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.
