The vast majority of insurance policies are sold by insurance agents. So, are the insurance companies responsible for the acts of these agents?
The first step to determine whether an insurance company is vicariously liable is to determine whether the agent who engaged in the conduct was acting as the insurance company agent.
The question — “Who are agents?” was answered, until recent years, by one statute. Formerly, article 21.02 broadly defined “agents” to include any person who performed certain actions on behalf of an insurance company. As part of the ongoing codification of Texas statutes, the old article 21.02 is now found in Texas Insurance Code, Sections 4001.003 and 4001.051.
“Agent” is now defined in Section 4001.003, while Section 4001.051 outlines what constitutes “acting as an agent,” and Section 4001.053 further defines who are agents.
It may be obvious that a person was the insurer’s agent and was acting as agent, e.g., a person licensed to sell the company’s policy was engaged in selling the policy. In addition, the statutes make clear that anyone engaging in the listed activities on behalf of an insurer will be treated as agent for that insurer.
As the Texas Supreme Court explained under the predecessor statute, agents are defined generally, and the statute lists various acts performed in the ordinary course of providing insurance — such as soliciting insurance; transmitting an application; receiving, collecting, or transmitting a premium; and adjusting a loss. Anyone who performs these acts “shall be held to be the agent of the company for which the act is done, or the risk is taken, as far as relates to all liabilities, duties, requirements and penalties set forth in the statute. This is from the 1994, Texas Supreme Court opinion styled, Celtic Life Ins. Co. v. Coats.
An agent can be both agent for the insured and for the insurance company. The agent may owe a duty to the insured to procure insurance, and a duty to the insurer to collect premiums and deliver the policy for the insurance company. Thus, proving the agent acted for the insured does not shield the insurance company from responsibilities, and proving the agent acted for the insurance company does not negate all duties to the insured.