Insurance Shades: Appointed Agent’s Relationship with Insurer

Insurance Shades

The ICO says that an ‘appointed insurance agent’ (note: it does not say ‘insurance agent’) is the agent of the insurer when dealing with a third party for (1) the issue of a contract of insurance and (2) insurance business relating to the contract. What this provision is largely saying is that whenever someone who is an appointed insurance agent of an insurer is dealing with a client in respect of (1) or (2) above, he is treated as having authority to bind the insurer; in other words, the insurer will be

vicariously liable to the client for the agent’s acts or omissions in the course of such dealings.

You will recall the common law rule you have learnt in Chapter 2 that the principal is vicariously liable for the agent’s conduct. But if you think that the said ICO provision is just repeating this common law rule, you are missing the essence of the ICO with respect to regulation of

insurance agents. Before the said provision was enacted, a dispute between an insured and an insurer as to for whom an insurance intermediary has acted would have to be adjudicated on the basis of the relevant common law rules. In the common law, the nub of this issue is best represented by

this question: ‘For whom at the material time was the insurance intermediary acting in respect of the act which is alleged to have given rise to a contract or transaction between the insured and the insurer?’ The courts would resolve this question on the particular facts of the case and might possibly hold that the insurance intermediary was an agent of the insured for the act in question, even if he was at and about the material time in the business of insurance agency rather than insurance broking.

In other words, this is a question of fact, rather than a question of law. Now that the said provision has come into effect, when a similar dispute arises, the insurer will be held vicariously liable for the acts of the insurance intermediary provided that he was at the material time its ‘appointed insurance agent’ and that the acts in question fall within the scope of (1) or (2) (see the first paragraph of 6.2.1a)

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