Insurance Agent Liability

December 29, 2012

Grand Prairie insurance attorneys need to be able to recognize when and if an insurance agent does something wrong.
A 1992, Amarillo Court of Appeals case provides some good discussion on this issue. The style of the case is, Pickens v. Texas Farm Bureau Insurance Companies.
Here is some of the relevant information.
Pickens filed suit against Texas Farm Bureau asserting several common law and statutory causes of action arising from its alleged failure to give adequate advice to the Bennetts regarding levels of liability coverage available on their homeowner's insurance policy.
In 1977, the Bennetts moved from Stinnett to Amarillo. They called the Texas Farm Bureau office and purchased a homeowner's policy for their home with liability limits of $25,000. Mrs. Bennett did not seek advice about coverage and did not confer with an agent.
On November 20, 1982, while the homeowner's policy was in effect, Johnny W. Bennett was cleaning a rifle in his garage when it discharged and struck James Pickens in the right arm. James Pickens and his parents filed suit against Bennett for damages. On March 31, 1986, a consent judgment was entered in favor of the Pickens in the amount of $953,000.
Texas Farm Bureau paid policy limits of $25,000 liability and $500 medical pay benefits on behalf of Bennett. On January 16, 1988, the parties signed a "covenant not to execute" wherein the Bennetts agreed to pay an additional $15,000 on the judgment and assigned any causes of action they might have against Texas Farm Bureau to Pickens.
After the assignment, Pickens instituted the instant action alleging negligence, breach of express and/or implied warranties, violation of the Texas Deceptive Trade Practices Act and Consumer Protection Act, and the Texas Insurance Code. Pickens' causes of action are derived from allegations that Texas Farm Bureau failed to advise the Bennetts, upon purchase of their homeowner's policy, of various liability coverage limits and premiums available.
It is well settled law that the right to recover for injuries from negligence is founded upon the violation of a duty. When no duty exists, there can be no violation or negligence.
Here, there is no evidence that Allison ever took care of the Bennetts' insurance needs without consulting them. When the Bennetts purchased insurance from Texas Farm Bureau they ordered their policies over the phone from the secretary in the office. The Bennetts did not seek advice from Allison as to how much coverage they should have obtained. The Bennetts received an updated policy every six months, showing the policy coverage. They did not question the amount of coverage. Nor, did they inquire about the possible coverage available.
Waynetta Bennett had previously called and raised the coverage of their standard dwelling insurance when the valuation of their home increased. She also called to inquire whether a gun collection was covered by their policy. When she learned it was not, she ordered additional dwelling coverage. Thus, Waynetta was aware of the process utilized to raise coverage limits on an insurance policy. At no time did she ask about increasing the liability coverage of their policy. Under the circumstances, there was no duty owed to the Pickens and their negligence cause of action fails.
Here, the Bennetts requested a homeowner's insurance policy without requesting any information about coverage options or advice regarding the type of coverage they should choose. Texas Farm Bureau supplied them with an insurance policy that met their request.
Texas courts have recognized that insurance carriers owe their customers a common law duty of good faith and fair dealing in the processing and payment of claims. In this instance, Pickens has cited no authority, nor can any be found, where the common law duty of good faith and fair dealing or breach of workmanlike service has been extended to the failure to disclose the range of liability coverage amounts. This court declined to extend the duty. To rule otherwise could permit the insured to dictate policy limits of the insurance company after the liability attached. Additionally, such liability cannot be assessed because it is contingent on what the insured would have done if disclosure of varying liability amounts had been made. Such damages are speculative and cannot be recovered. Consequently, Texas Farm Bureau owed no duty to the Bennetts beyond selling them the instant homeowner's policy. Pickens' first point of error was overruled.
Because Texas Farm Bureau established its entitlement to summary judgment as a matter of law, the first point of error was dispositive of the appeal and the Bennets lost. This case is also a reminder that an experienced Insurance Law Attorney needs to be consulted when a claim is denied.