If an agent misrepresents his authority to issue a policy, what type of agency principle is being exemplified?

When an agent misrepresents their authority to issue a policy, the situation exemplifies the concept of apparent authority. Apparent authority arises when a third party reasonably believes, based on the actions or representations of the principal (the insurer), that the agent has the authority to act in a certain way, even if the agent does not have that authority in reality.

In this scenario, if the agent leads a client to believe they are authorized to issue a policy, the insurer may still be held liable for the agent's actions under the principle of apparent authority. This is because the insurer's representation (whether intentional or not) created a reasonable belief in the mind of the third party (the client) about the agent's capabilities.

Implied authority, on the other hand, refers to powers that are not explicitly stated but are necessary for the agent to carry out their express authority. Express authority comes from direct and explicit statements granting authority. Universal authority would allow an agent to act without restriction, which does not fit the scenario of misrepresentation.

Thus, the situation clearly showcases the concept of apparent authority, as it centers around the perceptions created by the agent and the reliance of the third party on those perceptions.