Dirk Smarmly, lawyer for the plaintiff: Ms. Lopez, were you assisting my client, Fred Hapless, in obtaining insurance for his business in 2007?

Lopez: Yes. I was.

Smarmly: And in doing so, you were acting as Mr. Hapless' agent, correct?

Lopez: No. I wasn't an Agent.

Smarmly: Then tell me, Ms. Lopez, who represented Mr. Hapless in the 2007 insurance transaction?

Lopez: I did. Tom Mittleman was the Agent.

Smarmly: So, Mr. Mittleman and you were both the agents for Mr. Hapless?

Lopez: No. Mr. Middleman was the Agent.

Smarmly: Then did you represent the insurer, Secure Future Indemnity?

Lopez: No. I'm not an appointed Agent.

Smarmly: So you represented no one?

Lopez: I represented Mr. Hapless.

Smarmly: But not as his agent?

Lopez: Exactly.

Judge Knott: We'll take a 10-minute recess and I'll take two aspirin.

This sort of “Who's on First?” routine can be a point of confusion even inside the industry. Sometimes insurance insiders forget who represents whom. In July, the Connecticut Insurance Commissioner fined a prominent insurer $434,000. The Commissioner found, among other things,

[T]here were consistent violations related to instances of unlicensed adjusters and agents not appointed. In Connecticut, insurance companies are required by law to formally appoint and register with the state all agents who sell insurance products on their behalf. When combined, [Company] and its subsidiaries had 55 instances where agents were not appointed and 93 instances where individuals acted as a casualty adjuster without being licensed in accordance with Connecticut law.

Although the faux “Agents” were not individually fined, the situation could have led to results more dire than a stiff fine against the insurer and a tongue-lashing in a press release. Let's change the facts. Let's assume that a faux “agent” purportedly binds coverage on a hypothetical carrier's behalf on Tuesday, that a loss under the policy occurs and is reported on Wednesday, and that a denial of coverage is issued on Thursday (very promptly, I might add) because the policy was not properly bound. Not a pretty picture, is it?

We can make the facts less drastic: the “agent” purports to confirm coverage with a higher limit than real “Agents” of the carrier are authorized to bind; the carrier decides to honor the claim, but only up to the limit that a true “Agent” could have bound, telling the “agent,” in so many words, “You make up the difference.” We could term this scenario “Dirk Smarmly's Fondest Dream,” with two solvent defendants vigorously pointing their index, or other, fingers at each other, and the local, elected Commissar of Insurance and Cosmetology issuing damning pronouncements aimed at both of the future defendants.

Fanciful? Yes. Exaggerated? Yes. Could never happen? If you think these things never happen, write a letter to American Agent & Broker and tell us why. I'll reserve my entire next quarterly column for excerpts from the responses to that letter.

The fact is that there is no coherent system of state appointment requirements for insurance producers, by any other name. According to a survey by the National Assn. of Insurance Commissioners (NAIC) with the ponderous title, “Producer Licensing Assessment: Aggregate Report of Findings,” dated Feb. 19, 2008, there are 25 jurisdictions that “require business entities to be appointed. In addition, six states require each branch location of a business entity to hold an appointment. In 15 states the appointment of a business entity eliminates the requirement for each individual producer working for that business entity to hold an appointment with the insurer.”

In short, there are only 46 states in the Union, according to the NAIC (25 + 6 + 15), which underscores why an interstate–and international–business such as selling insurance on behalf of a carrier just might better be regulated through a uniform set of regulations or (shudder) the federal government.

But before we get to the Epiphany of the Proletariat, let's look at the simple grass roots solution. Business people in any business need to know who their customers are, and to whom they owe duties of care. If I were an insurance “Agent” in one of those states that requires each office of an insurance producer to hold a separate Agency appointment, I'd be concerned about working out of another branch office in the same state while traveling on a business/fishing trip. Chances are that my state doesn't recognize appointment of my business entity as automatically appointing each person employed by the entity. So, when I meet with my buddy while traveling on said business/fly-fishing trip to the Humbleville office, which isn't appointed, and I ask him, “Say, have you ever thought about a personal umbrella policy?” am I violating the law or am I telecommuting from my own office in Centerville?

These are difficult questions, the sort that underpaid public servants and 12 good citizens off the street are normally called upon to answer.

Know whose interests you serve, and whose you are allowed to serve. Returning to our original theme of children's literature, the question is simply stated by Humpty Dumpty, “The question is, which is to be master–that's all.”

He was a good egg.