A local restaurant owner contacts their insurance producer to add a new food delivery van to an existing commercial auto policy. The producer's contract with the insurer strictly prohibits binding coverage for delivery vehicles without prior home-office underwriting approval. However, the insurer has historically supplied this producer with pre-printed, branded insurance identification cards and blank coverage binders. The producer immediately fills out a branded ID card for the van, emails it to the restaurant owner, and states, 'You are fully covered as of right now.' Later that same afternoon, the delivery van is involved in a severe at-fault collision. The insurer attempts to deny the claim based on the producer's clear lack of express authority to bind the risk. Based on legal interpretations of agency law, under which doctrine is a court most likely to force the insurer to pay the claim, and why?
- AWaiver; by emailing the identification card to the client, the producer intentionally and voluntarily relinquished the insurer's known legal right to require prior underwriting approval.
- BContract of adhesion; the verbal conversation between the producer and the restaurant owner created an ambiguous coverage situation, which must always be interpreted in favor of the insured.
- Apparent authority; by providing the producer with official branded ID cards and binders, the insurer created a reasonable belief in the mind of the public that the producer had the power to bind the coverage.Answer
- DImplied authority; because the producer already manages the existing commercial auto policy, the power to bind additional vehicles is considered a necessary and assumed function of their daily business operations.