Principles Governing Insurance Agency Relationships

Generally, the Law of Agency -and particularly the concept of Insurance Agency- is governed by one cardinal maxim: qui facit per alium, facit per se, which is taken to mean that an agent must only act in the interests of the Principal. But before we even analyse this issue further, who is an Agent and who is a Principal? Simply defined, a Principal is the person on whose behalf certain actions are intended to be conducted. An Agent on the other hand is the person acting under the authority of another person. In context, if you contract the services of an Insurance Agent, you will be the Principal while the “Insurance Agent” will obviously be the Agent. The Insurance Agent will represent you as the Principal in negotiations with third parties; and in this context this is, principally, the Insurer. An Insurance Agency Victoria TX relationship will therefore connect the Assured to the Insurer.

What then are the principles governing Agency relationships?

First, it is worthy to appreciate that Agents are classified into 3 categories: Universal Agents, Special Agents and General Agents. This classification will help a prospective Insured person to define the terms of the Insurance Agency relationship intended to be conducted.

Universal Agents possess broad authority to act on behalf of the Principal. This may be through a Power of Attorney. Professional relationships such as Attorney-client relationships may also fall within this realm of universal agency. A point to note however is that a Universal Agent does not have unfettered powers to act on behalf of the Principal. Special Agents only have the authority to conduct one transaction. In the context of Insurance Agency, a special Agent will only effect one Insurance policy for a defined period of time.

General Agents on the other hand are empowered to transact a series of dealings for a continuous time period. In Insurance Agency Victoria TX, an Insurance Agent will have the authority to act on behalf of the Assured in a series of Insurance transactions for a continuous period of time to be specified in the Agreement. The cardinal rule governing all Agency relationships is the contract between the Agent and the Principal. In the event of uncertainties concerning the contract terms, the question to be asked is: what was the intention of the parties to the contract?

The second issue concerning an Insurance Agency is authority. Authority is threefold: Actual authority, Apparent authority and Ratified authority. As the wording suggests, Actual authority refers to the powers expressly conferred to the Agent. Apparent authority is where third parties reasonably infer that certain powers have been conferred on the Agent – even though such powers may actually be lacking. Ratified authority is where a Principal ratifies the actions of an Agent which were outside his scope of authority.

These principles should help any prospective Insured person in defining Insurance Agency Victoria TX relationships.

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Author: Victoria Garcia

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