Legal opinion identifies three distinct categories of authority a producer holds (or assumes) while representing an insurer.
- This is the authority given by the insurer to the producer; it is clearly stated in a written contract between the insurer and the producer.
- For example, Marvin has a contract with Marvelous Insurance Company to sell auto insurance in Summit County.
- This is the authority that is not clearly stated in the contract but is, nevertheless, understood as a matter of common sense;
- For instance, Patty Producer is a representative of Intelligence Insurance Company and decides to attend a Chamber of Commerce meeting to market products of the Intelligence Insurance Company. Even though the contract she has with that company does not specifically state that Patty can attend Chamber of Commerce meetings and market the products, it is implied (common sense) that she can do so.
- This is the authority that a producer is assumed to have—even if no such authority (express or implied) was given by the insurer.
- This type of authority is created when an action by the producer suggests that he or she has a certain authority.
- For example, suppose Peter Producer is a producer for Wonderful Insurance Company; further suppose that Peter Producer tells Curly Customer that he does not need to pay his insurance bill by the due date and that he can pay “whenever he wants.” This is certainly not something the insurer would want Peter Producer to say; therefore, making such a statement does not fall within the scope of express authority, nor is it considered implied authority. It is called apparent authority, since it is authority the insurer does not want Peter Producer to have. Nevertheless, because of apparent authority, the insurer could be obligated to pay for Curly Customer’s car accident—even though Curly Customer did not make a payment by the due date.