Most Dallas insurance lawyers in Dallas and Fort Worth know the ways agents and adjusters can liable for their actions in selling a policy or handling a claim.

Just as an insurance company is liable for its own misconduct, so too agents may be personally liable for their misdeeds, even when acting on an insurer’s behalf.  In general, an agent is individually liable for his or her own tort or statutory violation .  This has been made clear in numerous Texas cases including the Texas Supreme Court in its 1985 opinion, Weitzel v. Barnes.

Ordinarily, an agent is not liable for breach of contract based on the insurance policy, because the contract of insurance is not between the insured and the agent.

Texas insurance lawyers are always asking the above question when someone comes to see them about an insurance company doing them wrong.

To start with, as the contracting party, the insurance company can be liable based on the contract that exists between them and their customer.

There are also several statues, under which, the insurance company can be held liable.  For example, under Texas Insurance Code, Section 541.151, the statute states “any person” engaged in the business of insurance may be liable for unfair insurance practices.  Reading further, the Texas Insurance Code, Section 541.002(2), defines the term “person” to include various insuring entities.

Here is a curious 1933 opinion from the Texas Court of Commission of Appeals.  It is styled, American National Insurance Co. v. Huey.

This is a case wherein an insurance agent is alleged to have misrepresented the terms of an insurance policy wherein the insured was to receive monthly benefit.  This was not what the policy provided.  When the claim for benefits was denied, the insured filed suit alleging the misrepresentations by the agent.

It appears from the record and findings of the jury that, Huey made an application for insurance to the insurance company.  As actually written and signed, this application called for the issuance of a life insurance policy for $2,000, providing for double indemnity in case of accidental death, and waiver of premiums in case of total disability.  On March 12, 1929, a policy of insurance issued by such company was delivered to Huey in all things conforming to the application as written.

Cooperation with the insurance company investigation of a claim is required under the insurance policy.  Failure to cooperate can result in the policy being rescinded and the claim denied.

The 1994, Amarillo Court of Appeals opinion, Andy Costely and Cathy Costley v. State Farm Fire And Casualty Company, illustrates the necessity of cooperation with the insurance company investigation of a claim.

In this case, State Farm was allowed to rescind a policy based on the insured failure to cooperate.  Cathy had her truck, tractor, and other personal property destroyed by a fire while it was parked on Andy’s father’s (Robert) property.  Andy and Cathy sued Andy’s father.  Later Robert sued Andy alleging the damage was due to the negligence of Andy.

Area life insurance attorneys need to know the reasons an insurance company can rescind an insurance policy.

In addition to the common law standards, several statutory provisions regulate an insurer’s ability to avoid coverage based on a misrepresentation by the insured.  These are found in Texas Insurance Code, Chapter 705.

The statute provides:

Parker County life insurance lawyers know how the courts look at warranties in life insurance policies.

As stated in the 1997, 5th Circuit opinion styled, Riner v. Allstate Life Insurance Company, “Warranties in insurance applications are strongly disfavored in the law, and even fairly obvious attempts to create warranties in the application process have been rejected by Texas Courts.”  There is a line of cases holding the same as Riner.  Courts thus have been disinclined to find that contract language creates a warranty or condition precedent unless the language allows no other conclusion.

The language used the 1966, Texas Supreme Court case, Great American Reserve Insurance Co. v. Britton, said that “the policy shall not take effect until it has been delivered to its owner during the lifetime and good health of the Insured.”  The court found this was a condition precedent.

Aledo life insurance attorneys need to know the difference between a misrepresentation in a life insurance policy application and a condition precedent.  There is an important distinction between statements by the insured that are considered to be representations and those considered to be conditions precedent.  If the insured’s statement is considered a representation, a false statement alone will not let the insurer avoid coverage.  Each of the elements discussed by the Texas Supreme Court in the 1980, opinion styled, Mayes v. Massachusetts Mutual Life Insurance Co., must be shown.  In contrast, if the insured’s statement is considered a condition precedent, then falsity alone will allow the insurer to avoid coverage.

This representation versus warranty issue is well developed under Texas law.  If the statements are representations, then to avoid liability under the policy the insurance company must plead and prove:

1) the making of the representation;

Most insurance lawyers know that one way an insurance company tries to get away with refusing to pay on an insurance policy is to rescind the policy.  According to a 1931, Amarillo Court of Appeals opinion styled, Forrester v. Southland Life Ins. Co., the general principle is, prior to a loss an insurance company has the right to rescind the policy procured through mutual mistake or fraud.

As stated by the  Texas Supreme Court in a 1980 opinion styled Mayes v. Massachusetts Mut. Life Ins. Co., an insurance company may rescind a policy based on the insured’s misrepresentation, if the insurance company pleads and proves the following elements:

  1.  the making of the misrepresentation;

Dallas and Fort Worth area insurance lawyers need to read this November, 2017, opinion from the San Antonio Court of Appeals.  It is styled, Farmers Texas County Mutual Insurance Company v. Zuniga.

Zuniga was walking to school and struck by a car driven by Christopher Medina.  Zuniga sued Medina for negligence and gross negligence.  A jury awarded Zuniga $93,244.91 in actual damages and $75,000.00 in punitive damages.  Farmers insured Medina and paid the actual damages but then filed a declaratory judgment action seeking a declaration that the policy did not cover punitive damages.

Zuniga filed a motion for summary judgment on the punitive damages issue.  Farmers prevailed in this case.

A 2017, opinion styled, Carrillo Funeral Directors, Inc. v. Ohio Security Insurance Company, et al, is another example of incorrect pleadings against an adjuster.  The case is from the Northern District, Dallas Division.

Carrillo suffered hail damage and made a claim against its insurer Ohio.  There was an under payment of the claim and Carrillo sued Ohio and the adjuster John Horvath for violations of the Texas Insurance Code, in State District Court.  Ohio timely removed the case to Federal Court asserting that Horvath was improperly joined in the lawsuit in an effort by Carrillo to defeat diversity jurisdiction.

28 U.S.C. section 1441(a) permits the removal of any civil action brought in a State court of which the district courts of the United States have original jurisdiction.  But only if the action could have been originally filed in federal court.  However, the removal statute must be strictly construed because removal jurisdiction raises significant federalism concerns.  As a result, any doubt as to the propriety of removal should be resolved in favor of remand.