home Fire Ins. Co., 234 Minn. 169 , 47 N.W.2d 785 (1951). The power to bind the insurer, however, does not include the power to issue a temporary binder. Appelman states that “This is reasonable in view of the fact that almost all soliciting agents are now given the power of temporary binder to protect the insured while his application is being considered by the company for acceptance or rejection.

A general agent, on the other hand, has the right, not to make a temporary binder, but to issue the policy, accept the risk, and place the company upon the hazard at whatever terms he may see fit and for regular policy periods. In other words, the general agent’s acts involve the exercise of selection and discretion; ten-day binders are more or less automatic, and ministerial in their nature.” (emphasis supplied) Id. at 187-88 . See: Hartford Accident & Indemnity Co. v. Lougee, 89 N. H. 222, 196 A. 267 (1938) (power to issue 10-day binder, in absence of agreement to the contrary between insurer and soliciting agent, held not sufficient to change status of soliciting agent to that of general agent); M.F.A. Mutual Ins. Co. v. Rooney, 406 S.W.2d 1 (Mo. 1966) (power to issue 30-day binder held not sufficient to qualify soliciting agent as a general agent for purposes of accepting service of process).

We see no significance in the fact that the binders in this case ran for a period of 45 days. It is interesting to note that Art. 48A, § 191 (a) provides, inter alia, that “Upon placing a surplus line coverage, the broker shall promptly deliver to the insured evidence of the insurance consisting either of the policy as issued by the insurer or, if such policy is not then available, a binder or cover note which shall show the subject, coverage, conditions, term of the insurance, and the name and address of the insurer.” (Emphasis supplied). ⁷¹⁶ Appellant’s answer to Mutual Fire’s motion for summary-judgment had annexed to it a copy of the binder used by Evander Associates. The binder was not only delivered by Evander Associates but was in fact issued by it. The power to issue a temporary binder is to be distinguished from the power to effectuate a contract of insurance binding upon the insurer, and only the latter is sufficient to create a general agency.

We are equally unconvinced that the affidavits of the parties raised a material issue of fact as to whether Evander was an agent of Mutual Fire for purposes of publication and distribution of the brochure. Under Regulation 198-1, § 11 of the Maryland Insurance Department Regulations, “Surplus line brokers are subject to the provisions of Section 201 (b) of Article 48A of the Annotated Code of Maryland,” wherein it is provided in pertinent part “(b) Publishing or broadcasting advertisements of unauthorized insurers or agents. — (1) It shall be unlawful for any person to publish or print in any newspaper, magazine, periodical, circular letter, pamphlet, or in any