In insurance contracts, which authority allows an agent to act based on the facts presented in a situation?

Implied authority refers to the ability of an agent to act on behalf of their principal in situations where the authority is not explicitly stated but is necessary to carry out the duties of the role. This type of authority is derived from the actions and behaviors that are customary in the industry or inherent to the position the agent holds.

For example, when an insurance agent sells a policy, they may not have explicit instructions for every possible scenario that arises, but they possess the implied authority to make decisions that are standard practice or necessary within the context of their responsibilities. This enables them to handle situations such as negotiating terms or making small adjustments to coverage, based on the facts presented by the client.

The other forms of authority, such as express authority, include power that is clearly defined in a written contract, while customary authority relates to accepted industry practices. Apparent authority involves the perception that an agent has the authority to act, based on the principal's representations to third parties, which may not necessarily reflect the truth of their authority. Thus, implied authority is integral to enabling agents to function effectively within the bounds of their roles without needing constantly to refer back to their principals for every decision.