California Civil Jury Instructions (CACI)

2307. Insurance Agency Relationship Disputed

[Name of plaintiff] claims that [name of agent] was [name of defendant]’s agent and that [name of defendant] is therefore [responsible for/bound by] [name of agent]’s [conduct/ representations].

If [name of plaintiff] proves that [name of defendant] gave [name of agent] the [authority/apparent authority] to act on behalf of [name of defendant], then [name of agent] was [name of defendant]’s agent. This authority may be shown by words or may be implied by the parties’ conduct. This authority cannot be shown by the words of [name of agent] alone.

[In some circumstances, an individual can be the agent of both the insured and the insurance company. [Name of plaintiff] claims that [name of agent] was [[name of defendant]/[name of plaintiff]]’s agent for the purpose of [describe limited agency; e.g., “collecting insurance payments”] and therefore [describe dispute; e.g., “the insurer received plaintiff’s payment”]. [Name of defendant] claims that [name of agent] was [[name of defendant]/[name of plaintiff]]’s agent for the purpose of [describe limited agency] and therefore [describe dispute].]

New September 2003

Directions for Use

The instructions in this series assume the plaintiff is the insured and the defendant is the insurer. The party designations may be changed if appropriate to the facts of the case.

This instruction must be modified based on the evidence presented and theories of liability in the case. The distinction between an agent and a broker relationship may be crucial in determining, for example, whether an insurance salesperson’s representations bind the insurer, or whether the insurance salesperson has assumed a specific duty to the insured.

If ostensible agency is an issue, the court may modify and give CACI No. 3709, Ostensible Agent, in the Vicarious Responsibility series.

Sources and Authority

  • Insurance Code section 31 provides, in part: “ ‘Insurance agent’ means a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life, disability, or health insurance, on behalf of an admitted insurance company.” (See also Ins. Code, § 1621.)
  • Insurance Code section 33 provides: “ ‘Insurance broker’ means a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health with, but not on behalf of, an insurer.” (See also Ins. Code, § 1623.)
  • Civil Code section 2315 provides: “An agent has such authority as the principal, actually or ostensibly, confers upon him.”
  • “An individual cannot act as an insurance agent in California without a valid license issued by the commissioner of insurance. In addition to possessing a license, an insurance agent must be authorized by an insurance carrier to transact insurance business on the carrier’s behalf. This authorization must be evidenced by a notice of agency appointment on file with the Department of Insurance. An agent is generally not limited in the number of agency appointments that he or she may have; thus, an agent may solicit business on behalf of a variety of different insurance carriers, and still technically be an agent of each of those carriers.” (Loehr v. Great Republic Insurance Co. (1990) 226 Cal.App.3d 727, 732—733 [276 Cal.Rptr. 667], internal citations omitted.)
  • “[S]tatutes defining ‘broker’ are not determinative of the actual relationship in a particular case. The actual relationship is determined by what the parties do and say, not by the name they are called.” (Maloney v. Rhode Island Insurance Co. (1953) 115 Cal.App.2d 238, 245 [251 P.2d 1027], internal citations omitted.)
  • “While we note many similarities in the services performed and the monetary functions of agents and brokers, there is a more fundamental legal distinction between insurance agents and brokers. Put quite simply, insurance brokers, with no binding authority, are not agents of insurance companies, but are rather independent contractors …” (Marsh & McLennan of California, Inc. v. City of Los Angeles (1976) 62 Cal.App.3d 108, 118 [132 Cal.Rptr. 796].)
  • “Although an insurance broker is ordinarily the agent of the insured and not of the insurer, he may become the agent of the insurer as well as for the insured.” (Fraser-Yamor Agency, Inc. v. County of Del Norte (1977) 68 Cal.App.3d 201, 213 [137 Cal.Rptr. 118], internal citations omitted.)
  • “When the broker accepts the policy from the insurer and the premium from the assured, he has elected to act for the insurer to deliver the policy and to collect the premium.” (Maloney, supra, 115 Cal.App.2d at p. 244.)
  • “Generally speaking, a person may do by agent any act which he might do himself. An agency is either actual or ostensible. ‘An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him.’ To establish ostensible authority in an agent, it must be shown the principal, intentionally or by want of ordinary care has caused or allowed a third person to believe the agent possesses such authority.” (Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 761 [269 Cal.Rptr. 617], internal citations omitted.)
  • Sending notice of an automobile accident to the insured’s broker did not satisfy the insured’s obligation under the policy to provide prompt notice of a claim to the insurer since the broker was the agent of the insured and not of the insurer. (Arthur v. London Guarantee and Accident Co., Ltd. (1947) 78 Cal.App.2d 198, 202—203 [177 P.2d 625].)

Secondary Sources

Croskey et al., California Practice Guide: Insurance Litigation (The Rutter Group) ¶¶ 2:12—2:24, 2:31—2:43

1 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar) Determining Whether Enforceable Obligation Exists, §§ 5.4—5.8

2 California Liability Insurance Practice: Claims & Litigation (Cont.Ed.Bar) Actions Against Agents and Brokers, §§ 29.2—29.5

2 California Insurance Law & Practice, Ch. 9, Issuance of Insurance Policies, § 9.02 (Matthew Bender)

5 California Insurance Law & Practice, Ch. 61, Operating Requirements of Agents and Brokers, § 61.01[4] (Matthew Bender)

2 California Uninsured Motorist Law, Ch. 24, Bad Faith in Uninsured Motorist Law, § 24.40 (Matthew Bender)

26 California Forms of Pleading and Practice, Ch. 308, Insurance (Matthew Bender)

12 California Points and Authorities, Ch. 120, Insurance, §§ 120.18, 120.110, 120.170, 120.383, 120.392, 120.403 (Matthew Bender)