Tennessee Life Producer Practice Exam

Under what condition is an insurance company liable for a producer's act of coercion or intimidation?

1. If the producer acted independently

2. If the insurer was unaware

3. If the insurer approved of the act

4. If the act violated policies

The correct answer is: If the insurer approved of the act

An insurance company is liable for a producer's act of coercion or intimidation when the insurer has approved of the act. This means that if the insurance company has given its consent, authorization, or endorsement for the producer to engage in such behavior, the company can be held responsible for any resulting misconduct. The rationale behind this is based on the principle of vicarious liability, where an employer can be held liable for the actions of its employee or agent when those actions fall within the scope of their duties and with the employer's approval. If the insurer has a clear policy that allows or endorses such practices, they cannot distance themselves from the consequences of those actions. In situations where the producer acted independently without the insurer’s knowledge or approval, the insurer typically would not be held liable, as they cannot be expected to control actions they were unaware of. Similarly, if the act violated the company's policies, it suggests that the actions were outside the approved practices, further shielding the insurer from liability. Thus, approval from the insurer constitutes a critical factor for establishing liability in cases involving coercion or intimidation by the producer.