Drew v. Pac. Life Ins. Co.

447 P.3d 1257

LaMar DREW and LaRene Drew, Appellants,

v.PACIFIC LIFE INSURANCE COMPANY, Appellee.

No. 20160314-CA

Court of Appeals of Utah.

Filed July 18, 2019

Opinion

ORME, Judge:

¶1 LaMar and LaRene Drew appeal the district court's grant of summary judgment in favor of Pacific Life Insurance Company (Pacific) and the court's denial of the Drews' cross-motion for partial summary judgment on the issue of vicarious liability. The Drews contend that the district court erroneously determined that Pacific was not vicariously liable for the unlawful misrepresentations made by one of its appointed insurance producers, R. Scott National, Inc. (RSN). We reverse the summary judgment in favor of Pacific, and we remand for the entry of partial summary judgment in favor of the Drews.

JURISDICTION

¶2 Before turning to the merits, we pause briefly to consider our jurisdiction. The order appealed from was interlocutory in nature but was certified as final in contemplation of rule 54(b) of the Utah Rules of Civil Procedure. The certification does not meet the requirements laid out in a recent line of opinions from the Utah Supreme Court. See EnerVest, Ltd. v. Utah State Eng'r , 2019 UT 2, ¶¶ 16–20, 435 P.3d 209 (amended opinion); Copper Hills Custom Homes, LLC v. Countrywide Bank, FSB , 2018 UT 56, ¶¶ 15–17, 23–28, 428 P.3d 1133 (amended opinion); First Nat'l Bank v. Palmer , 2018 UT 43, ¶¶ 13–14, 427 P.3d 1169. Ordinarily in such a case, we dismiss for lack of jurisdiction. See, e.g. , Hayes v. Intermountain GeoEnvironmental Services Inc. , 2018 UT App 223, ¶ 1, 437 P.3d 650. But these cases all recognize that we "have the discretion to treat an improper rule 54(b) certification as a request for leave to take an interlocutory appeal under rule 5(a) of the Utah Rules of Appellate Procedure." Id. ¶ 5 n.2. Accord EnerVest , 2019 UT 2, ¶ 20, 435 P.3d 209 ; Copper Hills , 2018 UT 56, ¶ 29 n.15, 428 P.3d 1133 ; Palmer , 2018 UT 43, ¶ 14 n.4, 427 P.3d 1169. This discretion to treat an appeal taken from a non-final order as though it were an authorized interlocutory appeal is exercised "judiciously and sparingly." Copper Hills , 2018 UT 56, ¶ 29 n.15, 428 P.3d 1133. But it is exercised from time to time. See, e.g. , Hawkins ex rel. Hawkins v. Peart , 2001 UT 94, ¶ 3 n.2, 37 P.3d 1062 (flawed rule 54(b) certification); Chaparro v. Torero , 2018 UT App 181, ¶¶ 28–31, 436 P.3d 339 (non-final order due to an outstanding attorney fee issue). Cf . EnerVest , 2019 UT 2, ¶ 20, 435 P.3d 209 (suggesting that discretion to treat a flawed rule 54(b) certification as an authorized interlocutory appeal might have been exercised if appellant had standing on appeal).

¶3 We believe that the considerations that have prompted Utah's appellate courts in prior cases to exercise their discretion to treat a flawed rule 54(b) certification as, instead, a granted petition for interlocutory appeal, or to decline to exercise that discretion, are of only limited relevance in a subsequent case. Our resistance to a formulaic approach is inherent in the very concept of discretion. See Warren v. United States Parole Comm'n , 659 F.2d 183, 196 (D.C. Cir. 1981) ("[T]he essence of discretion is the absence of fixed rules."). See also United States v. Richards , 659 F.3d 527, 551 (6th Cir. 2011) ("It is the essence of discretion that it may properly be exercised in different ways and likewise appear differently to different eyes.") (quotation simplified); Walen v. United States , 246 F. Supp. 3d 449, 462 (D.D.C. 2017) ("Flexibility in the face of competing priorities ... is the essence of discretion.") (quotation simplified).

¶4 We determine that this case is appropriate for the exercise of our discretion to treat the flawed rule 54(b) certification as an interlocutory appeal pursuant to rule 5(a) of our appellate rules. Having done so, we now turn to a resolution of the appeal on its merits.

BACKGROUND¹

¶5 In 2009, Pacific appointed RSN as its insurance producer and authorized it to "solicit and procure applications for [Pacific's] life insurance and annuity products." The agreement, however, prohibited RSN from soliciting insurance products that did not meet the "customer's insurance needs and financial objectives." At the time the parties executed the agreement, Pacific had appointed other companies and individuals to sell its insurance products,² and RSN sold annuities and insurance policies on behalf of numerous companies and individuals.

¶6 LaMar and LaRene Drew are retired senior citizens who, after seeing an advertisement, sought out one of RSN's employees as a financial advisor. At the outset, the employee assisted the Drews in the acquisition and sale of multiple annuities. Later on, and with the assistance of another RSN employee, the initial employee informed the Drews that, even though they were approaching eighty, they could purchase a life insurance policy with a high death benefit and resell it on the secondary market for a large profit.³ Based on this information, the Drews purchased two $1.5 million life insurance policies, the first from PHL Variable Insurance Company (PHL) and the second from Pacific.⁴ To fund the premiums on the policies, the RSN employees advised the Drews to obtain a reverse mortgage on their home. The Drews followed this advice.

¶7 RSN was unable to sell the policies on the secondary market. After the Drews paid more than $300,000 in premiums and lost much of the equity in their home, the policies lapsed when the Drews could no longer afford the premiums. In total, they lost three-fourths of their life savings, and interest on their reverse mortgage is accruing at a rate of approximately $1,000 per month.

¶8 The Drews sued Pacific, claiming that it was vicariously liable for the tortious conduct of RSN's employees, whom the Drews contended were acting as Pacific's agents. Pacific and the Drews submitted cross-motions for summary judgment, and the district court granted summary judgment to Pacific. Although the court did not address whether an agency relationship existed between Pacific and RSN, it concluded that, even assuming such a relationship existed, RSN's employees were not acting within the scope of their authority as agents of Pacific. The Drews appeal.

ISSUE AND STANDARD OF REVIEW

¶9 The Drews contend that the district court erroneously granted summary judgment in favor of Pacific and that judgment should have been entered in their favor. "We review a district court's decision to grant summary judgment for correctness." Bodell Constr. Co. v. Robbins , 2009 UT 52, ¶ 16, 215 P.3d 933.

ANALYSIS

¶10 On appeal, the Drews argue that the district court misapplied agency law when it concluded that Pacific was not vicariously liable for the misrepresentations made by RSN's employees. "Under principles of vicarious liability, a principal is held responsible for the tortious acts of an agent acting within the scope of the agent's authority." Wardley Better Homes & Gardens v. Cannon , 2002 UT 99, ¶ 19, 61 P.3d 1009. Thus, in order to determine whether Pacific is vicariously liable for the misrepresentations of RSN's employees, we must answer two questions. First, we must decide whether an agency relationship existed between Pacific and RSN. If we conclude that an agency relationship did exist, we must then determine whether RSN's employees acted within the scope of their authority in their dealings with the Drews.

I. Agency Relationship

¶11 Given its conclusion on the scope of RSN's authority, the district court deemed it unnecessary to determine whether an agency relationship existed between Pacific and RSN. The parties disagree about whether such a relationship existed.

¶12 The Insurance Code suggests that the existence of an agency relationship turns on whether an insurance salesperson is a "producer for the insurer" or a "producer for the insured." See Utah Code Ann. § 31A-1-301(88) (LexisNexis 2010).⁵ If a producer is "compensated directly or indirectly by an insurer for selling, soliciting, or negotiating an insurance product of that insurer," that producer is a producer for the insurer and is therefore its agent. See id. § 31A-1-301(88)(b)(i). In contrast, if a producer is "compensated directly and only by an insurance customer," that producer is a producer for the insured and is not an agent of the insurance company. See id. § 31A-1-301(88)(b)(ii)(A).

¶13 It is clear from the record that the RSN employees received compensation directly from Pacific. Thus, under the plain terms of the Insurance Code, RSN's employees were producers for Pacific and were therefore acting as its agents.

¶14 Nevertheless, Pacific argues that RSN's employees were independent insurance brokers rather than its agents. In support of this argument, Pacific relies on Vina v. Jefferson Insurance Co. , 761 P.2d 581 (Utah Ct. App. 1988), in which this court analyzed whether an insurance salesperson was an agent or a broker. See id. at 584–86. In Vina , we articulated some relevant considerations, including the discretion of the salesperson, the salesperson's role as an intermediary between the insurance company and the prospective insured, and the salesperson's ability to bind the insurance company. Id.

¶15 Importantly, Vina predates the current statutory regime, see supra ¶ 12 n.5, and we qualified our decision in that case by stating that it was made "under the controlling statutes" in effect at the time, 761 P.2d at 585. The Insurance Code has since streamlined the agency determination in the insurance context, allowing courts to focus on how the insurance salesperson is compensated. See Utah Code Ann. § 31A-1-301(88). Thus, given Vina 's reliance on an outdated statute and the plain language of the now-controlling statute, the analysis in our previous decision is of limited utility at best. In any event, Vina is readily distinguishable from the case before us because the salesperson in Vina "was not specifically authorized to solicit insurance or otherwise act...