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One of the most vital subjects in fire insurance is that of agency. In this day when insurance is written almost exclusively by corporations, in most instances transacting business in many states, the agent is a necessary factor in the successful prosecution of the business. To govern his relations with the company there was to begin with the general law of agency. But there has since developed a large body of law dealing with insurance agents in particular, and it is from this law that we are able to comprehend the status of the fire-insurance agent.
As the term is generally understood, a fire-insurance agent is one who is engaged by a company to negotiate for and place contracts of insurance, to collect premiums therefor, and generally to aid in any manner in transacting the business of the company. There is a provision in the standard fire policy to the effect that '' in any matter relating to this insurance, no person unless duly authorized in writing, shall be deemed the agent of this company.'' This provision makes a written contract the sole evidence of agency, and may be regarded as notice to the insured that it is not safe to have business dealings with an agent who cannot show his written authority.
Ordinarily the company gives its agents a written commission defining their authority. But a provision in the policy, such as just quoted, does not relieve the company of responsibility for the conduct of those who are in reality its agents but who may not have written authority. To hold otherwise would enable the insurer at any time to avoid all responsibility for the misconduct or errors of its agents by simply sending them into the field without written authority. Agency is a fact depending on circumstances independent of this provision in the policy, and in numerous cases where the question has come up for adjudication, the courts have outlined the evidence that may be considered as proof of the fact and character of the agency. It may consist of an express contract between the principal and agent, or a recognition by the principal that a certain party is his agent. Again, the fact and character of the agency may be shown by the possession of papers such, for example, as policies executed in blank, or by the evidence of facts from which agency can be inferred as a matter of law. It is important to note, however, that the existence of the agency relationship cannot be presumed. It must be based on some real tangible evidence, and a person dealing with an agent is put on inquiry as to the extent of the agent's authority.
Statutory Regulations of Fire-insurance Agents.—Formerly it was the practice of some companies to send their agents out without written agreements, or to provide in the policy that, as regards all matters pertaining to the application, the person soliciting the insurance is expressly agreed to be the agent of the insured. Then, when trouble arose through the occurrence of a loss, the company could avoid the claim by placing the responsibility for the agent's misconduct or error on the insured. The injustice of this mode of procedure is evident, and many states were not long in enacting statutes defining the powers and duties of agents, and the character of the policies they could write. Where such statutes exist they control the situation and overcome the evils formerly associated with the practice, already referred to, of inserting stipulations in the application or policy which would relieve the company from responsibility for the acts of its agents as interpreted by the courts.
In the majority of states the meaning of "insurance agent'' has been denned by statute. The law of Massachusetts (section 93) will serve as an example, and resembles most of the other statutes on this subject. "A person not a duly licensed insurance broker," the law states, "who, for compensation, solicits insurance on behalf of any insurance company, or transmits for a person other than himself an application for or a policy of insurance to or from such company, or offers or assumes to act in the negotiation of such insurance, shall be deemed an insurance agent within the intent of this chapter, and shall thereby become liable to all of the duties, requirements, liabilities, and penalties to which an agent of such company is subject." Moreover the tendency of the state statutes is to make all agents general agents, except under certain stipulated conditions; and only a few states provide that one dealing with a soliciting fireinsurance agent is bound to ascertain the extent of his authority.
But the various states have not merely attempted to make soliciting agents specifically the agents of the company, but carefully supervise the operations of the agency force representing companies incorporated in other states. The law of Pennsylvania in this respect is probably as nearly typical as that of any other state, and will serve as an example. No person, according to the Pennsylvania Act, shall act as agent of a foreign company until that company has complied with all of the state's insurance laws; and any agent who shall assist in placing risks for a foreign company that has not complied with the law, shall be subject to a fine of from $100 to $1,000, and for the second offence to the same sum, or one year's imprisonment, or both. All foreign companies must certify to the insurance commissioner from time to time the names of their agents, and no agent can transact business for such company until he has received a certificate from the insurance commissioner stating that the company has complied with the law, and that the person named has been appointed its agent. When doing business for a foreign company without such a certificate of authority, the agent is subject to a fine of $500, and is personally liable on all contracts made by him or through him on behalf of such company. Furthermore, any person representing or advertising himself as the agent of any fictitious or spurious company shall be subject to a fine of not more than $500, or imprisonment for not more than three years.
The Character of Agency.—According to the usual classification there are two classes of agents, namely "general" and "special" agents. Story, in his work on Agency, states the distinction between them to be as follows (No. 17): "A special agency properly exists when there is a delegation of authority to do a single act; and a general agency properly exists where there is a delegation to do all acts connected with a particular trade, business, or employment.'' Hence a general agent is one who is employed to transact all the business of his principal of a particular kind or in a particular place, while a special agent is one authorized to act only in a specific transaction. In most states the terms "general agent" and "special agent" are defined by statute or by court decision. Thus in Virginia (23 S. E. Rep., 744) a general agent is defined as "an agent authorized to accept risks, settle the terms of insurance, and to issue and renew policies of fire insurance." On the other hand, the company may appoint, we will say, a special agent with power to adjust losses. Here is an agent whose powers extend only to the fulfilment of a single transaction. In some states, like Wisconsin, the distinction between general and special agents has been eliminated by a statute which declares the agent to be the agent of the corporation to all intents and purposes.
When dealing with a general agent the insured may assume him to exercise all powers coming within the scope of his apparent authority; but if the insured becomes cognizant of facts which would seem to indicate that the agent's authority is restricted, i.e., is special, it devolves upon him to ascertain the nature of the restrictions, and neglect to do this relieves the company from liability. In defining the powers of special agents, considerable difficulty arises, since the courts do not agree as to the powers which the insured may presume various classes of special agents to possess. In his summary of legal decisions defining the powers of special fire-insurance agents Elliott states: "There is considerable conflict of authority as to the powers of a soliciting agent who has actual authority merely to receive applications and forward them to the company for approval. It has been held that such an agent cannot bind the company by an oral contract of insurance, or for the renewal of a policy, or for additional insurance, or by his construction of the policy; nor can he consent to the assignment of the policy, or waive a condition therein. A mere collecting agent cannot bind the company by an agreement to waive any of the terms of the policy. So it has been held that an agent with authority to adjust a loss cannot waive a forfeiture of the policy, although he may waive the making of preliminary proofs of loss."1
The question as to whether a person may act as agent of both parties to the fire-insurance contract has been answered differently by the courts of the various states. One view is presented by the Supreme Court of Wisconsin (70 N. W. Rep., 84, and 48 Wis., 420), and is to the effect that the state statute defining insurance agents does not prevent such an agent from acting as the agent of the insured in certain cases. In the case last cited (Northrup vs. Germania Fire Insurance Co.) the agent of the company also had charge of the property as regards the collection of rents, the payment of taxes,
"'Elliott on Insurance," pp. 133, 134.