When an insurance agent exceeds their given authority, what type of authority are they exercising?

When an insurance agent exceeds their given authority, they are exercising apparent authority. This concept refers to the authority that an agent appears to have in the eyes of third parties, even if that authority has not been explicitly granted by the insurer. It originates from the perceptions of those who are interacting with the agent and is not limited to the actual authority defined by the agency agreement.

For example, if an agent signs a contract or makes a promise that goes beyond the scope of their documented authority, a client may reasonably believe that the agent has the ability to make such commitments. This can lead to liability for the insurance company if the third party relies on this apparent authority.

Express authority refers to the powers specifically defined and granted to the agent by the insurer, while implied authority includes those actions that are not expressly stated but are necessary to carry out the duties authorized in the express authority. Limited authority would pertain to situations where an agent's authority is specifically restricted, but even among these, apparent authority can still mislead third parties into believing the agent has greater power. Thus, apparent authority plays a critical role in the interactions between agents and clients, shaping the expectations and responsibilities of both parties.