(Note: This Guest Blog is by Corey Harris, an attorney with Merlin Law Group in the Tampa, Florida, office. This is the fourth part in a series he is writing on post-loss duties).

Last week, I received a great question regarding my post, Who Can Accept My Notice of Loss. The entire question and my response are rather long to re-post, but the gist of the question was:

What is the difference between your case with the secretary acting in an agent capacity and an adjuster acting in a claims settlement capacity for the insurer? Are the sales agent’s actions more binding than the claims adjusters’ actions? I realize there are two topics here, but it would be very informative if you could enlighten the subscribers as to who may become an "agent" of the insurer during a claim, when estoppel applies, to whom it applies and if there is any case law on this issue.

First, let me say that there is generally not any significant difference between the ability of a claims adjuster and a sales agent to bind an insurer. Although someone on the loss adjustment side of the company and someone in the sales department have vastly different roles, their position is not the main determining factor. The main point to look at is whether an ordinary person would have a reasonable belief that the individual employee has the authority to make statements which would bind an insurer. This is usually fact intensive and can involve the individual’s title, what authority he held himself out as having, as well as what actions the company took to instill this belief. Therefore, depending on the situation, there is little difference in the ability of an adjuster and a sales representative when it comes to binding an insurer.

In general, everyone that works for an insurer is an “agent” of that company in some respect. I know there are probably some industry people who might not agree with that statement, but in the end, if someone is an employee, they are technically an agent. If a low level employee did something that reflected negatively on the company, he would likely be fired because his actions reflected badly on the company. Therefore, although a person may technically be an agent of the company, he may not have the authority to bind the company.

The determining question is whether the person has actual or apparent authority to bind the insurer. His position may be enough in some situations. For example, the night janitor might serve a vital function at the company, but would it be reasonable for someone to believe that he had the authority to make binding statements on company policy? Probably not. A director, on the other hand, likely would have the authority to bind the company because of his position alone.

Most of the issues of who has the authority to bind an insurer are not so clear cut. Insurance companies are large, complex organizations. Therefore, it is important to look at how the individual projects himself to the public as well as his job title. If the person flat out says that he has the authority to make binding decisions, the insurer will be hard pressed to show that the policyholder should not have relied upon his statements and actions. Similarly, if the individual has made binding decisions in the past, the same would be true.

Also, how the insurer has acted in regards to that individual’s ability to bind the company is important. If the individual has made binding decisions in the past and the insurer has not objected, the insurer will have a difficult time explaining why it is now saying that he does not have this power.

The legal terms for the types of authority are actual and implied. Actual authority occurs when the person is entitled to make binding decisions on behalf of the insurer. If this is the case, then there is likely no argument that his decisions were not final. Implied authority is more fact intensive and involves looking at the factors mentioned above.

While there is no comprehensive list of who is an “agent” with binding authority, some court cases have mentioned specific people that generally have the authority to do things like waive policy conditions.

For example in Florida:

An insurance adjuster is a special agent for the company and his powers and authority are prima facie coextensive with the business intrusted to his care…which is ascertaining and determining the amount of any claim, loss or damage payable under an insurance contract, and/or effecting settlement of such claim, loss or damage. F.S. ss 626.0404 and 626.0405, F.S.A. The acts of an adjuster within the apparent scope of his authority are binding on the company without notice to the insured of limitations on his powers. Old Republic Ins. Co. v. Von Onweller Const. Co., 239 So.2d 503, 504 (2nd DCA 1970.)

The acts of an agent [referring to a broker], performed within the scope of his real or apparent authority, are binding upon his principal. The public have a right to rely upon an agent’s apparent authority, and are not bound to inquire as to his special power, unless the circumstances are such as to put them upon inquiry.” Hughes v. Pierce, 141 So.2d 280, 284 (Fla. 1st 1961).

In Texas:

…it does not follow that one employed as an adjuster may not also be vested with authority to bind the insurance company by a waiver of a breach by the insured of some warranty on his part relative to his policy of insurance, to the same extent as any other representative of the company. And, in the absence of any proof to the contrary, we believe that the facts and circumstances related above, prima facie, were sufficient to show that it was in the apparent scope of the authority of [the adjuster] as a representative of the company to bind the company to waivers pleaded by the appellee, and to [the adjuster’s] agreement to pay the losses claimed by the plaintiff. Home Insurance Co. v. Moriarty, 37 S. W. 628 (Tex. Civ. App.)

These cases all stand for the proposition that many individuals on both the adjustment and sales side of insurance can bind the insurer, however, it is important to note that some cases go the other way. Over the past few months. I have heard horror stories about the plight of the policyholders in Texas, and the courts could come down on either side when evaluating these issues. Therefore, make sure everything is well documented and in writing, so that you have the best chances.

Also note that the NFIP has completely different rules when it comes to waiver and estoppel. As the policy states, only FEMA may waive the requirement that an insured submit a Proof of Loss. When a policy is this explicit, relying on a verbal or written waiver by someone other than the individuals listed in the policy may provide the insurer with a reason to deny the claim entirely. In the case of the National Flood Insurance Policies, you can almost be guaranteed of it. See Sanz v. United States Security Insurance Co., 328 F.3d 1314 (11th Cir.2003)(holding the Proof of Loss requirements may be waived, but to be effective the waiver must be made by the Federal Insurance Administrator and must be in writing).