14.9 Duties Owed to Insurers

JurisdictionArizona

14.9 Duties Owed to Insurers. Insurance producers must exercise good faith and reasonable diligence in executing duties owed to the insurer, as well as those duties owed to the insured.137 These duties are imposed upon producers by the principal-agency relationship or, where the producer is not the agent of the insurer, may arise from a producer agreement between the producer and insurer.138 These contractual obligations include holding funds received from clients for payment to the insurer139 and following the insurer’s instructions on submission of risks.140 In a principal-agency relationship, an agent assents to act for the benefit of the principal and subject to the principal’s control.141 All principal-agent relationships involve fiduciary obligations, including duties of loyalty, good faith and fair dealing.142

A fiduciary relationship is a confidential relationship whose attributes include “great intimacy, disclosure of secrets, [or entrusting] of power.”143 It requires the “peculiar reliance in the trustworthiness of another,” not the “mere trust in another’s competence or integrity.”144 This is because the agent owing a fiduciary duty must act loyally for the principal’s benefit in all matters connected with the agency relationship.145 Although an agent’s interests are often concurrent with those of the principal, the general fiduciary precept requires that the agent subordinate the agent’s interests to those of the principal and place the principal’s interests first as to matters connected with the agency relationship.146 It also requires that a fiduciary avoid a position where the agent’s interests or those of any...

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