Insurance Agents and Brokers
An insurance agent is an individual appointed or employed by an insurer who sells, solicits, or negotiates insurance, or an individual insurance producer. Agents are licensed by and subject to regulation by the state. An agent may be an independent agent, representing at least two insurance companies and serving clients by searching the market for the most coverage at the best price. An agent generally receives a commission and a fee for handling the insured’s policy. A captive agent is a representative of a single insurer or group of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive list of employee benefits such as pensions, life insurance, health insurance, and credit unions.
The terms “agent” and “broker” are now often used interchangeably. Early case law suggests that an “agent” usually refers to a captive agent and a “broker” to an independent agent. Here, however, we will use “agent” to refer to both independent and captive agents.
Scope of Agent’s Authority
The general law of agency applies to insurance agents. Under general agency law, a principal is bound by all acts of its agent within the scope of the agent’s authority. The express or actual authority of an agent is often spelled out in an agency agreement executed between the insurance company and the agent.
The principal is also bound when the agent lacks express authority but possesses apparent authority. An agent’s authority may be established by the principal’s conduct and course of dealing. If a principal holds another out as his agent, indicating by his course of dealing that the agent has certain authority, and induces another to deal with his agent pursuant to that apparent authority, the principal is estopped to deny the agent’s authority. The acts of the agent which create apparent authority may include written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him. To prove apparent or ostensible agency, a party must show:
- the apparent principal represented or held out the apparent agent as having authority
- the party’s justifiable reliance upon the representation led to the injury. “Apparent authority is not predicated on whatever a third party chooses to think an agent has the right to do, or even upon what the agent says he can do, but must be based on acts of the principal which have led the third party to believe reasonably the agent had such authority.” Agency will not be found where the only evidence of that agency is the mere assumption by one party that such agency exists.
Issues of an independent agent’s apparent authority often arise when an insured gives notice of a claim or suit to his agent, expecting that notice to the agent to constitute notice to the insurer. As discussed below, independent insurance agents are often considered agents of the insured under Georgia law, and not agents of the insurer. However, an insurer could place an independent insurance agent in a position of apparent authority such that one might be justified in assuming that the agent had authority to receive notice of an occurrence or claim. When the terms of the policy or instructions stamped upon the face of a liability policy instruct the insured that he is to provide notice of suit, either to the independent insurance agent or the insurer, that delegation of apparent authority will estop the insurer to deny any notice that was given to the independent agent under its instructions.
In International Indem. Co. v. Odom, the Court of Appeals considered the question of an agent’s authority to receive notice on behalf of an insurer. The policy delivered to the insured stated that in the event of an accident, the insured should “notify your agent or Alexander Underwriters, Inc.” The insured had applied for his policy through the George H. Greene Insurance Agency, Inc. (“Greene”), made all payments on his insurance to Greene and only had contact with the insurer through Greene. The insured was injured in an accident, and the insured’s wife gave notice of the accident to Greene before the insured left the hospital (the insured suffered brain damage as a result of the accident and he was unable to give notice on his own.) The insurer claimed that notice was insufficient because Greene was an independent broker rather than an agent of the insurer. The Court of Appeals disagreed, noting that [a]pparent authority to do an act is created as to a third person by written or spoken words or any other conduct of the principal which, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him.” The Court of Appeals further stated that when a principal places a purported agent in a position of apparent authority so that a person of ordinary prudence is justified in assuming that the agent has authority to perform a particular act, and deals with the agent accordingly, the principal is estopped from denying the agency. By stating on the policy that the insured could “notify [Greene] or Alexander Underwriters, Inc.” the insurer placed Greene in a position of apparent authority and the insured was justified in assuming that Greene had the authority to receive notice of the accident. The Court of Appeals held that the insurer was estopped to deny that Greene was its agent.
Knowledge Imputed to Insurer
Where an insurance company gives an agent the authority (either actual or apparent) to acquire knowledge for the company or to act for the company in issuing a policy, the agent’s knowledge as to matters within the general scope of the agent’s authority is imputed to the company even if the company attempts to place express limitations on the power of that agent.
Waiver of Policy Provisions
An insurance agent generally does not have the power to waive policy provisions unless the agent receives express authority to do so from the insurer. For example, an insurance agent does not have the authority to waive a policy provision that states that suit must be brought within twelve months of the date of loss. Absent some fraud by the agent that induces the insured to delay bringing the lawsuit until after the time for bringing suit has expired, the insured cannot rely on the agent’s conduct as an excuse for failing to sue in a timely manner.