Apparent Agency

What Does Apparent Agency Mean?

Apparent agency refers to a situation where a person or company creates the impression that someone is authorized to act on their behalf, even though they are not actually authorized to do so.

Apparent agency cannot arise solely from the actions of the alleged agent; it must also involve some action by the party who has the authority to grant the agent permission to act on their behalf.

This concept is also referred to as apparent authority.

Insuranceopedia Explains Apparent Agency

A person may be considered to have apparent authority if a company contributes to the perception that they are authorized to act on its behalf. For example, the company might provide them with office space in its corporate building, give them company letterhead, or allow them to use a company vehicle. In such cases, a person dealing with the apparent agent could reasonably, albeit mistakenly, assume they have the authority to act on the company’s behalf.

An employee of a company may also possess apparent authority if they exceed their authorized duties. For instance, a salesperson who is not authorized to issue contracts on the company’s behalf may still draft and present one to a potential client. Because situations like this can leave a company on the hook for promises it never authorized, agents and brokers commonly carry professional liability insurance to cover claims arising from acts performed outside their actual authority.

The absence of actual authority does not necessarily make the transaction between the apparent agent and the client void. If the company has played a role in creating the appearance of authority, it may be held liable for the apparent agent’s actions. Insurance agents and brokers typically buy their own coverage against this kind of exposure, with insurance agent business insurance costs varying based on the size of their book and the lines they write.