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Question

Difficulty: MediumAgent Authority and Agency Law

Producer Elena is appointed by Apex Life Insurance Company under a written contract that explicitly grants her the right to solicit life insurance applications and deliver policies. The written agreement does not mention the collection of premiums. However, Elena routinely collects initial premium payments from clients upon policy delivery because it is standard industry practice necessary to carry out her authorized duties. Based on agency law, which type of authority permits Elena to collect the initial premium?

  1. Implied authorityAnswer
  2. B
    Express authority
  3. C
    Apparent authority
  4. D
    Fiduciary authority

Answer

Implied authority
The correct answer accurately identifies that implied authority is not explicitly stated in a written contract but is inherently granted so the producer can perform the duties they were expressly authorized to complete. Since collecting the initial premium is required to deliver the policy effectively, it falls under implied authority.

Step-by-Step Solution

1
Analyze the written contract terms
The contract explicitly grants the right to solicit applications and deliver policies, but does not mention premium collection.
This establishes the scope of the agent's express authority.
2
Evaluate the unwritten action taken by the producer
The producer collects premiums because it is an industry standard necessary to complete her explicit duties.
Identifying why the unwritten action is performed helps classify the type of authority.
3
Classify the authority based on agency law principles
Authority that is unwritten but assumed to be granted in order to carry out expressly authorized duties is classified as implied authority.
This directly connects the scenario's facts to the legal definition of implied authority.

Key Concept

Types of Agent Authority
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Topics

Agent Authority and Agency Law

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