An agent holding binding authority tells an applicant by phone that coverage is in force, and the building burns before any paperwork is issued. The likely outcome is that:
Explanation
A binder is temporary evidence that coverage is in effect pending underwriting and issuance, and an agent with binding authority can create one orally as well as in writing. Waiting for the policy or for the premium check would leave applicants unprotected during exactly the gap a binder exists to close. Because the agent acted inside the authority the insurer granted, the loss belongs to the insurer, not to him.
This topic, taught in full in the California Property & Casualty Broker-Agent guide. California Property & Casualty Broker-Agent Study Guide — 2026 Edition — PDF + EPUB, $24.99 · 14-day refund →
Practice all 531 questions free — no signup required.
Own the complete California Property & Casualty Broker-Agent guide — PDF + EPUB, $24.99 →
Related questions on this topic
- A homeowners form places the phrase residence premises in quotation marks every time it appears. That signals the phrase:
- Insurers write exclusions into a property policy chiefly in order to:
- An endorsement is attached to a policy and its wording conflicts with the printed form. The result is that:
- Mid-term, an insurer broadens the coverage of its standard form without charging more for it. Under the liberalization clause the change:
- The entire contract provision in a property and casualty policy means that:
- An applicant says nothing about a fire that destroyed an earlier building at the same location, and the insurer does not ask about it. This is best described as:
Last reviewed: · editorial process