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The following examples are selected from Wolff as illustrations of the many instances that may arise where an agent can bind his company by exercising his power of waiving conditions of the policy: 1

"If the agent knows warranties by the insured are false, and yet issues the policy, the warranties are waived" (p. 77).

"By retaining the premium with knowledge of a forfeiture of a policy condition, such forfeiture is waived" (p. 77).

"By a prior agreement with the insured, an agent can waive conditions of the policy as to sole ownership" (p. 77).

"An agent may consent to prior or subsequent insurance, although the policy forbids it" (p. 78).

"An agent may, by indorsement on the policy, bind the company to an assignment of interest" (p. 79).

"An agent can waive a condition against incumbrances by an indorsement on the policy" (p. 79).

"An agent can by written indorsement permit the removal of insured goods to another location" (p. 80).

"He may consent to a vacancy and insure property he knows to be vacant" (p. 81).

"He may extend credit for a longer time than the company has authorized" (pp. 81 and 82).

"If the agent has authority to adjust a loss he may waive proof of loss" (p. 145), “and can bind the company on an admission of liability" (p. 146).

"By his statements he can waive the company's right to object to proof of loss, or take advantage of the delay in submitting them" (p. 147).

"By his admissions he can bind the company when adjusting a loss" (p. 148), "or prevent the company from suing" (p. 148). "Delivery of proof of loss to the agent of a company is delivery to the company" (p. 151).

"The company is bound by its acceptance of a compromise settlement of a loss made by its agent" (p. 152).

In all cases, however, if the company wishes to protect itself, it can limit the powers of the agent in any manner thought desirable. Such restrictions on the agent's author

'See the many legal case citations for each of these examples.

ity will prove effective in all cases where the insured had knowledge of the same. If the limitations are contained in the application which the insured signs, the courts have generally regarded them as binding against the applicant. But where the limitations are inserted in the policy considerable difference of opinion exists. In some states the courts have refused to uphold provisions in the policy which limit the authority of the agent, whereas others regard them as effective against the insured who has agreed to be bound by the terms of the contract. The weight of authority, however, is to the effect that policy provisions which define the future powers of the agent should be enforced against the insured in matters which arise subsequent to the issuance of the policy. It is essential to bear in mind that, as regards an agent's powers, a distinction should be made between those acts which relate to the solicitation and writing of the policy, and those which pertain to future events, such as the giving of permits and the waiving of policy conditions. The company, however, is not permitted to limit its powers to aet through its officers and general agents by inserting a provision in the policy to this effect. Although the standard fire policy provides that "no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative shall have . . such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto," the courts have decided that the company can waive this provision like any other, and that the general agent has power to do what the company can do. In New York (Weed vs. London, etc., Insurance Co., 116 N. Y., 117) it was decided that "notwithstanding the provision of the policy that anything less than a specific

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agreement clearly expressed and indorsed on the policy should not be considered as a waiver of any printed or written condition therein, the court recognized and affirmed the law, as settled in the state, that such condition can be dispensed with by the company or its general agent by oral consent as well as by writing."

Agents in the course of their daily business are frequently asked to express opinions on the meaning of policy provisions and other matters, and it is of the utmost importance that definite relations should exist between the company and its agents as regards the expression of such opinions. What, then, is the legal effect of the agent's opinion? The general rule is that no legal effect can be given to such opinions in case, for example, they result in misleading the insured as to the meaning of any policy provision. This view is based on the theory that an agent's opinion as to the meaning of any section of the contract does not create new or change old obligations. A case in point is that of the Laclede Fire Brick Mfg. Co. vs. The Hartford Steam Boiler Inspection and Insurance Co. (9 C. C. A. 1; 60 Fed. 351). After taking a policy the insured later asked that insurance be granted on several more boilers. The agent and inspector of the company several times expressed himself to the effect that the new boilers were covered by the original policy. When a loss occurred the company denied the claim, and the court held that despite the agent's statement no modification of the insurance had been made, and that no new contract existed.

Liability of Agents for Misconduct to the Principal.The relation of the agent to his employer is such that he must never further his own personal interests by disobeying or exceeding his instructions. Any misconduct of the agent of either the insured or insurer makes him personally liable to his principal for the damage occasioned. Among the many legal text-books announcing this principle we may

quote from Story on Agency, section 217: "Whenever an agent violates his duties or obligations to his principal, whether it be by exceeding his authority or by mere negligence or omission in the proper functions of his agency or in any other manner, and any loss or damage thereby falls on the principal, he is responsible therefor, and bound to make full indemnity."

As illustrations of this rule, a number of instances may be cited, where the agent is liable to the insured. Thus if he represents an unincorporated company he will be liable to the insured for any loss that may occur, for in the absence of any responsible principal from whom indemnity can be obtained, the law presumes that he wrote the policy on his own responsibility and account, and intended by his act to hold himself responsible. If the agent places insurance for his employer in an insolvent company he is likewise liable to him for any loss that may occur,1 and if engaged for the purpose of keeping his employer's property insured, he becomes liable if he does not protect the same as agreed.2

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When representing the company, the agent, as we have seen, is bound to act in conformity with the definite instructions given to him by his principal, and no custom or usage can overcome the same. Failure to obey his principal's orders literally makes him responsible for any losses that may result, unless the execution of such orders is prevented by an unavoidable accident or he is required to perform an act which is illegal or immoral. If ordered by the company to cancel a policy, neglect to obey the order renders the agent liable for the amount of the loss, and this rule is not waived even though he gives instructions to a broker who placed the insurance with him to have the policy cancelled. In the same way, if ordered to make a reduction

1 Hurrell vs. Ballard, 3 Fost. F., 445.
2 Thomas vs. Funkhouser, 91 Ga., 478.

3 Osborne vs. Rider, 62 Wis., 235.

in the amount of the policy, failure to comply will make the agent liable. Furthermore, in case he cancels policies with a view to subordinating his principal's interest to his own selfish gain, the agent is liable to the company for the premiums involved. Especially is this true when the agent resorts to the practice of "twisting," i.e., of inducing policyholders, when his agency with a company terminates, to cancel their policies with that company, and have him rewrite the same in another company which he now represents. Where an agent is guilty of this practice, he is liable to the company which originally wrote the policies for the commission on the unearned premium. An agent must also account to his principal for all money collected in the manner agreed upon.

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Knowledge of Agent the Knowledge of the Company.— Unless the agent's authority is restricted by the company, and the restrictions are known to the insured, it is a wellrecognized principle that the knowledge of the agent is the knowledge of the company. The principle is well summarized by Wolff in the following words: "Before he issues a policy, the power and authority of a local and soliciting agent of a fire-insurance company are coextensive with the business with which he has been entrusted, and his positive knowledge of material facts, and his acts and declarations within the scope of his employment are binding on his principal unless such principal restricts his authority, and such restrictions are known to the other party at the time of the transaction."" But a distinction must here be made between the time preceding the issuance of the policy and the time following. It is a generally accepted rule that knowledge

'Phoenix Insurance Co. vs. Pratt, 36 Minn., 409; Northern Assurance Co. vs. Hamilton, 50 Nebr., 248.

2 American Steam Boiler Co. vs. Anderson et al., 6 N. Y., Suppl., 507.

3 Wolff's "Law of Insurance Agency," pp. 121, 122.

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