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Difficulty: MediumAgent Authority and Agency Law

Producer James represents Sentinel Mutual. His written agency agreement explicitly grants him the power to solicit life insurance applications and collect initial premium payments. The contract does not specifically mention that James can deposit these client checks into the agency's fiduciary trust account before remitting the funds to the insurer. However, James performs this action regularly because it is a standard, necessary procedure to fulfill his explicitly authorized duties. Which of the following legal concepts validates James's ability to perform this unwritten task?

  1. Implied authorityAnswer
  2. B
    Express authority
  3. C
    Apparent authority
  4. D
    Waiver and estoppel

Answer

Implied authority
The correct answer is implied authority. Implied authority refers to the powers that are not formally written in the agency contract but are reasonably assumed to exist so the agent can transact the insurer's business. Since the agent has the express authority to collect premiums, the operational authority to deposit them into a required trust account is implied.

Step-by-Step Solution

1
Identify the powers explicitly granted to the producer in the scenario.
The producer has written permission to solicit applications and collect premiums.
Establishing the baseline express authority is required to evaluate related actions.
2
Analyze the nature of the unwritten task being performed.
Depositing checks into a trust account is an unwritten but necessary procedural step to fulfill the explicitly granted duty of collecting premiums.
The relationship between the written duty and the unwritten task determines the type of authority.
3
Match the scenario to the correct legal definition of agent authority.
Authority that is unwritten but necessary to carry out express duties is classified as implied authority.
This confirms the legal doctrine that validates the producer's actions.

Key Concept

Types of Agent Authority
Estimated Time:1m 0s
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Topics

Agent Authority and Agency Law

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