Most experienced insurance attorneys in Dallas and Fort Worth can tell you the law in this area can be confusing, despite the relatively straightforward principles. Historically, there was a distinction between “recording” agents and “soliciting” agents. A recording agent had authority co-extensive with that of the company, so there was no question of the agent’s actual or apparent authority. This was discussed in the well known 1979, Texas Supreme Court opinion, Royal Globe Insurance Co. v. Bar Consultants, Inc. The court noted that the authority of a soliciting agent was much more limited than the authority of a recording agent. The same court went on to hold that the insurance company was liable for the agent’s misrepresentation of coverage.
This has led some courts to conclude mistakenly that an insurance company could be liable for misrepresentations by a recording agent, but not by a soliciting agent. This has been seen in the 1984, Houston [1st Dist.] opinion styled, Guthrie v. Republic National Insurance Co. This analysis was wrong, which was made clear when the Texas Supreme Court decided the 1994, opinion, Celtic Life Insurance Co. v. Coats, and rejected this argument.
In Celtic v. Coats, the court held the insurance company was liable for a misrepresentation by a soliciting agent. The focus was not on the agent’s status as recording or soliciting. Instead, the court applied the two-step analysis: was he the company’s agent; and was the misconduct within the actual or apparent scope of his authority? Both questions were answered affirmatively, so the insurance company was liable.