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Difficulty: MediumProducer Authority and Agency Law

A producer whose agency contract explicitly limits their authority to selling personal auto insurance issues a commercial liability binder for a local business. Because the producer collected the premium on behalf of the insurer, the insurer is legally bound to honor the commercial coverage under the legal doctrine of implied authority.

Answer: Answer

Answer

False
The statement is false. Implied authority refers only to the unwritten powers that are necessary and customary to carry out a producer's expressly authorized duties. Since the express authority is limited to personal auto insurance, writing a commercial liability policy is entirely outside the scope of both express and implied authority. Collecting a premium does not automatically create implied authority to write prohibited policies.

Step-by-Step Solution

1
Analyze the producer's express authority.
The agency contract strictly limits the producer to selling personal auto insurance.
Identifying the baseline express authority is necessary to determine the scope of implied or apparent authority.
2
Evaluate the producer's actions in the scenario.
The producer issued a commercial liability binder and collected a premium.
This establishes whether the producer's actions fall within or outside their granted authority.
3
Apply the legal definition of implied authority.
Implied authority only covers customary acts required to fulfill express authority, not writing entirely different business lines.
This validates whether the legal justification provided in the statement is conceptually sound.

Key Concept

Implied Authority vs. Express Limitations
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Topics

Producer Authority and Agency Law

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