Property & Casualty Insurance Exam (National Portion)Producers and AdjustersEasy
An insurance producer has been legally appointed by an insurer to act on its behalf and has been given a written contract detailing the scope of their authority, including policy issuance limits and claims handling procedures. What type of authority does this written contract explicitly grant the producer?
- AFiduciary authority.
- BApparent authority.
- CImplied authority.
- DExpress authority.
Show answer & explanationAnswer & explanation
Correct answer: D. Express authority.
Express authority is the specific authority that the insurer gives to the agent in a written contract or agreement. It explicitly outlines what the agent is allowed to do on behalf of the insurer.
Why the other options are wrong
- A. Fiduciary duty is a responsibility, not a type of authority granted.
- B. Apparent authority arises from the insured's reasonable belief based on the insurer's actions, not a written contract.
- C. Implied authority is not explicitly granted but is necessary to carry out express authority, or is customary.
Express Authority
The specific powers and duties explicitly given to an insurance producer by an insurer, typically in a written agency agreement or contract.
- Explicitly granted by insurer
- Usually in written contract
- Defines scope of agent's power
Memory trick: Express is written, implied is assumed, apparent is perceived.