1. CPCU 530
Business Law for Insurance
Professionals
Donna M. Kesot, CPCU
The Institutes
Chapters 7 & 8 Homework
March 6, 2013
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

2. Agency Law & Applications
Chapter 7

3. Agency Creation—Activities 2
Agency Creation
Educational Objective (EO)
Explain how an agency relationship can be created by each of the following:
Appointment
Estoppel
Ratification
Instructions
Review the terms agency, agent, and principal and then proceed to Activity 1—
Developing a Scenario to Explain the Creation of an Agency Relationship
Activity 1—Developing a Scenario to Explain the Creation
of an Agency Relationship
Group Activity Followed by Large Group Discussion
Divide participants into small groups and provide each group with a flipchart, if
possible.
Assign each group one of the following terms:
Appointment
Estoppel
Ratification
Ask the participants to develop a scenario in which their assigned situation
creates an agency relationship. Remind participants to define any key terms, as
necessary. Have the groups include as much detail as possible in their
examples, whether real or fictional.
Debrief:
Ask each group to present their scenario to the class.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty
2 Underwriters

4. Agent’s Authority—Activities 3
Agent’s Authority
Educational Objective (EO)
Describe an agent’s authority in terms of the following:
The scope of authority granted (actual or apparent)
Third party’s duty to ascertain scope of authority
Instructions
Activity 1—Describing An Agent’s Authority
Pairs (or Small Group) Activity Followed by Large Group
Discussion
Divide participants into pairs (or small groups). Have the pairs/groups work
together to complete the questions on the Activity 1—Describing An Agent’s
Authority worksheet.
Alternative: This activity could be assigned as individual pre-work. If used as
an assignment, participants should come prepared to share their answers.
Reconvene the large group and ask for volunteers to share their responses.
Debrief:
Review the answers with the large group.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

5. Agent’s Authority—Activities 4
Activity 1—Describing An Agent’s Authority
Working in pairs or small groups, describe an agent’s authority.
Describe the scope of an agent’s authority
in terms of actual authority, express
authority, and implied authority.
Describe the key characteristics of apparent
authority.
Explain why a third person is not entitled
to rely on an agent’s statements about the
scope of the agent’s authority.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

6. Agent’s Authority—Activities 5
Answers to Activity 1—Describing An Agent’s Authority
Working in pairs or small groups, describe an agent’s authority.
Describe the scope of an agent’s authority
in terms of actual authority, express
authority, and implied authority.
Describe the key characteristics of apparent
authority.
Explain why a third person is not entitled
to rely on an agent’s statements about the
scope of the agent’s authority.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

7. Agent’s Duties and Remedies—Activities 6
Agent’s Duties and Remedies
Educational Objective (EO)
Describe the principal-agent relationship in terms of the following:
Duties an agent owes to the principal
Remedies a principal has for an agent’s breach of duties
Duties a principal owes to an agent
Remedies an agent has for a principal’s breach of duties
Instructions
Activity 1—Role Playing Agent’s and Principal’s Duties
and Remedies
Pairs (or Small Group) Activity Followed by Large Group
Discussion
Divide participants into pairs (or small groups) and provide them with a
flipchart. Ask one person to assume the role of agent and another assume the
role of principal.
Using the Activity 1—Role Playing Agent’s and Principal’s Duties and
Remedies worksheet, have each role describe their duties to the other, and the
remedies the other has if those duties are breached.
Pairs or groups should have a scribe list their answers as they work through
each segment of the activity.
Reconvene the large group and ask for volunteers to share the duties and
remedies they have identified.
Debrief:
Review the answers with the large group. Ask participants for any further examples to illustrate
the principal-agent relationship.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

8. Agent’s Duties and Remedies—Activities 7
Activity 1—Role Playing Agent’s and Principal’s Duties and
Remedies
Working in pairs or small groups, describe the duties of your assigned role and
the remedies available to the other in the event there is a breach of duty.
Duties of the Agent Remedies Available to the Principal
Duties of the Principal Remedies Available to the Agent
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

9. Agent’s Duties and Remedies—Activities 8
Answers to Activity 1—Role Playing Agent’s and Principal’s Duties
and Remedies
Working in pairs or small groups, describe the duties of your assigned role and
the remedies available to the other in the event there is a breach of duty.
Duties of the Agent Remedies Available to the Principal
Loyalty
Obedience
Reasonable care
Accounting
Information
Duties of the Principal Remedies Available to the Agent
Agreed-on period of employment
Compensation
Reimbursement for expenses
Indemnity for losses
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

10. Agency Termination—Activities 9
Agency Termination
Educational Objective (EO)
Describe the various means by which parties can terminate agency relationships.
Instructions
Activity 1—Describing the Termination of an Agency
Relationship
Large Group Brainstorming Activity
Lead the large group in a brainstorming session:
First, ask for any of the various ways agencies can be legally terminated. List
all answers on a board or flipchart.
Then, ask participants for as many examples as they can think of for each
answer given.
Debrief:
Fill in any additional answers, if necessary.
y
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

11. Contractual Rights and Liabilities—Activities 10
Contractual Rights and Liabilities
Educational Objective (EO)
Describe the potential contractual rights and liabilities of a principal and its agent in
terms of the following:
A third party’s rights against a principal
A principal’s rights against a third party
An agent’s liability to a third party
An agent’s rights against a third party
Instructions
Activity 1—Writing a Memo to Describe Contractual
Rights and Liabilities
Small Group (or Individual) Activity Followed by Large
Group Discussion
Have participants work in small groups or on their own. Ask participants to
complete Activity 1—Writing a Memo to Describe Contractual Rights and
Liabilities.
This can be a timed activity. Give each individual or group 5 minutes to write
their description and prepare to share it with the class. Reconvene as a large
group and ask for volunteers to summarize their memos with the group.
Alternative: This activity could be assigned as individual pre-work. If used as
an assignment, participants should come prepared to share their summary.
Debrief:
Discuss the points covered in each participant’s summary.
Follow up question: What defenses are available for each party described?
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

12. Contractual Rights and Liabilities—Activities 11
Activity 1—Writing a Memo to Describe Contractual Rights and
Liabilities
Agency contract liability deals with situations in which parties to a
contract fail to fulfill their obligations. When this occurs, the party that
suffers a resulting loss has a right of recovery against the party in breach.
Agency contract liability focuses on these respective rights:
A third party’s rights against a principal
A principal’s rights against a third party
An agent’s liability to a third party
An agent’s rights against a third party
A contract establishes rights and duties of the various parties to it.
Write a brief memo describing the rights and liabilities listed above.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

13. Tort Liability of Principal and Agent—Activities 12
Tort Liability of Principal and Agent
Educational Objective (EO)
Describe the potential tort liability of a principal and its agent in terms of the following:
Respondeat superior liability of the principal for the agent’s torts
Direct liability of the principal for the agent’s torts
Principal’s liability for torts of independent contractors
Principal’s liability for agent’s misrepresentations
Agent’s liability for agent’s own torts
Instructions
Activity 1—Describing Tort Liability of Principal and
Agent
Individual Activity Followed by Large Group Discussion
The Activity 1—Describing Tort Liability of Principal and Agent worksheet
has mismatched descriptions for the potential tort liability circumstances.
Have participants rearrange the descriptions in the correct order.
Note: This activity can be assigned as class pre-work.
Debrief:
Review the answers and check for understanding of the concepts, if necessary.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

14. Tort Liability of Principal and Agent—Activities 13
Activity 1—Describing Tort Liability of Principal and Agent
Match the following circumstances on the left with the correct description on the right.
Liability Circumstance Description
Principal’s liability for agent’s
misrepresentations
Respondeat superior liability
Agent’s liability for agent’s own torts
Direct liability
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

15. Tort Liability of Principal and Agent—Activities 14
Principal’s liability for torts of independent
contractors
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

16. Tort Liability of Principal and Agent—Activities 15
Answers to Activity 1—Describing Tort Liability of Principal and
Agent
Match the following circumstances on the left with the correct description on the right.
Liability Circumstance Description
Principal’s liability for agent’s
misrepresentations
Respondeat superior liability
Agent’s liability for agent’s own torts
Direct liability
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

17. Tort Liability of Principal and Agent—Activities 16
Principal’s liability for torts of independent
contractors
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

18. Tort Liability of Principal and Agent—Activities 17
Chapter 8
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

19. Insurance Producer Classifications—Activities 18
Insurance Producer Classifications
Educational Objective (EO)
Describe the agency relationship that exists between insurers and each classification of
producers:
Agents
Broker
Instructions
Activity 1—Defining Types of Producers
Pairs (or Small Group) Activity Followed by Large Group
Discussion
Divide participants into pairs (or small groups) and provide each pair/group
with a flipchart. Have the pairs work together to define types of producers in
Activity 1—Defining Types of Producers.
Debrief:
Ask for volunteers to share each definition. Review the answers with the large group.
Activity 2—Describing Agency Relationship Between
Insurers and Brokers
Pairs (or Small Group) Activity Followed by Large Group
Discussion
Retain the pairs (or small groups) and provide each pair/group with a flipchart.
Have the pairs/groups work together to complete the questions in Activity 2—
Describing Agency Relationship Between Insurers and Brokers and record
their responses on their flip charts.
Reconvene the large group and ask for volunteers to share their answers.
Debrief:
Review the answers with the large group.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

20. Insurance Producer Classifications—Activities 19
Activity 1—Describing Types of Producers
Define the following
terms:
Insurance agent
General agent
Special agent
Soliciting agent
Broker
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

21. Insurance Producer Classifications—Activities 20
Answers to Activity 1—Describing Types of Producers
Define the following
terms:
Insurance agent
General agent
Special agent
Soliciting agent
Broker
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

22. Insurance Producer Classifications—Activities 21
Activity 2—Describing Agency Relationship Between Insurers
and Brokers
Describe the authority of each type of agent presented and then note the activities
this type of agent conducts.
General Agent Special Agent Soliciting Agent
Authority: Authority: Authority:
Activities: Activities: Activities:
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

23. Insurance Producer Classifications—Activities 22
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

24. Insurance Producer Classifications—Activities 23
Answers to Activity 2—Describing Agency Relationship Between
Insurers and Brokers
Describe the authority of each type of agent presented and then note the activities
this type of agent conducts.
General Agent Special Agent Soliciting Agent
Authority: Authority: Authority:
Broad powers within Authority restricted by express Narrow authority derived
underwriting guidelines agreement with insurer. directly from the agency
contract•
Activities: Activities: Activities:
Solicits applications Induces third parties Solicits applications
for insurance to apply for insurance for insurance
Receives premiums Forwards applications Forwards applications
Issues and renews to the insurer to the insurer
policies Delivers policies to
Appoints subagents the insureds on receipt
Adjusts losses, in of premium
some cases Possible additional
duties, such as
inspecting property,
quoting rates,
collecting premium
payments, and
assisting with changes
in coverage
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

25. Producers’ Authority—Activities 24
Producers’ Authority
Educational Objective (EO)
Distinguish a producer’s actual authority, both express and implied, from apparent
authority.
Instructions
Activity 1—Developing a Scenario to Distinguish Actual
and Apparent Authority of Producers
Group Activity Followed by Large Group Discussion
Divide participants into small groups. Assign each group either “actual
authority” or “apparent authority.”
Have the groups develop a brief scenario to illustrate their assigned type of
authority and explain how they distinguished it from the alternative. For
example, one group may have been given express authority and need to contrast
it with apparent authority. Participants should explain any key terms to the
group, where appropriate.
Debrief:
Ask each group to present their scenario. Help participants compare and contrast the different
types of authority.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

26. Extent of Producers’ Authority—Activities 25
Extent of Producers’ Authority
Educational Objective (EO)
Explain how the extent of a producer’s authority is affected by these factors:
• Producers’ status as general agents, special agents, or brokers
• Producers’ notice and knowledge
• Producers’ authority to bind coverage
• Appointment of subagents
Instructions
Activity 1—Explaining the Extent of the Producer’s
Authority
Group Activity Followed by Large Group Discussion
Divide participants into small groups and provide each group with a flipchart.
Assign the groups one or more of the following factors in the course materials:
• Producers’ status as general agents, special agents, or brokers
• Producers’ notice and knowledge
• Producers’ authority to bind coverage
• Appointment of subagents
Ask participants to discuss how their assigned factor impacts that producer’s
authority. Groups should prepare to give a brief explanation to the class.
Debrief:
When the groups are finished working on their discussion, call on each group in order to
discuss their assigned topic.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

27. Termination of Producer Authority—Activities 26
Termination of Producer Authority
Educational Objective (EO)
Explain how producers’ authority can be terminated.
Instructions
Activity 1—Explaining Termination of a Producer
Large Group Discussion
Lead a brief class discussion about how producers’ authority can be terminated.
You may want to begin with asking participants the following questions:
What are some of the way a producer/insurer relationship can be
severed?
How are the typical circumstances for termination communicated?
How should the insurer avoid possible adverse consequences of their
apparent authority after terminating an agency relationship?
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

28. Producers’ Duties and Liabilities—Activities 27
Producers’ Duties and Liabilities
Educational Objective (EO)
Describe producers’ duties and liabilities to insurance customers, third parties, and
insurers.
Instructions
Activity 1—Describing Producers’ Duties and Liabilities
Group Activity Followed by Large Group Discussion
Divide participants into small groups and provide each group with a flipchart.
Assign the groups one of the following points of view:
Producers’ duties and liability to insurance customers
Producers’ defenses to liability
Producers’ duties and liability to third parties
Producers’ duties to insurers
Ask participants to use Activity 1—Describing Producers’ Duties and
Liabilities to describe the key elements of their assigned topic(s) from the
course materials.
Debrief:
When the groups are finished, call on each group in order to present their findings for their
assigned topics. You may want to compile all answers on a sheet and provide for participants,
as a study aid.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

29. Producers’ Duties and Liabilities—Activities 28
Activity 1—Describing Producers’ Duties and Liabilities
Locate your assigned topic below and describe the elements listed.
Producers’ duties and liability to
insurance customers
Duty to follow instructions
Duty to procure insurance
Duty to maintain coverage
Duty to place insurance with a solvent
insurer
Duty to advise
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

30. Producers’ Duties and Liabilities—Activities 29
Producers’ defenses to liability
The producer assumed no duty to the
customer.
The producer did not breach a duty to the
customer.
The insurance customer was partly at
fault.
The insurance customer failed to read the
policy.
Insurance was not available to the
customer.
Producers’ duties and liability to
third parties
Explain how under general contract law
principles, the parties to an agreement
owe duties and obligations to each other,
but not to third parties who might come
in contact with either of them.
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

31. Producers’ Duties and Liabilities—Activities 30
Producers’ duties to insurers
Duty to disclose risks
Duty to follow instructions
Duties of loyalty and accounting
Duty to transmit information properly
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters

32. Producers’ Duties and Liabilities—Activities 31
Copyright Donna M. Kesot & American Institute For Chartered Property Casualty Underwriters