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State Statutes Regulating Agents
Practically all the states have seen fit to enact laws which define the meaning of the term "agent" regulate the appointment and licensing of agents, and prohibit on their part various kinds of misconduct. The statute law relating to these three subjects may briefly be summarized as follows: Definition of the term "agent". It was at one time the practice of certain companies to employ agents without written agreements and to provide in their contracts or application forms that "as regards all matters pertaining to the application, the person soliciting the insurance is expressly agreed to be the agent of the insured". Such a practice manifestly afforded abundant opportunity to the company to resist many claims by simply considering the solicitor the agent of the insured, thus placing all responsibility for the agent's misconduct or error upon the insured. To preclude such treatment to policyholders the several states soon found it necessary to enact statutes which denned the term "agent" with particular reference to the insurance business. Such statutes are held by the courts to control the situation, and thus overcome the evils formerly connected with stipulations in the policy or application which declared the solicitor to be the agent of the insured as regards all matters relating to the application for a policy. A few states even provide by statute that notice to the agent as to the health, habits, or occupation of the insured shall he deemed notice to the company. In the great majority of states a solicitor of life insurance is expressly declared by statute to be the agent of the insurance company and not of the insured. The law of Pennsylvania, which will serve as an example, provides that "an agent is a person, firm or corporation authorized in writing by a company to solicit or countersign or issue policies of insurance on its behalf". A considerable number of the states have formulated the law to the effect that any person soliciting insurance, or performing any act in relation thereto shall be deemed the agent of the company, anything in the policy to the contrary notwithstanding. Attention should be called to the distinction, although of much less importance in life insurance than in fire and other forms of property insurance, which the laws of many states make between insurance agents and brokers. As distinguished from an agent a broker is usually defined " to be a person, not an officer or agent of the company interested, who, for compensation, acts or aids in any manner in obtaining insurance for a person other than himself." There has always been much disagreement between the court decisions in the different states as to the legal position which the insurance broker bears to the insured. In some of the states the courts declare him to be the agent of the party paying him for his services, but this rule necessarily involves uncertainty unless the courts fix the ownership of the fund from which the broker is compensated. Other state courts have declared the broker to be the agent of the insurer as regards the payment of the premium and the delivery of the policy, but to be the agent of the insured in all other matters relating to the insurance. For the greater protection of the insured various states have also seen fit to pass laws which make the broker the agent of the company for certain purposes and the agent of the insured for others. In the great majority of states, however, an insurance broker is regarded as the agent of the insured in all matters. Where the broker is thus declared not to be an agent of the company, it is important for the insured to bear in mind that the broker is his agent, and that consequently the act or knowledge of the broker is his act or knowledge. This is especially true as regards the payment of the premium to a broker who may neglect to remit the same within the proper time, although the courts have shown a disposition to protect the insured in this matter where it appears that an arrangement existed whereby the broker made periodical settlement with the company for premiums collected. Regulation of the appointment and licensing of agents. Most of the states have not only made solicitors of life insurance specifically the agents of the company, but also carefully regulate their appointment and licensing. While numerous differences of detail present themselves in the statutes of the several states, the law of Pennsylvania is probably as nearly typical as that of any other state and will be used for illustrative purposes. Thus, according to the law of this state, all companies to which certificates of authority are issued must certify to the insurance commissioner from time to time the names of all agents appointed by them to solicit risks in the state, and such agents may be either individuals, co-partnerships, or corporations. Before transacting any business each agent must obtain from the commissioner a certificate showing that the company has complied with all the laws of the state and that the agent has been duly appointed its agent. In case the agency is a co-partnership or corporation, every member, officer and director is required to have an individual license. Certificates to agents are issued only upon written application, approved and countersigned by the company, which must be made upon a form prescribed by the commissioner, and which must furnish the information he desires. The commissioner is empowered by the law "to refuse to issue a certificate to any agent, or to renew the same; or he may suspend or revoke any certificate when it shall appear to his satisfaction that the applicant for a certificate, or the agent holding a certificate, has, by misconduct or by misappropriation of collected premiums, or by misrepresentation, or incomplete or misleading comparison of. policies, oral, written or otherwise, for the purpose of inducing or tending to induce a policy-holder in any company to lapse, forfeit or surrender his insurance therein, and to take out a policy of insurance in another company insuring against similar risks, or otherwise, proved to be unfit to hold such certificate." It may be added that the law provides not only for heavy fines in case the aforementioned regulations axe violated, but further declares that the agent " shall be personally liable on all contracts of insurance unlawfully made by or through him for or in behalf of any company not authorized to do business in the state." Prohibition of various kinds of misconduct. In addition to the foregoing regulations most of the states have seen fit to regulate specifically the conduct of agents in at least five other important matters. Briefly stated the laws referred to in this connection are directed against and designed to punish the following acts on the part of an agent:
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