Ohio Farmers Insurance Co. v. Dakota Agency, Inc.

551 N.W.2d 564 (1996)

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Nature of the Case

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Facts

Dakota (D) entered into an 'Agency Agreement' with P. Randall L. Standaert (D), an employee and licensed insurance agent of D, signed the agreement on behalf of Dakota (D) as its general manager. The agreement incorporated the terms of the Underwriting Guide and Limit of Authority for Fidelity and Surety Bonds which required prior approval from P before D could issue certain P bonds. P issues powers of attorney solely to employees and licensed agents of its corporate agencies, relying on the agency's representations that the individual is licensed and qualified to execute undertakings on behalf of the agency and P. P had previously granted Standaert (D) powers of attorney through D’s predecessor and other insurance agencies where Standaert (D) had worked. Standaert (D) also signed an underwriting guide and letter of authority with P. Standaert (D) executed, as attorney-in-fact for P, a $150,000 performance bond guaranteeing the contractual obligations of S & G Packing Company (S & G) to the United States Department of Agriculture (USDA) to package unprocessed honey. Standaert (D) again executed, as attorney-in-fact for P, another $150,000 performance bond guaranteeing the contractual obligations of S & G to the USDA. Both bonds were issued without the prior approval of P. Nor did anyone receive any premium payments for the bonds. A fire destroyed more than one million pounds of USDA-owned honey. The USDA notified P of a loss in excess of the $300,000 performance bonds. P had no prior knowledge of the bonds and would not have approved their issuance if approval had been requested by Standaert (D). P paid the USDA $300,000 and efforts against S & G and Standaert (D) were unsuccessful. Ohio sued D for $ 300,000, alleging D was responsible for Standaert's (D) unauthorized conduct. The trial court granted P's motion for summary judgment, concluding as a matter of law that Standaert (D) was acting as an agent and employee of D when he issued the performance bonds. It held as a matter of law, D was liable to P under principles of tort law and respondeat superior. D appealed.