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Difficulty: MediumProducer Authority and Agency Law

If an insurer terminates a producer's appointment but fails to retrieve their branded application forms, rate books, and agency signage, the terminated producer can still legally bind the insurer to new contracts with unsuspecting applicants under the legal doctrine of implied authority.

Answer: Answer

Answer

False
The statement is false because it incorrectly names the legal doctrine. When an insurer terminates a producer but leaves behind branded materials that mislead the public into believing the agency relationship still exists, it creates 'apparent authority.' 'Implied authority' is the unwritten authority necessary to perform actual contractual duties, which completely ends when the contract is terminated.

Step-by-Step Solution

1
Analyze the source of the producer's power to bind the insurer in the given scenario.
The power to bind the insurer stems from the insurer's failure to retrieve materials, creating a false public perception of an active relationship, not from an actual ongoing agency contract.
Identifying how the authority is created is necessary to classify it correctly under agency law principles.
2
Differentiate between the definitions of implied and apparent authority.
Implied authority is unwritten but necessary to perform authorized express duties, while apparent authority is created by the principal's actions or inactions toward third parties.
The stem claims the scenario represents implied authority, which must be evaluated against legal definitions.

Key Concept

Types of Producer Authority (Apparent vs. Implied)
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Topics

Producer Authority and Agency Law

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