Which statement about an insurer's liability for its agents is correct?

• A. An insurer is presumed to know what its agent knows about underwriting significance, regardless of whether the information is communicated to the company by the agent.
• B. An insurer has no responsibility for the acts of the agent when the agent is acting within the scope of apparent authority.
• C. An insurer has no liability for the acts of subagents and employees to whom its agent has delegated responsibility.
• D. An insurer is bound by opinions given by its soliciting agents.

Answer: (A)

In agency relationships, the insurer relies on information gathered by its agents for underwriting decisions. The idea is that what the agent knows about underwriting significance is treated as knowledge the insurer can be presumed to have, even if the agent hasn’t directly communicated that particular detail to the company. This imputed knowledge helps ensure material risk information known to the agent is considered in underwriting, since the agent acts within the insurer’s authority and serves as the information channel for risk assessment.

Why this is the best choice: it reflects that the insurer bears responsibility for information the agent knows about underwriting significance because the agent’s knowledge is part of the underwriting process and is effectively attributed to the insurer through the agency relationship.

Why the others don’t fit: the insurer does have liability for the acts of its agents when those agents act within apparent authority; it can also be liable for subagents and employees to whom the agent delegates tasks; and insurers are not bound by the opinions of soliciting agents—underwriting decisions must follow the insurer’s own policies and guidelines.