Chapter 8: Agency Law: Insurance Applications

Question 1

Insurance Producer Classifications

Answer 1

Agents (represent insurer)

• General agent
• Special agent
• Soliciting agent

Brokers (represent customer)

Question 2

Producers’ Authority

Answer 2

• Actual authority

- Apparent authority

Question 3

Extent of Producers’ Authority (Brokers)

Answer 3

A broker’s typical duties include these:

• To produce insurance for the insurance customer-principal
• To select the insurer to provide the desired coverage
• To arrange for the payment of premiums
• To cancel and receive unearned premiums on a policy the broker had obtained
• To obtain a new policy upon cancellation of one previously obtained

Question 4

Producers’ Authority to Bind Coverage

Answer 4

Oral Insurance Contracts (usually temporary until finalized in writing), usually must contain:

• Subject matter of the insurance
• Loss exposure insured
• Premium
• Insurance contract duration
• Coverage amount
• Identity of parties

Question 5

Termination of Producer Authority

Answer 5

To avoid possible adverse consequences of apparent Authority when terminating producer’s authority, the insurer should:

• Notify all third parties known to have dealt with the producer
• Repossess from the producer any evidence of the agency relationship, such as application forms and insurer stationery

Question 6

Producers’ Duties and Liabilities

Answer 6

• Producers’ duties and liability to insurance customers
• Producers’ defenses to liability
• Producers’ duties and liability to third parties
• Producers’ duties to insurers

Question 7

Producers’ Duties and Liability to Insurance Customers

Answer 7

• Duty to follow instructions
• Duty to produce insurance
• Duty to maintain coverage
• Duty to place Insurance with a solvent insurer
• Duty to advise

Question 8

Producers’ Defense to Liability

Answer 8

• The producer assumed no duty to the customer
• The producer did not breach a duty to the customer
• The insurance customer was partly at fault
• The insurance customer failed to read the policy
• Insurance was not available to the customer

Question 9

Producers’ Duties and Liability to Insurer

Answer 9

• Duty to disclose risks
• Duty to follow instructions
• Duties of loyalty and accounting
• Duty to transmit information properly