Concept of Agency ***
MR. WATSON: The authority of an agent to undertake certain functions, such as soliciting applications for the insurance company, collecting premiums, etc., is found in the concept of agency, or an agency agreement, between the company and the agent.
MR. WATSON: And, this authority is governed by agency law. What this means is that the agent and the company are one.
- What the agent knows, the company knows.
- Money paid to the agent is money paid to the company.
- What the agent says, the company says. What he sees, the company sees. The agent and the company are one.
MR. WATSON: If I, as the agent, misrepresented, your attorney is going to try to tie me to the insurance company I represent, to make us as one. So you can sue us both. Do you agree?
ALL: Yeah.
MR. WATSON: Picture this. You are over here on this side of the courtroom, and my company and I are on the other side, and the jury somewhere on the corner. I lied to you, ripped you off, and your attorney is trying to tie me to my company. Agree?
STUDENTS: Yes.
MR. WATSON: He's going to do that through one of three different types of authority . Three different types are:
Agent Authority ***
MR. WATSON: So he's going to present to the jury -- he's going to say, "Your Honor, here's a contract between the insurance company and Mr. Watson. In the contract, Watson’s power to represent the insurance company is expressed.”
Expressed means written. It is granted by means of the contract. It's going to point out things I can and cannot do. But it's not going to cover everything. It cannot be all-inclusive. Do you agree?
STUDENTS: Yes.
MR. WATSON: So if the contract is not going to cover everything, he might use "implied ."
Implied authority is not overtly extended. "Overtly" means outwardly.
MR. WATSON: If you have been conducting business a certain way and the insurance company knew about it but said nothing, they are in effect giving you permission to continue doing so. That’s implied authority. Implied authority is incidental to express authority, and all that means is that it’s second, or not first.
MR. WATSON: So your attorney would say, the insurance company knew what Watson was doing, but they looked the other way. They were aware of it. They gave him the authority by looking the other way, in effect saying, it was okay. Does that make sense?
STUDENTS: Yes.
MR. WATSON: So expressed is what?
STUDENTS: Written.
MR. WATSON: Written. Implied is not written, not overtly extended.
MR. WATSON: Another way the attorney could tie the agent to the insurance company is this:
MR. WATSON: AFLAC fired me two weeks ago. But I still have their big magnetic sign on my pickup truck. I still have their applications, business cards, and receipts.
MR. WATSON: I come out to your house and I sell you a policy. You fill out the application and give me money. AFLAC would be bound by the receipt. That's called apparent authority , apparent authority . It's what you (a third party) think I have. AFLAC led the public to believe I still had authority to write business for them. So how will the attorney tie the insurance company to me, the agent?
MR. WATSON: Through apparent authority . What is it that the insurance company did not get back from me? The applications. You understand? So the insurance company would still be on the hook should you die. That contract would be legal, valid, and binding.
MR. WATSON: Expressed , implied , and apparent .
MAN: I have a question. So an agent needs to have the authority?
MR. WATSON: He does. It's going to be written but it's not going to cover everything, so he will be doing things not spelled out in his contract. Where did he get that authority? Because he did it once. The company knew about it, and they didn't say he couldn't do it. By not saying he couldn't do it, then they're implying its okay.
MR. WATSON: All that says is, the insurance company and the agent are one and the same. So when they sue you, the agent, they are going to be suing the insurance company as well.
MR. WATSON: Expressed authority . What is it?
STUDENTS: Written.
MR. WATSON: What about implied ?
STUDENTS: Not written. Not overtly (outwardly) given.
MR. WATSON: And apparent authority ?
STUDENTS: What a third party thinks you have.
Principle of agency law: ***
MR. WATSON: Again, this just means that the agent legally is the insurance company. So anything the agent does, the insurance company is presumed to have done. This is why when you mess up, the customer goes after the insurance company.
- The acts of the agent within the scope of his authority are the acts of the principal, "the principal" being the insurance company.
- A contract completed by an agent on behalf of the insurance company or the principal is a contract of the principal.
- Payments made to an agent on behalf of the principal, are payments made to the principal.
- Knowledge of the agent regarding business of the insurance company is presumed to be knowledge of the insurance company.