Actual Authority Of Insurance Agent

Lawyers in general and insurance lawyers specifically know there are two types of authority — actual and apparent.  In turn, actual authority can be expressed or implied.  An agent’s authority can be actual authority expressly conferred by the insurer, or it can be actual authority implicit in the agent’s duties.  The authority also can be apparent authority arising from acts by the insurer that give the agent the appearance of having authority.

Unfortunately, courts are not always precise in labeling the types of authority.  Confusion creeps in when courts mistakenly call implied is not actual authority, or when they speak of implied authority as a form of apparent authority.

Courts have described actual authority this way:

“Actual” authority, which includes both express and implied authority, usually denotes that authority a principal:  (1) intentionally confers upon an agent; (2) intentionally allws the agent to believe he possesses; or (3) 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 principal expressly delegates …

This is discussed in the 1994, Houston 1st Dist opinion, Spring Garden 79U, Inc. v. Stewart Title Co. and in the 1991 Corpus Christi opinion, Cameron County Saving Association v. Stewart Title Guaranty Co.

In the previously discussed Royal Globe 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.

In the previously discussed Celtic Life case, the court said where the insurer authorized the agent to explains 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.