Authority Of Insurance Agent

Fort Worth insurance lawyers and those in North Richland Hills, Saginaw, Roanoke, Lake Worth, and other places around Tarrant County need to understand the authority of insurance agents and the legal responsibilities related to that authority.
Courts have described actual authority this way:
“Actual” authority, which includes both express and implied authority, usually denotes that authority a principle: (a) intentionally confers upon an agent; (b) intentionally allows the agent to believe he possesses; or (c) allows the agent to believe that he possesses by want of due care. “Implied” actual authority exists only as an adjunct to express actual authority because implied authority is that which is proper, usual, and necessary to the exercise of the authority that the principle expressly delegates.
Here’s a couple of examples:
In the Texas Supreme Court opinion issued in the case, Royal Globe Ins. Co. v. Bar Consultants, Inc., a 1979 case, the court said an agent may be given express authority to sell policies. That express grant of authority would carry with it implied authority to explain the policy benefits. A misrepresentation about the policy would be within the scope of the agent’s actual authority.
The same Court in a 1994 opinion, in the case Celtic Life Ins. Co. v. Coats, said that where the insurance company authorized the agent to explain its policy, the insurer was liable for the agent’s misrepresentation that the policy provided a greater amount of mental health benefits than it actually did.
So, instead of “actual” authority, how about “apparent” authority:
An insurance company also may be liable for the unauthorized acts by an agent, if the agent is acting within the scope of his “apparent” authority. Actual authority is not required. The insurer will be liable when by its conduct it has given the agent the appearance of having authority, so that a reasonable person would suppose the agent had authority.
Apparent authority is an estoppel theory that holds the insurer liable because the insurer has clothed the agent with indicia of authority that would lead a reasonable person to believe the agent had authority. If the agent is acting within the scope of his apparent authority, not even instructions not to mislead, nor diligence in preventing misrepresentations, will shield the insurance company from liability.
Here are a few examples of “apparent” authority:
1) application forms referring to the individual as the company’s agent;
2) forms signed by the agent as “authorized representative”;
3) corroborating statements by the agent.
One case where the courts found there was not apparent authority is a 2002, 5th Circuit case styled, TIG Insurance Co. v. Sedgwick James. Here the court said the only indicia of the agent’s authority was a certificate of insurance provided by the insurer. The certificate disclaimed that the agent had the power to name additional insureds. The agent did not have apparent authority to modify the policy.