Life Insurance Agent Liability-4

Insurance companies, like other entities, can only act through it’s agents.  Insurance companies rely on agents to sell their policies, to under write potential insureds, and to investigate and adjust claims.  Insurance companies may be vicariously liable for another’s misconduct if that other person is the insurer’s agent and if that agent acted within the scope of his or her authority.  This is discussed in several cases starting with the 1994 Texas Supreme Court opinion styled, Celtic Life Ins. Co. v. Coats, then the 1979 opinion styled, Royal Globe Ins. Co. v. Bar Consultants, Inc.  This is also discussed in the 1989 Houston 14th Court of Appeals opinion styled, Paramount Nat. Life Ins. Co. v. Williams.
The Texas Supreme Court explained in the Celtic case as follows:  An insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent’s authority.  This rule is based on notions of fairness: “since the principal has selected the agent to act in a venture in which the principal is interested, it is fair, as between him and a third person, to impose upon him the risk that the agent may exceed his instructions.”
The analysis for deciding if an agent is vicariously liable for the conduct of another has two steps:
Regarding Agency – Was the person acting as the insurer’s agent?
Regarding Authority – Did the misconduct occur within the actual or apparent scope of the agent’s authority?
When both elements exist, the insurer will be liable for the agent’s conduct.  Otherwise, the insurer’s liability must be based on some other theory – e.g., the insurer is directly liable, or the insurer ratified the misconduct.
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