The Risk
Brokers and the law of agency
Submitted by Lloyd_Haynes » Mon 13-Jun-2022, 21:21Subject Area: General | 1 member rating |
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The law which primarily governs the relationship between insured, broker and insurer is that of agency. An agent is a person employed for the purpose of bringing his principal into a contractual relationship with a third party. He does not make contracts on his own behalf. The legal doctrine which applies is qui facit per alium facit per se (he who does something through another does it himself).
The broker is an agent employed to buy or sell on behalf of another. He is not usually liable to his principal for the failure of the buyer to pay the price. However, in performing his role, he owes a duty of care to his principal. The level of care expected will vary; a higher level of care will be expected from a professional broker than from a part-time insurance agent.
It is sometimes a matter of uncertainty whether an insurance intermediary is agent for the insurer or the insured. In general, a broker is the agent of the insured with the aim of finding suitable insurance cover, whereas an insurance agent is the agent of the insurer with the responsibility of finding a client to purchase insurance. In both cases, however, the intermediary normally receives his income from the insurer. The market is, however, changing and the broker may forego commission and negotiate a fee from the insured.
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