Insurance Agent Authority

There are various acts or in-actions that an insurance agent can take that will hold not only the agent responsible but also the insurance carrier.

An insurance company 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 insurance company 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 made clear in the 1979, Texas Supreme Court opinion styled, Royal Globe Ins. Co. v. Bar Consultants, Inc.

Apparent authority is an estoppel theory that holds the insurer liable because the insurer 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 according to the Royal Globe opinion.  Evidence of apparent authority may include:

a. application forms referring to the individual as the company’s agent, as found in the 1989 case from the 14th Court of appeals opinion styled, Paramount Nat. Life Ins. Co. v. Williams.

b. forms signed by the agent as “authorized representative,” according to the 1962 case from the El Paso Court of Appeals styled, Employers Cas. Co. v. Winslow.

c. corroborating statements by the agent, according to the 1941 Texas Supreme Court case styled, McAfee v.  Travis Gas Corp.

Here is another example from the 2002, 5th Circuit Court of Appeals.  The opinion is styled, TIG Insurance Co. v. Sedgwick James.  The Court found that 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 insured.  The agent did not have apparent authority to modify the policy.