Chapter 8 Flashcards
What can general agents do?
Broad powers within underwriting guidelines.
1) solicit applicants and accept applications
2) receive premiums
3) issue/renew policies
4) appoint subagents
5) adjust losses
What powers do special agents have?
Only powers specified in agency contract or agreement.
1) solicit applications
2) forward applications to their insurers
3) deliver policies upon receipt of their first premiums
What are the three types of producer’s authority?
1) Actual authority
2) Apparent authority
3) Created by ratification
What are the two types of actual authority?
1) Express
2) Implied
How is apparent authority created?
By the insurer’s acts, such as providing stationery or forms. They make reasonable person think the agent has authority (agency by estoppel)
What does the extent of a producer’s authority depend on ?
1) Status (general/special/broker)
2) Producer’s notice and knowledge
3) The nature of the insurance contract
4) The appointment of subagents
When can the following bind an insurer? general agent, special/soliciting agent, broker?
general agent: full authority to bind. Can bind any time
special agent: only in the case of apparent authority.
broker: only in the case of apparent authority.
Is a broker’s knowledge imputed to the insurer?
No, because they represent the insured. A general or special agent’s knowledge can be imputed to the insurer.
When is an insurer not bound by the producer’s knowledge?
1) no actual agency
2) applicant and producer conspired to provide false info
When are oral contracts or binders only valid?
When the producer had actual or apparent authority.
What happens if an agent doesn’t designate an insurer before a loss occurs?
Courts look for evidence that he intended to bind a particular insurer .. prior dealing, memo, etc.
When can a producer delegate responsibilities that require exercise of personal care, skill and judgment:
1) delegating administrative or ministerial tasks
2) ratifies subagents acts
3) could not otherwise fulfill duties
How can a producer’s authority be terminated?
1) expiration of contract
2) occurrence (or nonoccurrence) of conditions in the agency agreement
3) any act by either party that indicates the intent to terminate the agency relationship
4) operation of law
Provide an example of when operation of law would terminate a producer’s authority?
insurer’s bankruptcy, death, insanity
Haw can an insurer avoid the creation of apparent authority after its producer’s authority is terminated?
1) notify all parties who have dealt with the producer
2) repossess any materials that imply an agency relationship (stationary, forms)
What are the producer’s duties to the insured?
1) perform duties with reasonable care
2) deal in good faith
3) use reasonable diligence in behalf of their customers
4) maintain reasonable knowledge about the policies they sell.
What are the 5 duties producers owe their customers?
1) follow instructions
2) obtain correct coverage
3) maintain coverage.
4) place insurance with solvent insurer
5) adequately advise customers
What are the producer’s defenses to liability to an insured?
1) producer did not assume a duty
2) producer did not breach a duty
3) customer was at fault
4) customer did not read the policy
5) the requested insurance was not available.
When may a producer be liable to an insurer?
For loss due to
- failure to disclose material risks–causing the insurer to either accept an unwanted exposure or to charge a lower-than-intended premium,
- failure to follow instructions,
- action beyond the scope of his authority,
- failure to keep proper accounting, and/or
- failure to transmit information promptly–resulting in a default judgment (automatic loss of a
lawsuit) for failure to respond
Mike over a loose brick on Juan’s stairs. The day before, Juan had approved Maple Insurance Agency, made a deposit, signed an application, and left under the assumption that he had written a homeowners policy which would normally cover injuries to Mike. Mike asked Juan who his homeowners carrier is so he could submit a claim. Juan checked with Maple and was told that they never wrote a policy with any carrier. Would Maple be liable for Mike’s injuries?
Most likely they would NOT BE responsible. If it were an auto or worker’s comp loss the agency may have been liable in some states.
