Can An Insurance Company Agent Change Insurance Policy Terms?

Another one of those questions that Insurance Law Attorneys ask themselves on many of the cases they see.

Pursuant to Texas Insurance Code, Sections 4001.051(c) and 4001.053, an agent is not authorized by statutes to alter or waive a term or condition of an insurance policy or an application for an insurance policy.  Nevertheless, as can be seen in section 4001.051(b), an insurer will be liable “for purposes of the liabilities, duties, and penalties provided by” certain statutes.  The referenced statutes include the prohibitions found in Chapter 21 and now found in the new codification at Sections 4001.051 and 4001.009.  The Texas Supreme Court explained the interaction between these provisions under the older statutes as follows quoting from Royal Globe Insurance Co. v. Bar Consultants, Inc.:

We are not to be understood as holding that the statutory authority granted an agent under Article 21.02 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 us in International Sec. Life Ins. Co. v. Finck, 496 S.W.2d 544 (Tex. 1973).  However, an insurance company that authorizes an agent to sell its policies may not escape liability for the misrepresentations made by that agent which violate article 21.21 or section 17.46 merely by establishing that the agent had no actual authority to make such misrepresentation.

Thus, even if the agent cannot change the policy, the insurance company may still be responsible for what the agent represented.