An insurer also may be liable for 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. This was the ruling in the 1979, Texas Supreme Court case, Royal Globe Insurance Co. v. Bar Consultants, Inc.
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 insurer from liability. Evidence of apparent authority may include:
- application forms referring to the individual as the company’s agent, (see Paramount National Life Insurance Co. v. Williams and Tidelands Life Insurance Co. v. Franco)
- forms signed by the agent as “authorized representative,” (see Employers Casualty Co. v. Winslow)
- corroborating statements by the agent. This occurred in the 1941 case, McAfee v. Travis Gas Corp. and the 1983, case, Duval County Ranch Co. v. Alamo Lumber Co.
In the 2002, 5th Circuit opinion styled, TIG Insurance Co. v. Sedgwick James, 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.
It should be obvious that an experienced Insurance Law attorney should be consulted when there is doubt.