An insurer specifically revokes a producer's authority to write commercial liability policies for restaurants due to high loss ratios. However, the insurer fails to retrieve the commercial application forms, rating manuals, and company-branded binders previously issued to the producer. Two weeks later, the producer visits a restaurant owner, presents the official company materials, completes an application, and issues a binder in exchange for a premium check. Under the principles of agency law, which concept dictates that the insurer is likely bound to honor the coverage?
- Apparent authority, because the insurer's failure to recover its official materials created a reasonable public perception that the producer still held the power to bind the risk.Cevap
- BImplied authority, because the producer's continued physical possession of the required forms implicitly granted the customary power to execute the transaction.
- CExpress authority, because the use of the insurer's officially issued corporate documentation supersedes any internal revocation of writing privileges.
- DEstoppel, because the producer voluntarily relinquished the insurer's underwriting guidelines by accepting the initial premium payment.
Cevap
The insurer is bound by apparent authority because it failed to retrieve the official materials, creating a reasonable expectation for the client.
Apparent authority exists when a principal (the insurer) acts or fails to act in a way that causes a third party to reasonably believe the agent has authority. By failing to retrieve the official forms and binders, the insurer clothed the producer in the 'trappings of agency,' making the insurer legally responsible for the coverage since the restaurant owner reasonably relied on those official materials.
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Apparent Authority in Agency Law