Insight

An Insurance Agent is not Just the Agent of the Insured

An Insurance Agent is not Just the Agent of the Insured

Adam B. Kutinsky

Adam B. Kutinsky

April 19, 2022 10:59 AM

An Insurance Agent is not Just the Agent

of the Insured

By Adam Kutinsky, Kutinsky PLLC

The Common Law Rule

In the context of insurance agent errors and omissions

the common law holds that an independent insurance agent

is considered an agent of the insured rather than an agent of

the insurer:

“. . . the independent insurance agent or broker is

considered an agent of the insured rather than an

agent of the insurer.” 1

An independent agent is one who represents multiple insurance

companies as opposed to a captive or exclusive agent

who sells policies for one insurer. Conversely, when a case

involves an insurance agent but is not limited to errors and

omissions claims, involves other parties or entirely different

claims, the independent agent common law rule becomes less

relevant and in some contexts irrelevant. This is because independent

insurance agents are not exclusively the agent of

the insured and because an agent does not only owe duties

to its principal but also has authority to act on its behalf. Put

another way, an independent insurance agent is a dual agent

with duties and authority for the insured and the insurer.

The Agent’s Contractual Obligation

The common law rule that an independent agent is the

agent of the insured is an incomplete statement because it

does not consider an agent’s contractual and statutory duties

and authority. By way of example, in most circumstances an

independent agent maintains a “producer agreement” with

each insurance company for whom he sells policies. A producer

agreement grants the agent the necessary authority to

bind the insurer to coverage at least temporarily. Absent public

policy or statutory exceptions, the aforementioned common

law rule does not affect a contract that creates a principalagent

relationship and defines the scope of that relationship.

Statutory Law

Additionally, the Michigan Insurance Code was amended

in 2018 to add definitions of “agent of the insurer” and

“agent of the insured.”2 These definitions conflict with the

common law rule:

(b) “Agent of the insured” means an insurance

producer who is not an appointed insurance

producer of the insurer with which the insurance

policy is placed. An agent of the insured is treated

as representing the insured or the insured’s

beneficiary and not the insurer.

(c) “Agent of the insurer” means an insurance producer

who sells, solicits, or negotiates an application

for insurance as a representative of

the insurer and not the insured or the insured’s

beneficiary.

In Michigan an insurance company must appoint an independent

insurance agent who maintains authority to bind

the insurer to coverage. Once that appointment is made the

insurance code considers the insurance agent the agent of the

insurer, not the insured. Whether a statute abrogates common

law is subject to further analysis and the conflict between the

two should be raised when an agent’s duties and authority is

at issue. And the application of the contractual, statutory and

common law governing insurance agents requires a case-bycase

analysis. Take for example the situation of an insurance

company issuing a policy with different coverage from what

an insured requested and was promised by an independent

insurance agent. The common law would be relevant to an

errors and omissions claim against the agent but not relevant

to a reformation claim against the insurance carrier. It is the

insurer/agent producer agreement that determines whether an

agent bound the insurance company to the promised coverage

or exceeded that authority.

The bottom line is that insurance agents are governed by

three sources of authority - contract, statute and common law.

All three should be reviewed to determine what duties and

authority an insurance agent held towards the insured and the

insurer in each particular case. 

About the Author

Adam Kutinsky is an insurance coverage attorney and

CPCU® who represents policyholders and other parties affected by

or entitled to insurance benefits. He can be reached by telephone

at (248) 762-8644 and by email at adam@kutinsky.com. His

website is kutinsky.com.

Endnotes

1 West American Ins. Co. v. Meridian Mut. Ins. Co., 230 Mich. App.

305, 310, 583 N.W.

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