Lawyers in general and insurance lawyers specifically know there are two types of authority — actual and apparent.  In turn, actual authority can be expressed or implied.  An agent’s authority can be actual authority expressly conferred by the insurer, or it can be actual authority implicit in the agent’s duties.  The authority also can be apparent authority arising from acts by the insurer that give the agent the appearance of having authority.

Unfortunately, courts are not always precise in labeling the types of authority.  Confusion creeps in when courts mistakenly call implied is not actual authority, or when they speak of implied authority as a form of apparent authority.

Courts have described actual authority this way:

Most Weatherford lawyers will tell you that it may be obvious that a person was the insurer’s agent and was acting as a agent — e.g., a person licensed to sell the company’s policy was engaged in selling the policy.  In addition, the statutes make clear that anyone engaging in the listed activities on behalf of an insurer will be treated as agent for that insurer.

As the Texas Supreme Court said in the 1994 opinion, Celtic Life Insurance Co. v. Coats, under the predecessor statute agents are defined generally, and the statute lists various acts performed in the ordinary course of providing insurance — such as soliciting insurance; transmitting an application; receiving, collecting or transmitting a premium; and adjusting a loss.  Anyone who performs these acts “shall be held to be the agent of the company for which the act is done, or the risk is taken, as far as relates to all liabilities, duties, requirements, and penalties set forth in the statute.

In Celtic Life where the person performed on behalf of the insurer at least some of the listed acts – such as soliciting the policy – he was clearly the insurer’s agent.  The insurer was liable for the agent’s misrepresentation in explaining the mental health benefits under the policy.

Weatherford insurance attorneys need to read and know Texas Insurance Code, section 4001.051.  This section provides an expansive list of conduct that constitutes “acting as an agent” for an insurance company, as follows:

a) This section applies regardless of whether an insurer is incorporated under the laws of this state or another state or a foreign government.

(b) Regardless of whether the act is done at the request of or by the employment of an insurer, broker, or other person, a person is the agent of the insurer for which the act is done or risk is taken for purposes of the liabilities, duties, requirements, and penalties provided by this title, Chapter 21, or a provision listed in Section 4001.009 if the person:

Graford Texas insurance lawyers learn real fast how to determine whether someone is an agent of an insurance company, or not.

The first step to determine whether an insurer is vicariously liable is to determine whether the person who engaged in the conduct was acting as the insurer’s agent.

The question — “Who are agents?” was answered, until recently, by one statute.  Formerly, article 21.02 broadly defined “agents” to include any person who performed certain actions on behalf of an insurance company.  As part of the ongoing codification of Texas statutes, the old article 21.02 is now found in Texas Insurance Code sections 4001.003 and 4001.051.

It is not unfair to say that an insurance company is going to be liable for the acts of its agents 95% of the time.

Insurance companies, like other entities, can act only through agents.  Insurance companies rely on agents to sell their policies, to underwrite 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 it that agent acted within the scope of his or her authority.  This is made clear in the 1994 opinion from the Texas Supreme Court styled, Celtic Life Insurance Company v. Coats.  It was stated earlier in the Supreme Court from 1979 styled, Royal Globe Insurance Company v. Bar Consultants, Inc.  Another case mentioned often is the 1989 opinion from the Houston 14th District styled, Paramount National Life Insurance Co. v. Williams.

As explained by the Texas Supreme Court in the Celtic Life case:

Insurance attorneys know about the statutory requirements of making a claim.  These rules can be looked up in the Texas Insurance Code.  The problem arises when the insurance companies do not comply with these rules.  So, what are some of these rules.

Start with Texas Insurance Code, Section 542.056(a).  This statute requires an insurance company to give written notice it is accepting or rejecting a claim.  A telephone call from the insurance company adjuster notifying the insured of the amount of the loss will not constitute “notice of payment of claim, because the statute requires that the acceptance or rejection be in writing.  This writing requirement is discussed in the Houston Court of Appeals [14th Dist.] opinion styled Daugherty v. American Motorists Insurance Company.

However, an insurance company’s written response acknowledging only that a claim has been received does not constitute an acceptance or rejection under the statute according to a Corpus Christi Court of Appeals opinion styled, Northern County Mutual Insurance Company v. Davalos.

Texas insurance law lawyers should be able to turn to the Insurance Code and know this section that relates to insurance agents.  The section is 4001.053.  It says an agent also may be personally liable for performing acts on behalf of an insurance company.  This is supported with case law from the Texas Supreme Court in the 1998 opinion styled, Liberty Mutual Insurance Company v. Garrison Contractors, Inc.

While an individual agent is subject to being sued under the statute, for the agent to be liable there must be proof that the agent himself committed a violation that caused damage to the plaintiff.  This is what was stated in the 2004, 5th Circuit opinion styled, Hornbuckle v. State Farm Lloyds.

Here is an example from the Garrison Contractors opinion.   An agent personally carried out the transaction that formed the core of the unfair insurance practices complaint.  The agent was responsible for explaining premiums and was required to have a measure of expertise.  He was a “person” engaged in the “business of insurance” and could be liable under the statute.  On the other hand, clerical employees, who have no responsibility for policy sales and servicing and no special insurance expertise, are not “engaged in the insurance business,” and thus, would not be personally liable under this rationale.  The same reasoning should apply to other statutes, like the unfair discrimination statute, that include similar definitions.

Most Dallas insurance lawyers in Dallas and Fort Worth know the ways agents and adjusters can liable for their actions in selling a policy or handling a claim.

Just as an insurance company is liable for its own misconduct, so too agents may be personally liable for their misdeeds, even when acting on an insurer’s behalf.  In general, an agent is individually liable for his or her own tort or statutory violation .  This has been made clear in numerous Texas cases including the Texas Supreme Court in its 1985 opinion, Weitzel v. Barnes.

Ordinarily, an agent is not liable for breach of contract based on the insurance policy, because the contract of insurance is not between the insured and the agent.

Texas insurance lawyers are always asking the above question when someone comes to see them about an insurance company doing them wrong.

To start with, as the contracting party, the insurance company can be liable based on the contract that exists between them and their customer.

There are also several statues, under which, the insurance company can be held liable.  For example, under Texas Insurance Code, Section 541.151, the statute states “any person” engaged in the business of insurance may be liable for unfair insurance practices.  Reading further, the Texas Insurance Code, Section 541.002(2), defines the term “person” to include various insuring entities.

Here is a curious 1933 opinion from the Texas Court of Commission of Appeals.  It is styled, American National Insurance Co. v. Huey.

This is a case wherein an insurance agent is alleged to have misrepresented the terms of an insurance policy wherein the insured was to receive monthly benefit.  This was not what the policy provided.  When the claim for benefits was denied, the insured filed suit alleging the misrepresentations by the agent.

It appears from the record and findings of the jury that, Huey made an application for insurance to the insurance company.  As actually written and signed, this application called for the issuance of a life insurance policy for $2,000, providing for double indemnity in case of accidental death, and waiver of premiums in case of total disability.  On March 12, 1929, a policy of insurance issued by such company was delivered to Huey in all things conforming to the application as written.