The Law of Agency
agent vs fiduciary
a person who holds a position of financial trust and confidence agents act in this capacity when they accept premiums on behalf of the insurer or offer advice that affects a person's financial security
a broker (independent agent),
may represent several insurance companies under separate contractual agreements solicits and accepts applications for insurance and then places the coverage with an insurer
agent vs solicitor authority
An insurance producer working on behalf of a property and casualty company can be given agent authority, which is the ability to bind coverage between a customer and the company on the authority granted to the producer (as agent) from the company (as principal).
an agent is a person who
acts for another person or entity (known as the principal) with regard to contractual arrangements with third parties
example of express authority
an agent has the express authority to solicit applications for insurance on behalf of the company
example of implied authority
an agent's contract may not explicitly state that he can print business cards that contain the company's name, but the authority to do so is implied
insurance agent
an individual who is authorized by an insurer to sell insurance products on behalf of the insurer
significance of authority (whether express, implied, or apparent) is that
it ties the company to the acts and deeds of its agents the law will view the agent and the company as one and the same when the agent acts within the scope of his authority additionally, an insurer may be liable to an insured for unauthorized acts of its agent when the agency contract is unclear about the authority granted
how are brokers and agents similar?
both are governed by the law of agency
example of apparent authority
by providing an individual with a rate book, application forms, and sales literature, a company creates the impression that an agency relationship exists between itself and the individual. The company will not later be allowed to deny that such a relationship existed
an agent's role involves the following duties:
describing the company's insurance policies to prospective buyers and explaining the conditions under which the policies may be obtained soliciting applications for insurance collecting premiums from policyowners rendering service to prospects and to those who have purchased policies from the company
types of agent authority
express, implied, apparent
solicitor
has the authority to seek insurance applicants for a company but does not have any authority to bind coverage on behalf of a company to a customer possible role for producer
what is the difference between brokers and agents?
in a sales transaction, agents represent the insurer and brokers represent the buyer (or applicant) a broker (or independent agent) may represent several insurance companies under separate contractual agreements a broker solicits and accepts insurance applications and then places the coverage with an insurer the agent's contract and appointment with the insurance company grants the authority to bind an insurer to an insurance contract in any dispute between the insured or beneficiary and the insurer, the agent or broker who solicits an insurance application represents the insurer and not the insured or beneficiary
implied authority
is the unwritten authority that is not expressly granted, but which the agent is assumed to have in order to transact the business of the principal incidental to express authority because not every single detail of an agent's authority can be spelled out in the agent's contract
principles of agency laws
the acts of the agent (within the scope of his authority) are the acts of the principal a contract completed by an agent on behalf of the principal is a contract of the principal payments made to an agent on behalf of the principal are payments to the principal knowledge of the agent regarding the business of the principal is presumed to be knowledge of the principal
apparent authority
the appearance or assumption of authority based on the actions, words, or deeds of the principal it can also exist because of the circumstances the principal created
express authority
the authority a principal deliberately gives to its agent granted by means of the agent's contract, which is the principal's appointment of the agent to act on its behalf
an authorized agent has
the power to bind the principal to contracts (and to the rights and responsibilities of those contracts
agency law
the relationship between an agent and the company represented
agent authority
what is given by an insurer to a licensee to transact insurance on their behalf