By: Thomas S. Tripodianos Published: September 2006

Notifying Insurer and Agent

Question. If notice of loss is provided to the individual or entity from who the policy was purchased and that individual or entity accepts the notice of loss on behalf of the insurer have the notice requirements of the policy been satisfied? The policy declarations page, which is a form with spaces to be filled in by the agent or broker when writing a new policy includes a space for "Named Insured and Mailing Address," beneath which the name of the contractor and its address are entered. Adjacent to the space for the named insured and mailing address, the form includes a space for "Agent," next to which an identification number is entered in type, and beneath which the name of the person who sold the policy appears.

answer. YES, under the above fact pattern and assuming there is nothing on the face of the policy to the contrary and nothing was communicated to the insured to lead him to believe that the powers of the agent were special or restricted. Insurance companies, doing business by agencies at a distance from their principal place of business, are responsible for the acts of the agent, within the general scope of the business intrusted to his care; and no limitations of his authority will be binding on parties with whom he deals, which are not brought to their knowledge.

The question that comes to my mind is why wouldn’t you send notice directly to the insurance company as well? The better practice is to read your policy and provide the insurance company as well as the person who sold you the policy with a Notice of Loss as soon as possible. The alternative is to pay you lawyer to convince a Court that your failure to comply with the policy requirements is excusable.

As a general rule under New York law, an insurance broker is the agent of the insured, not the insurance company, and notice to an insurance broker, absent exceptional circumstances is not notice to the insurer. Such exceptional circumstances have been found in situations where the agent's role went far beyond that of solicitor of the policy and included responsibilities such as collecting premiums, issuing the policy, and being designated as an agent or broker for the insurer. For a broker to become the insurer's agent, there must be evidence of some action on the insurer's part from which a general authority to represent the insurer may be inferred. Selling a policy to the insured does not by itself make the broker an agent of the insurer. Furthermore, the use of the term "agent" in a contract is not conclusive as to whether an agency relationship existed. Rather, the acts of the individual may determine the category into which the person falls, and whether an agency exists hinges predominately on the facts and circumstances of a particular case. The question of whether an agency relationship exists is both a question of law and fact.

The doctrine of apparent authority also bears discussion here. Apparent authority arises when a principal places an agent in a position where it appears that the agent has certain powers which he may or may not possess. If a third person holds the reasonable belief that the agent was acting within the scope of his authority and changes his position in reliance on the agent's act, the principal is estopped to deny that the agent's act was not authorized. Where the insurer has voluntarily placed the agent in such a situation that a person of ordinary prudence may be justified in believing that the agent has authority to perform a particular act, apparent authority may exist.

Bottom line is the under New York law, with limited exceptions, an insured must comply with the notice provision of an insurance policy in order to obtain coverage under that policy. Absent a valid excuse, a failure to satisfy the notice requirement vitiates the policy, and the insurer need not show prejudice before it can assert the defense of noncompliance.

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