It is common for an insurance agency to have some very long-term employees. With relatively few young people entering the industry, agencies increasingly rely on customer service representatives and other employees with several years or even decades of service there. Not all of these employees hold producer licenses, but they have gained a wealth of knowledge during their careers and agencies trust them. However, an unlicensed employee’s interactions with customers can cause complications or even legal actions, as a Texas agency found out.
A woman bought a new car and contacted the agency for insurance quotes. She already had a policy; the court’s opinion described her as “a long-time customer.” Her communications about the insurance quote were with the office receptionist, who was not a licensed agent. The customer asked the receptionist questions about the various quotes the agency obtained and complained that the prices seemed high. She did not accept any of the quotes right away.
The following month, someone tried to steal something out of the new car and broke the windshield. The woman incurred repair expenses of $12,535.05 and lost the use of the car for a time. Even after the loss occurred, she continued to communicate with the agency about insurance for it. In the meantime, she submitted a claim to her incumbent insurance carrier. However, their policy provided automatic coverage for new cars for up to 20 days. She never told them about the new car and was well past the deadline, so they denied coverage.
The woman then sued the insurance agency, charging that:
- The receptionist represented herself as a licensed insurance agent
- The receptionist failed to obtain coverage on the car in a timely manner
- The receptionist assumed that the customer’s existing insurance policy would cover the car
- The agency was negligent and breached its contract with her.
The insured and the receptionist filed affidavits with the court. The receptionist’s affidavit stated that she thought the insured had been misled, but the agency was successful in having parts of both affidavits stricken from the record. The trial court then ruled that the law did not impose any liability on the agency for the loss. The insured subsequently requested a new trial and permission to amend her arguments, but the trial court did not rule on these requests, so she appealed to a higher court.
The appellate court agreed with the trial court. The insured had argued that the receptionist’s unlicensed status, combined with evidence that she assumed the existing policy would cover the car, was proof that the misrepresentation about the receptionist’s licensing status was a cause of the loss. However, the appellate court noted that any evidence of the receptionist’s assumptions had been stricken from the record, so there was no evidence of what she thought.
The court also found no evidence that the lack of a license caused the receptionist to fail to timely bind coverage. The record showed that she was out of the office on sick leave when the insured requested coverage.
Ultimately, the court found no relationship between the insured’s lack of insurance and the receptionist’s lack of a license. It further found no reason to conclude that the agency was negligent, since it offered several quotes and the insured did not accept any of them. It also found no reason to believe a contract between the insured and agency existed, so there were no grounds for the breach-of-contract claim.
This case appears to be a situation where the insured tried to blame the agency for her own mistake. However, it also appears that the receptionist may have been discussing matters that should have been off limits. An unlicensed employee is not an agent of an insurer and has no authority to bind coverage. According to the court’s opinion, this employee spoke as if she had that authority.
While the misrepresentation about her abilities did not cause this uncovered loss, it certainly could have caused one with a much larger price tag. An unlicensed employee should never give the impression that he or she can bind, or even discuss, coverage. Every agency should ensure that only licensed staff discuss coverage options and the binding of insurance.
