Property & Casualty Insurance Exam (National Portion)Producers and AdjustersMedium
An insurance producer has been legally appointed by an insurer to act on its behalf and has a written contract outlining their duties and responsibilities, including the authority to bind certain coverages. What type of authority does this represent?
- AApparent authority
- BCustomary authority
- CExpress authority
- DImplied authority
Show answer & explanationAnswer & explanation
Correct answer: C. Express authority
Express authority is the specific authority granted to an agent by the principal (insurer) through a written or oral agreement, explicitly detailing the actions the agent is permitted to take.
Why the other options are wrong
- A. Apparent authority is created when a third party reasonably believes the agent has authority based on the principal's actions or inactions.
- B. Customary authority is not a recognized legal term for agent authority; it's a synonym for implied or apparent.
- D. Implied authority is not explicitly granted but is necessary to carry out express authority.
Express Authority
Express authority is the specific, explicit authority granted to an insurance producer by an insurer, typically in writing through an agency contract, detailing what actions the producer is authorized to perform.
- Explicitly granted by the principal.
- Usually in writing (e.g., agency contract).
- Details specific powers and duties.
- Legally binding for the insurer.
Memory trick: Express is explicit, written in text; Implied is assumed, for the task to be blessed.