So you think you know who you are dealing with when you make your auto and home insurance purchases? Think again! There are significant differences between “agents” and “brokers” which should not overlooked.Frequently, the purchase of insurance is something that needs to be accomplished quickly. For example, a new house purchase requires coverage be bound to satisfy prospective lenders. Similarly, a newly purchased or leased automobile requires immediate evidence of insurance to either the lender or lessee of the vehicle. Only certain types of insurance “producers” can provide that instantaneous level of service.
Insurance brokers act as a fiduciary on behalf of the consumer. Unless a broker has a specific written agency agreement with an insurance carrier, that broker is not capable of instantly binding coverage without specific individual authorization from a carrier. The ability to immediately bind coverage is only imparted on an insurance professional who has an agency relationship. Agency relationships can take many forms and are usually written agreements with one or more carriers. A “captured” agent is one who works exclusively for one company and is frequently an employee of that carrier rather than a true agent. Clearly, captured agents have the capacity to instantaneously bind coverage. Independent agents normally have agency relationships with several carriers. They may also have brokerage relationships with customers. In some cases, they can also place coverages with carriers with whom they have no agency relationship. In those circumstances, they act as brokers only and do not have capacity to bind coverage. Of course, whenever they write policies as agents, they have capacity to bind coverage.
As evidence of bound coverage, always look for the Accord form certificate. Recognize though, a certificate of insurance is not evidence of insurance coverage beyond the date of the certificate. That is, coverage could conceivably be cancelled one minute after the issuance of the certificate. The certificate would still be accurate as of its issuance, but not beyond.
James E. Jaworski is a Partner at WJ&L, LLP’s, and is the Chairperson of the Real Estate Department.