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If a rathskeller near a college campus is known as a "hangout" for students, the insurance company would hardly be within its rights in trying to avoid a claim for a fire loss on the grounds that the proprietor did not reveal that students were his principal customers.
It may be that the fact that customers are students may increase the likelihood of a fire loss; but, since the insurer may be assumed to know the facts concerning the occupancy, he would be barred from using the charge of concealment in an attempt to avoid the policy.
Another instance in which the insured is under no obligation to speak results is when the communication of facts has been waived by the insurer or his agent.
The insurance business is conducted for the most part through representatives of insurance companies known as "agents." An insurance agent may be said to be one who is authorized by an insurance company to create, modify, and terminate contracts of insurance between the company and the public.
Whether you hold a policy for whole life insurance or term life insurance, the powers possessed by even cheap life insurance agents are twofold.
First of all, the agent has certain powers which are specifically bestowed on him by the terms of his contract with the insurance company, his principal. He will be told by the company what types of risks and in what amounts he may write.
The second type of powers is the implied powers. Agents are given powers by law which the public may reasonably believe them to have. The legal rules state that the public cannot be expected to know or to inquire into the actual terms of each agency agreement.
If it is reasonable for the public to believe that agents from the best life insurance companies have certain powers, then the best life insurance companies do have those powers; the best insurance company can, so far as the law is concerned, be trusted to not take advantage of the public.
There are two categories of implied powers. One group consists of powers that the agent has exercised and in which the company has acquiesced by failure to protest the agent's action. The second group consists of powers that the agent reasonably may be expected to have because of custom or usage in the business.
It is reasonable to assume that, for whole life insurance, an agent selling affordable life insurance through his company has the power to accept life insurance premiums. If a life insurance company, for quite inexplicable reasons, should not specifically empower an agent to collect premiums, he would be granted the power through the doctrine of implied agency.
Even if the company should state specifically in the agency contract that the agent was not to collect premiums, in the absence of notice to that effect to each and every insured, the courts would hold that insureds could discharge their premium-paying obligations by making payments to the agent.
In all transactions between the prospective insured and the insurance company, the agent is the agent of the insurance company and not of the insured. Knowledge of the agent is knowledge of the company. Anything the agent is told or knows, his insurance company is presumed to have been told or to know.
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