Deck 2 Flashcards
What is the law of agency?
An insurance agent is an individual who is authorized by an insurer to sell insurance products on behalf of the insurer. 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 policy owners; and
Rendering service to prospects and to those who have purchased policies from the company.
what are the Principles of Agency Law?
An agent is a person who acts for another person or entity (known as the principal) with regard to contractual arrangements with third parties. An authorized agent can bind the principal to contracts (and to the rights and responsibilities of those contracts). With this in mind, we can review the main principles of agency law:
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 principal’s business is presumed to be knowledge of the principal.
what is the Express authority ?
For example, an agent has the express authority to solicit applications for insurance on behalf of the company.
What is the implied authority?
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.
For example, 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.
What is the Apparent authority?
Apparent authority is 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.
For example, 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.
what is Brokers versus Agents?
Insurance producers may be agents who represent a particular company, or brokers, who can represent many insurers’ products. While an agent has an agent’s contract, and a broker has a broker’s contract, both parties are governed under the same Law of Agency. The most significant difference is, 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.
What is Agent versus 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). Another possible role for a producer is that of a solicitor. A 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.
What is the Agent as a Fiduciary?
Another legal concept that governs an agent’s activity is fiduciary responsibility. A fiduciary is a person who holds a position of financial trust and confidence. Agents act in a fiduciary capacity when they accept premiums on behalf of the insurer or offer advice that affects a person’s financial security.
fiduciary responsibility
The notion of fiduciary responsibility is another legal concept that governs the activity of an agent. A fiduciary is a person who holds a position of financial trust and confidence. Agents act in a fiduciary capacity when they accept premiums on behalf of the insurer or offer advice that affects a person’s financial security.
what is Subrogation?
Subrogation is the right for an insurer to pursue a third party that caused an insurance loss to the insured. Subrogation is used to recover the amount of the claim paid to the insured for the loss.
what is Tort Law?
The concept of tort law is to provide full compensation for proved harm. In other words, to right a wrong done to a person and provide relief for the wrongful acts of others, by awarding monetary damages as compensation. Negligent acts resulting in a loss or damage can create a tort, which is an action to recover damages for injuries inflicted upon an innocent party or victim as the result of a negligent act. There are several types of negligence, including:
Simple negligence: Simple negligence is defined as the failure to act in a reasonable or prudent manner.
Gross negligence: Gross negligence is a more severe act because it involves a reckless disregard for the need to act in a reasonable manner regardless of the potential for harm.
Willful and wanton negligence: Willful and wanton negligence is considered even more severe. Not only does the negligent individual recklessly disregard reasonable standards of care, he or she is also aware of the probability that some form of bodily harm or property damage will occur. Willful and wanton negligence borders on almost being an intentional act. Intentionally caused losses are often not insurable, depending on the type of insurance contract.
What are Insurance Agent Errors and Omissions? Professional Liability Insurance (E&O)?
Just as doctors should have malpractice insurance to protect against legal liability arising from their professional services, insurance agents need errors and omissions (E&O) professional liability insurance. Under this insurance, the insurer agrees to pay sums that the agent legally is obligated to pay for injuries resulting from professional services that he rendered or failed to render.
What is the Typical Losses Covered?
A professional is supposed to deliver a level of service that is standard for the industry. Sometimes an insurance producer can make a mistake or fail to do something they were supposed to do. Typical losses covered for the producer under an E&O policy include:
Not providing insurance coverage when the agent was supposed to
Creating an administrative error
Premium calculation errors
Misstating insurance coverage
Not effecting a policy change requested by the customer
Not explaining the policy provisions properly
Incorrect identification of client loss exposures
Forwarding inaccurate or incomplete information about a client to a carrier
Failing to recommend coverage
Not handling a claim properly
Typical E&O Exclusions
Common in any liability coverage, intentionally harming someone is always excluded, including:
criminal acts;
illegal acts;
dishonest acts;
malicious acts;
libel;
slander; and
intentional violation of any law, regulation, statute, or ordinance.
What is the certificate of authority
it is granted to the insurer by the commissioner of the insurance
insurance producer
People who wish to sell, solicit or negotiate insurance in the United States must be licensed as a “producer”.
