Chapter 4 Flashcards
Who is the ‘Principal’
CLIENT
Who is the ‘Agent’
BROKER
Who is the ‘Third Party’
INSURER
What are the 4 Duties the Law of Agency Requires?
- Duty of Obedience
- Duty of Due skill and care
- Duty of Good Faith
- Duty of Accountability
What is the Duty of Obedience?
Duty to perform all principals lawful instructions and in a timely fashion.
What is the Duty of Due skill and care?
Duty to exercise reasonable care and in performance of the principals instruction.
What is the Duty of Good faith?
Duty to act at all times in the best interest of their principal to avoid conflict of interest…
What is the Duty of Accountability?
Duty to account to their principals monies etc.
What duty if this - ‘Duty to perform all principals lawful instructions and in a timely fashion.’
Duty of OBEDIENCE
What duty if this - ‘Duty to exercise reasonable care and in performance of the principals instruction.’
Duty of DUE SKILL AND CARE
What duty if this - ‘Duty to act at all times in the best interest of their principal to avoid conflict of interest…’
Duty of GOOD FAITH
What duty if this - ‘Duty to account to their principals monies etc.’
Duty of ACCOUNTABILITY
What are the 2 duties of Principal?
- Remuneration
- Indemnity
Notes on Remuneration…
- Brokers MUST prove they were the effective cause of any transaction.
- Brokerage is earned on INCEPTION.
- Commission = subject to legal agreement.
Notes on Indemnity…
- Agent has a right to claim from their principal an indemnity against all expenses/losses incurred.
- Principal must not conceal/misrepresent any info that may materially affect UW decision to issue policy.
When is a broker an agent of the INSURED? (2 answers)
- When giving advise on types of covers/placing insurance.
- When giving advise on a claim.
Order of broker chain…
Insured - Retail Broker - Wholesale broker - Insurer
Order of Reinsurance broker chain
Insurer - Reinsurance broker - Reinsurer
When does a broker act as an agent for an INSURER? (3 answers)
- Insurer authorises broker to receive/handle proposal forms on behalf of insurer.
- Broker surveys and describing property on insurer behalf.
- Broker has authority to collect premiums.
What is the Principal of TORT?
Obligations we have to one another with NO contractual relationship. (Brokers legally responsible for client)
What must the broker do in regards to a principal and conflict of interest?
Must fully disclose to the principal any circumstances that may give rise to a conflict.
What are 3 situations which can cause conflict?
- Delegated Authority (focus on como etc)
- Insurance and Reinsurance
- Acting for 2/more clients with similar interests
How do you prevent companies that provide insurance and reinsurance?
Ensure proper barriers are in place between business functions.
Why may a broker working for 2/more client with the same interest cause a conflict of interest?
- Competing for the same contract
- Limited market capacity
