George Wallace continues his terrific commentary with a post on the California Commissioner’s most recent regulatory proposal concerning agent/broker compensation and disclosure (see George Wallace and also here and here).
This discussion brings to mind a question concerning “agent” and “broker,” one which is particularly important in the specialty lines area. In specialty lines, the relationship between an insurer and a "producer" (I will use “producer” when the agent/broker role is not clear) is often defined in a contract as a broker. The purpose is to make it clear that the producer is not an agent of the insurer, and has no agency powers or rights that would normally be associated with an agency relationship. Does this mean that the producer, when the relationship is defined as "broker," is therefore a representative of the insured?
To add more complexity, assume a producer typically acts as an agent on his business. However, assume he is in need of a specialty lines product for one piece of a client's program and approaches a wholesaler for this coverage. Not uncommon in the specialty lines business. What role does the “agent” then have with his client? Does it change for each of the coverages? The producer is acting as an agent on most of his business, and all the rest of the business for that client, but the producer is defined by contract as a "broker" to the wholesaler, not an agent.
Lastly, the wholesaler is often a broker (as defined by contract), not an agent, but never communicates with the client. Does the wholesaler have a "brokers" duty to the client?
George - can you shed some light on this?