## Facts

- Gallant Insurance Company issued an automobile policy to Christina Isaac through Thompson-Harris Company, an independent agency that routinely placed Gallant policies.
- Gallant’s course of dealing allowed Thompson-Harris to bind coverage and process interim changes (e.g., adding/changing vehicles) by transmitting information to Gallant; premiums were paid to Thompson-Harris.
- Isaac’s existing coverage period ended on December 2, 1994.
- On December 2, 1994, Isaac traded her insured car for a Pontiac Grand Prix and contacted Thompson-Harris the same day to obtain “full coverage” required by her lender.
- A Thompson-Harris employee told Isaac coverage would be “bound” immediately and that she could complete paperwork and pay the premium down payment on Monday, December 5, 1994.
- Thompson-Harris prepared a policy change request substituting the Grand Prix, adding coverages, listing the lender as lienholder, and stating an effective change date of December 3, 1994.
- On December 4, 1994, Isaac was involved in an accident while driving the Grand Prix; Loretta Davis was injured.
- On December 5, 1994, Isaac paid premiums at Thompson-Harris and reported the accident; Thompson-Harris also represented to police that Isaac had coverage at the time of the accident.
- Gallant later took the position that no coverage existed on the accident date because the prior policy had expired and the renewal premium had not been paid before the loss.

## Issues

1. Whether the insurer was bound to provide coverage for the accident when the insured relied on an agency’s oral assurance that coverage was immediately “bound,” despite policy language limiting agent authority and requiring timely premium payment for renewal.
2. Whether the agency had authority—particularly apparent authority—to bind the insurer to coverage for the newly acquired vehicle during the gap between expiration and payment/paperwork.

## Decision

- The Indiana Supreme Court held that coverage existed for the accident.
- The Court rejected the intermediate appellate court’s reliance on “inherent authority” as inapplicable on these facts.
- The Court concluded that the insurer’s dealings and manifestations to the insured established the agency’s apparent authority to bind coverage.
- The judgment for the insured and injured third party was affirmed on the ground of apparent authority, making the insurer responsible for coverage notwithstanding internal or contractual limits on the agent’s power.

## Legal Principles

- Apparent authority exists when a principal’s manifestations to a third party cause a reasonable belief that an agent is authorized to act on the principal’s behalf.
- An insurer may be bound by an independent agent’s coverage representations when the insurer’s course of dealing and operational practices reasonably convey to insureds that the agent can bind coverage.
- Contractual or internal restrictions on an agent’s authority do not defeat liability to third parties who reasonably rely on apparent authority created by the principal’s conduct.
- In this setting, “inherent authority” is not the governing doctrine; the proper analysis focuses on actual authority and apparent authority.

## Conclusion

Because the insurer’s relationship and practices with its producing agency reasonably led the insured to believe the agency could immediately bind coverage for the replacement vehicle, the agent acted with apparent authority and the insurer could not deny coverage for the accident based on policy restrictions or the timing of premium payment.


Gallant Ins. Co. v. Isaac, 751 N.E.2d 672 (Ind. 2001)