by Phoenix attorney Christopher A. Combs, partner with Combs Law Group, P.C.

Question:

During an open house the agent had aromatic candles burning. After the open house was over, the agent removed all of the candles except one. This one candle caused a fire which resulted in $25,000 worth of damage to seller’s home. The seller’s insurance company has reimbursed the seller for the $25,000 in damages, and is now seeking payment of this $25,000 in damages from the agent and the agent’s broker. Are the agent and the agent’s broker liable for the $25,000 in damages?

Answer:

Probably. After paying the $25,000 to the seller, the insurance company has a subrogation claim against anyone who negligently caused the fire. If the agent negligently caused the fire, the insurance company is entitled to the $25,000 in damages from the agent. The agent’s broker is also liable under the principle of respondeat superior for the negligent acts of the agent in the course of business. Therefore, if the agent is unable to pay some or all of the $25,000 in damages, the broker is required to make payment. Inasmuch as the broker is liable only as a principal for the agent’s negligence, the broker is entitled to indemnification from the agent if the broker has to make any payment.

The above is for informational purposes only and is not intended as definitive legal or tax advice. You should not act upon this information without seeking independent legal counsel. If you desire legal, tax or other professional advice, please contact your attorney, tax advisor or other professional consultant. Reprinted with permission. Copyright 2007, all rights reserved.

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