1.5 Parties, Agents vs. Brokers, and Authority

Arkansas Property & Casualty Insurance State

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1 Standalone Coverage Map

Standalone Coverage Map

2 Introduction: Arkansas Property & Casualty Insurance Exam Overview

Arkansas Property & Casualty Exam Overview

3 National Portion: Insurance Fundamentals

1.1 Risk, Hazards, Perils, and the Law of Large Numbers 1.2 Insurable Interest, Indemnity, and Other Insurance Principles 1.3 Insurance Contract Law and Elements 1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions 1.5 Parties, Agents vs. Brokers, and Authority

4 National Portion: Property Insurance Concepts

2.1 Causes of Loss / Named-Peril vs. Open-Peril 2.2 Valuation: ACV, Replacement Cost, and Functional Value 2.3 Coinsurance and the Coinsurance Formula 2.4 Deductibles, Limits, and Loss Settlement 2.5 Common Property Policy Conditions and Clauses

5 National Portion: Dwelling Policies (DP)

3.1 Dwelling Policy Forms DP-1, DP-2, DP-3 3.2 Dwelling Coverages A-E and Other Coverages 3.3 Dwelling Perils, Conditions, and Endorsements 3.4 Mobile Home and Specialized Dwelling Coverage

6 National Portion: Homeowners Policies - Forms & Section I

4.1 Homeowners Forms HO-2 through HO-8 and Eligibility 4.2 Section I Coverages A-D and Additional Coverages 4.3 Section I Perils Insured Against and Exclusions 4.4 Replacement Cost vs. ACV and Loss Settlement in Homeowners

7 National Portion: Homeowners Policies - Section II & Endorsements

5.1 Section II Coverages E (Liability) and F (Medical Payments) 5.2 Homeowners Conditions and Duties After Loss 5.3 Common Homeowners Endorsements (scheduled property, water backup, ordinance or law)

8 National Portion: Personal Auto Policy - Liability & Injury

6.1 Personal Auto Policy Structure and Eligibility 6.2 Part A Liability and Supplementary Payments 6.3 Part B Medical Payments 6.4 Part C Uninsured/Underinsured Motorists

9 National Portion: Personal Auto Policy - Physical Damage & Duties

7.1 Part D: Coverage for Damage to Your Auto 7.2 Exclusions and Part E: Duties After an Accident 7.3 Part F: General Provisions, Endorsements, and No-Fault Concepts

10 National Portion: Liability Insurance Concepts

8.1 Negligence, Torts, and Legal Liability 8.2 Defenses, Damages, and Vicarious Liability 8.3 Occurrence vs. Claims-Made Triggers 8.4 Bodily Injury, Property Damage, and Personal/Advertising Injury

11 National Portion: Commercial Property Insurance

9.1 Commercial Package Policy Structure and Common Policy Conditions 9.2 Building and Personal Property Coverage Form (BPP) 9.3 Causes of Loss Forms (Basic, Broad, Special) 9.4 Business Income and Extra Expense 9.5 Commercial Property Endorsements and the BOP

12 National Portion: Commercial General Liability - Coverages

10.1 CGL Coverage A: Bodily Injury and Property Damage Liability 10.2 CGL Coverage B: Personal and Advertising Injury, Coverage C: Medical Payments 10.3 Who Is an Insured and Supplementary Payments

13 National Portion: Commercial General Liability - Limits, Triggers & Exclusions

11.1 CGL Limits of Insurance and Aggregates 11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates 11.3 Key CGL Exclusions and Endorsements

14 National Portion: Commercial Auto Insurance

12.1 Business Auto Coverage Form and Covered Auto Symbols 12.2 Commercial Auto Liability and Physical Damage 12.3 Motor Carrier / Trucking and MCS-90 12.4 Garage Coverage Form and Garagekeepers 12.5 Commercial Auto Endorsements

15 National Portion: Workers Compensation

13.1 Workers Compensation Statutory Background and Benefits 13.2 Part One (Workers Comp) and Part Two (Employers Liability) 13.3 Premium Basis, Experience Modification, and Classification 13.4 Other States, USL&H, and Federal Acts 13.5 Workers Comp Exclusions and Endorsements

16 National Portion: Other Commercial Lines - BOP, Crime & Marine

14.1 Businessowners Policy (BOP) in Depth 14.2 Crime and Fidelity Coverage 14.3 Inland Marine and Nationwide Marine Definition 14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)

17 National Portion: Other Commercial Lines - Specialty & Professional

15.1 Farm and Agricultural Coverage 15.2 Commercial Umbrella and Excess Liability 15.3 Professional Liability and Errors & Omissions 15.4 Directors & Officers and Employment Practices Liability

18 National Portion: Other Commercial Lines - Surety, Flood & Specialty

16.1 Surety and Fidelity Bonds 16.2 National Flood Insurance Program (NFIP) 16.3 Cyber, Aviation, and Other Specialty Lines

19 National Portion: Insurance Regulation & Market Conduct

17.1 State Regulation, Licensing, and the McCarran-Ferguson Act 17.2 Rates, Forms, Solvency, and Guaranty Associations 17.3 Producer Authority, Fiduciary Duty, and Company Operations

20 National Portion: Ethics & Unfair Trade Practices

18.1 Unfair Trade Practices and Unfair Claims Settlement 18.2 Producer Ethics, Errors & Omissions Exposure, and Fiduciary Conduct 18.3 Privacy, Fraud, and Consumer Protection

21 Chapter 1: Arkansas P&C Insurance Regulation & Licensing

1.1 Arkansas Insurance Department 1.2 Arkansas P&C Producer Licensing Requirements 1.3 Arkansas Producer Responsibilities

22 Chapter 2: Arkansas Property Insurance

2.1 Arkansas Homeowners Insurance 2.2 Arkansas Commercial Property Insurance

23 Chapter 3: Arkansas Casualty & Auto Insurance

3.1 Arkansas Auto Insurance Requirements 3.2 Arkansas Liability Insurance 3.3 Arkansas Workers' Compensation Insurance

24 Chapter 4: Arkansas Ethics & Professional Conduct

4.1 Ethical Practices and Consumer Protection

1.5 Parties, Agents vs. Brokers, and Authority

Key Takeaways Explain This Topic AI

An agent legally represents the insurer; a broker legally represents the insured (the applicant)

Three types of agent authority: Express (written in the contract), Implied (reasonably necessary to carry out express), and Apparent (created by the insurer's conduct)

Knowledge of and statements by an agent acting within authority are imputed to the insurer (the principal)

Admitted (authorized) insurers hold a state Certificate of Authority; non-admitted insurers write surplus lines for risks the admitted market declines

Producers owe a fiduciary duty to handle premiums and confidential information with utmost care; commingling premium with personal funds is a violation

Last updated: June 2026

Who Represents Whom

The word producer is the modern umbrella term for licensed agents and brokers, but the exam still tests the classic legal distinction:

• Party Legally represents Practical role
• Agent The insurer (principal) Solicits, binds, and services policies on the company's behalf
• Broker The insured/applicant Shops the market for the client; cannot usually bind coverage

Quick Answer: An agent works for the insurer; a broker works for the insured. This single rule resolves a cluster of exam questions about whose knowledge binds whom.

Because an agent represents the insurer, the law of agency governs the relationship: the insurer is the principal , and the agent's authorized acts and knowledge are imputed to the insurer.

The Three Types of Authority

An agent can bind the insurer only within the scope of authority. Expect a scenario question asking which type is in play.

• Authority Source Example
• Express Written in the agency contract Agent is contractually allowed to bind auto policies up to set limits

Implied Powers reasonably necessary to exercise express authority, though not written Renting an office, using company forms, accepting premium

Apparent (ostensible) Authority a reasonable person believes exists from the insurer's conduct or appearances Agent uses company signage, letterhead, and supplies, so a client reasonably assumes binding power

Trap: Apparent authority can bind the insurer even when the agent had no actual authority, if the insurer's own conduct created the impression and the third party reasonably relied on it. This is why insurers must promptly retrieve supplies and signage from terminated agents.

Imputed Knowledge and the Admitted vs. Surplus-Lines Market

Because the agent represents the insurer, knowledge held by the agent is knowledge held by the insurer . If an applicant tells the agent a material fact and the agent omits it from the application, courts generally treat the insurer as having known it — limiting the insurer's ability to later void coverage.

Market Structure

Insurer type Status When used

Admitted / Authorized Holds a Certificate of Authority from the state; backed by the state guaranty fund The standard market for ordinary risks

Non-admitted / Surplus lines Not licensed in the state but eligible ; placed through a licensed surplus lines broker Hard-to-place or unusual risks the admitted market declines (e.g., coastal property, special events)

Surplus-lines business follows a strict rule: the broker must usually obtain declinations from several admitted insurers first (a "diligent search") and must disclose to the client that the coverage is not protected by the state guaranty fund .

Producer Fiduciary Duties

A producer who collects premiums holds them in a position of trust — a fiduciary relationship. Core duties tested on the exam:

Account for and remit premiums promptly to the insurer.

Do not commingle premium funds with personal or operating funds; many states require a separate trust account.

Maintain confidentiality of client information.

Act with utmost good faith and full disclosure toward both insurer and client.

Violations — misappropriating premium (conversion), commingling, or rebating where prohibited — are common grounds for license suspension or revocation , a topic the state portion expands but the National portion introduces here.

Agent vs. Broker in a Claim Dispute

The agent-versus-broker distinction is not academic — it decides whose mistake binds whom . Because an agent's knowledge and authorized acts are imputed to the insurer , an applicant who honestly discloses a fact to the agent is generally protected even if the agent fails to record it. A broker , by contrast, legally represents the insured , so the broker's error (failing to forward an application or pay a premium) is usually the insured's problem and may expose the broker to an errors-and-omissions claim rather than binding the insurer.

Quick Answer: Agent's error usually falls on the insurer (imputed knowledge); broker's error usually falls on the insured (and the broker's E&O policy).

Special Producer Roles

The exam tests several specialized roles beyond plain agent and broker:

• Role Function
• Solicitor Limited license to solicit and take applications; cannot bind
• Surplus-lines broker Places business with eligible non-admitted carriers after a diligent search
• Managing general agent (MGA) Has broad underwriting/binding authority delegated by the insurer

Independent vs. captive agent Independent represents multiple insurers and owns the expirations; captive/exclusive represents one

• Third-party administrator (TPA) Handles claims/administration but does not assume risk
• Rebating, Commingling, and Common License Pitfalls

Most state exam items on producer conduct reduce to a short list of prohibited acts that flow from the fiduciary duty:

Rebating — returning part of the commission or giving anything of value not in the policy to induce a sale; prohibited in most states even if offered to all.

Commingling — mixing premium trust funds with personal or operating accounts; premiums must be remitted or held in trust.

Misappropriation/conversion — using client or insurer premium for personal purposes; a serious revocation trigger.

Misrepresentation and twisting — inducing a policyholder to lapse one policy for another through misleading comparisons.

These acts are the bridge from the National portion's agency law into the state portion's licensing penalties, so mastering the definitions here makes the Arkansas conduct chapter far easier.