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GFA Business Solutions3/10/2000
Ru-115
This case involves whether an insurance agency may be held liable for breach of contract and fraud if its manager agrees to procure insurance for a client, but fails to obtain the policy and pockets a portion of the premiums. The trial court found that the insurance agency could not be held liable and granted summary judgment in its favor. As we find that the agency may be held liable for breach of contract, but not for fraud, we affirm in part and reverse in part.
In order to prevail on a motion for summary judgment under OCGA ยง 9-11-56, the movant must show that there is no genuine issue of material fact and that the facts, viewed in the light most favorable to the non- movant, warrant judgment as a matter of law. A defendant may accomplish this by demonstrating that the record contains insufficient evidence to create a jury issue on at least one essential element of the plaintiff's case.
Viewed in the light most favorable to the non-movant, the evidence shows that, in January 1995, Jimmy Selph started GFA Business Solutions, Inc., an employee leasing company. In late 1994, Selph contacted Glynn Greenway, the president and sole shareholder of Greenway Insurance Agency, Inc., about obtaining workers' compensation insurance. Greenway, who did not actively manage the Greenway Agency, directed Selph to Peter O'Malley, who did manage it, and who would actually procure the policy.
Selph and O'Malley met to discuss premiums, and Selph agreed to obtain GFA's insurance coverage through the Greenway Agency. To this end, he gave O'Malley a check for approximately $7,000.00 as a down payment on the expected premium for the first year. Selph understood that, since his was a new company, it would be insured through the assigned risk pool.
Throughout 1995, GFA paid the agency additional premiums of approximately $50,000. Whenever GFA required a certificate to document its insurance coverage, Selph would contact O'Malley and would receive a certificate of insurance.
GFA continued to obtain its insurance coverage through the Greenway Agency until 1997. Selph estimates that GFA paid more than $229,000 in premiums from 1995 through March 1997. In March 1997, however, Selph was contacted by an insurance investigator who informed him that the insurance certificates that the Greenway Agency had provided were fraudulent and that GFA had no insurance coverage. Selph subsequently learned that O'Malley never obtained insurance, but paid for any insurance claims out of Greenway Agency accounts. Greenway discovered that O'Malley had either used GFA premiums to pay actual claims or for his personal needs. Greenway also learned that O'Malley had substantial gambling debts and that he needed large sums of money. Because of O'Malley's acts, Greenway estimates that the agency lost up to $1.2 million.
After Selph learned that GFA had no workers' compensation insurance, he immediately obtained coverage from another agency. With respect to pending claims, however, GFA had to pay $7,200 from its own funds to obtain legal representation.
GFA sued both the Greenway Agency and O'Malley for breach of contract, negligence, and fraud. The Greenway Agency moved for summary judgment, arguing that it could not be held liable for O'Malley's acts or omissions, and the trial court granted the motion. With respect to the contract claim, the trial court found that the Greenway Agency could not be held liable for breach of contract because there was no insurance contract between it and GFA. As to the fraud claim, the trial court ruled that O'Malley's acts were unauthorized and beyond the scope of his employment and that the Greenway Agency could no
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