The Powers of an Insurance Agent
It is quite a situation when the insured buys his insurance policy through a broker. A broker is a person who, for a consideration, solicits and negotiates contracts of insurance for an insured. He is the agent of the insured and not of the insurance company.
The broker’s life insurance quotes are not necessarily known by the term life insurance company. The life insurance policy, likewise, should not be presumed to be knowledge possessed by anyone besides the broker.
Payment of premiums to the broker is not payment to the insurance company, although statutes in many states now make the broker the agent of the company for premium-collecting purposes.
The legal doctrines of waiver and estoppel in whole life insurance are closely connected with, even in the best life insurance, powers of the agent giving the life insurance quote.
There is much confusion in decisional law as to the true nature of these two concepts. Some courts carefully distinguish between them whereas other courts seem to use the terms interchangeably.
The term “waiver” has been defined by the New York Court of Appeals as “the voluntary abandonment or extinguishment of some right or advantage.” This same court has defined the term “estoppel” as “the doctrine…that a party may be precluded by his acts or conduct from asserting a right to the detriment or prejudice of another party who entitled to rely on such conduct has acted upon it.”
Reduced to nontechnical terms, this says that if a company selling cheap life insurance, through its low cost life insurance agent, has lulled the holder of the low rate insurance policy into a feeling of security or has led the insured to believe that he may do certain things barred by the contract itself, the insurance company cannot avoid the contract because the insured has taken this action.
Questions of waiver and estoppel arise largely in questions involving the relationship of agent and policyholder. Often, an applicant for a policy will tell the agent of some condition which would seem to be a breach of the policy at its inception.
The prospect may tell the agent, for example, that he is operating a fireworks plant on a small scale in his basement. The agent tells him not to worry, since such small-time operations are all right with the insurance company; or perhaps the agent says nothing but goes ahead issuing the policy and collecting the premium.
If a loss occurs, another representative of the company, the loss adjuster, visits the insured. When he learns about the fireworks and makes a report to the home office, the insurance company likely will deny liability. The insured hires a lawyer.
If the case is tried in the courts of any state except New Jersey or Massachusetts, experience has shown that the insurance company will be held liable and forced to pay the claim. These courts take the position that the action of the agent constituted a waiver, and the insurance company is estopped from disclaiming liability.
Suppose the agent had not known of the fireworks plant. A few state courts would interpret even this for the insured on the grounds that the issuance of a policy with a breached clause is in itself a waiver of the breach.
of the company for premium-collecting purposes.
The legal doctrines of waiver and estoppel in whole life insurance are closely connected with, even in the best life insurance, powers of the agent giving the life insurance quote.
There is much confusion in decisional law as to the true nature of these two concepts. Some courts carefully distinguish between them whereas other courts seem to use the terms interchangeably.
The term “waiver” has been defined by the New York Court of Appeals as “the voluntary abandonment or extinguishment of some right or advantage.” This same court has defined the term “estoppel” as “the doctrine…that a party may be precluded by his acts or conduct from asserting a right to the detriment or prejudice of another party who entitled to rely on such conduct has acted upon it.”
Reduced to nontechnical terms, this says that if a company selling cheap life insurance, through its low cost life insurance agent, has lulled the holder of the low rate insurance policy into a feeling of security or has led the insured to believe that he may do certain things barred by the contract itself, the insurance company cannot avoid the contract because the insured has taken this action.
Questions of waiver and estoppel arise largely in questions involving the relationship of agent and policyholder. Often, an applicant for a policy will tell the agent of some condition which would seem to be a breach of the policy at its inception.
The prospect may tell the agent, for example, that he is operating a fireworks plant on a small scale in his basement. The agent tells him not to worry, since such small-time operations are all right with the insurance company; or perhaps the agent says nothing but goes ahead issuing the policy and collecting the premium.
If a loss occurs, another representative of the company, the loss adjuster, visits the insured. When he learns about the fireworks and makes a report to the home office, the insurance company likely will deny liability. The insured hires a lawyer.
If the case is tried in the courts of any state except New Jersey or Massachusetts, experience has shown that the insurance company will be held liable and forced to pay the claim. These courts take the position that the action of the agent constituted a waiver, and the insurance company is estopped from disclaiming liability.
Suppose the agent had not known of the fireworks plant. A few state courts would interpret even this for the insured on the grounds that the issuance of a policy with a breached clause is in itself a waiver of the breach.
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