Agency/ insurance law: What is “personal knowledge” of a corporation?

Mann v. Adventure Quest (2007-443) (24-Apr-2009), 2009 VT 38 (Dooley, J.)

This suit arises out of the conduct of, the executive director of Adventure Quest who sexually abused both plaintiffs when they were minors and attended Adventure Quest. Plaintiffs appeal from the Windsor Superior Court’s grant of summary judgment to intervenor-insurer Virginia Surety Company, determining that insurer would not owe indemnification to Adventure Quest should it be found liable to plaintiffs for sexual abuse they experienced while attending Adventure Quest’s school. On appeal, plaintiffs argue that insurer was not entitled to summary judgment because the superior court should not have imputed knowledge of the sexual abuse to Adventure Quest and because a material fact remained in dispute. The insurance policy exclusion insurer seeks to apply is invoked only if Adventure Quest has “personal knowledge of any sexual abuse, sexual molestation, sexual exploitation, or sexual injury.” The superior court granted summary judgment to insurer because the executive director’s knowledge of his own misconduct must be imputed to Adventure Quest, so that it can be said to have had “personal knowledge” of the abuse thereby precluding coverage under the exclusion quoted above. We agree that a material fact remains in dispute and reverse and remand.

Under agency law, the executive director’s knowledge of his own misconduct must be imputed to Adventure Quest, so that it can be said to have had “personal knowledge” of the abuse in this case only if the executive director controls and dominates the corporation. Any notice or knowledge received by an officer or agent authorized to receive the same is imputed to the corporation itself, unless it is received by the agent outside the scope of the agent’s authority. When an agent’s interests in the subject matter are so adverse as to practically destroy the agency relationship, there is no imputation of knowledge to the principal. This is the adverse-interest exception. There is an exception to the adverse interest exception when an adverse agent is the sole representative of the principal.

We adopt the sole-representative doctrine as applied when an agent controls and dominates the corporation. Although we generally view this case as turning on agency principles, the policy language does not necessarily adopt these principles. The use of the word “personal” suggests a more rigorous standard. Our duty is to construe the policy as it is written and not to rewrite it using language we can more easily construe. It is important that we not broadly allow imputation of knowledge of misconduct through a sole-representative doctrine. We view the very limited policy language requiring “personal” knowledge as addressing that concern.

From this record we cannot determine whether the executive director controlled and dominated Adventure Quest. There are clearly disputed questions of material fact that prevent the grant of summary judgment.