Insurance Agent Lack Of Authority

Dallas insurance lawyers will run across situations where it is apparent an insurance agent does not have authority to do so of the things he is doing. So, what does this mean when trying to advise a client. Here is some information to know.
An insurance company cannot escape liability by showing that it did not authorize the specific wrongful act. This was stated by the Texas Supreme Court in cases in 1994 and 1979. One of those cases was Celtic Life Insurance Company v. Coats.
The Celtic court stated:
“In determining a principal’s vicarious liability, the proper question is not whether the principle authorized the specific wrongful act; if that were the case, principals would seldom be liable for their agents’ misconduct. Rather, the proper inquiry is whether the agent was acting within the scope of the agency relationship at the time of the act. The misrepresentation in the present case was made in the course of explaining the terms of the policy — a task the jury specifically found to be within the scope of the agent’s authority. Thus, Celtic cannot escape liability on the basis that it did not authorize particular representations concerning the policy.”
Here is more information to be known.
An agent is not authorized by the statutes to alter or waive a term or condition of an insurance policy or an application for an insurance policy. This is found in Texas Insurance Code, Sections 4001.051(c) and 4001.053. Nevertheless, an insurance company will be liable “for purposes of the liabilities, duties, and penalties provided by” certain statutes. This is pursuant to Section 4001.051(b). The referenced statutes include the prohibitions formerly found in earlier statutes. The Texas Supreme Court explained the interaction between these provisions as follows:
“We are not to be understood as holding that the statutory authority granted an agent under previous law authorizes that agent to misrepresent policy coverage and bind the company to terms contrary to those of the written policy; that question was decided by the Court in an earlier 1973 opinion. However, an insurance company that authorizes an agent to sell its policies may not escape liability for the misrepresentations merely by establishing that the agent had no actual authority to make such misrepresentations.”
SO, here is what is important to realize: Even if the agent cannot change the policy, the insurance company may still be responsible for what the agent represented.
Relevant parts of Section 4001.051 read:
(b) Regardless of whether the act is done at the request of or by the employment of an insurer, broker, or other person, a person is the agent of the insurer for which the act is done or risk is taken for purposes of the liabilities, duties, requirements, and penalties provided by this title, …if the person:
(1) solicits insurance on behalf of the insurer;
(2) receives or transmits other than on the person’s own behalf an application for insurance or an insurance policy to or from the insurer;
(3) advertises or otherwise gives notice that the person will receive or transmit an application for insurance or an insurance policy;
(4) receives or transmits an insurance policy of the insurer;
(5) examines or inspects a risk;
(6) receives, collects, or transmits an insurance premium;
(7) makes or forwards a diagram of a building;
(8) takes any other action in the making or consummation of an insurance contract for or with the insurer other than on the person’s own behalf; or (9) examines into, adjusts, or aids in adjusting a loss for or on behalf of the insurer.
The above is vital information to know.