It’s Not Your Policy – Can You Still Sue?

A Grand Prairie man is in a wreck and the other guy’s insurance company tells him to get his car fixed and where to go. Same facts, but the guy is from Arlington, Fort Worth, Dallas, Weatherford, or somewhere else in Texas. The insurance company later denies the claim for benefits. What does this mean?
It is rare for a person to be able to make a claim for benefits or sue an insurance company that is not his own insurance company. The exceptions have been pointed out in other posts and deal with situations where the person who does not have the policy was an intended beneficiary of the policy. An easy to understand example is a life insurance policy.
The general rule, or law in Texas is that a third party cannot use the Deceptive Trade Practices Act (DTPA) or the Insurance Code for sueing an insurance company or one of it’s representatives or agents. But there is Texas case law that allows the third party claimant to sue when the insurance company makes misrepresentations that result in harm to the third party claimant.
In the case, Hermann Hospital v. National Standard Insurance Co., decided in 1989, the 1st District Court of Appeals, Houston, allowed the hospital to directly sue the insurance company after the insurance company falsely represented that a patient had coverage, thereby inducing the hospital to render services. It turned out there was not any coverage. In this case the court relied on the special relationship between the hospital and insurance companies as justification for allowing the lawsuit to go forward.
However, two 5th Circuit, Federal Court cases, one in 1993 and one in 1996 had an opposite result.
Another case, Jack Webb, Receiver of Employers Casualty Company and Employers National Insurance Company, et al., v. International Trucking Company, Inc., et al., decided by the Texas Appeals Court, San Antonio, in 1995, is favorable to third parties being able to maintain lawsuits against insurance companies in the right circumstances.
The facts in this case are similar to the first paragraph in this writing. A truck owed by International Trucking, Inc. (Trucking) was in a wreck with another vehicle insured by Employers Casualty Company and Employers National Insurance Company (ECC). An adjuster for ECC told Trucking that ECC would pay for repairs and for Trucking to have the truck towed to Victoria Mack Company. Another adjuster later denied the claim and Trucking brought the lawsuit against ECC for violations of the DTPA and the Insurance Code.
Earlier, two Texas Supreme Court decisions severly limited third party claims against insurance companies. But this court pointed out the following: The Supreme Court never says in these two opinions, or any other opinion, that all statutory third party actions are barred against insurance companies. If the Court had meant to say that it no doubt would have done so with a simple declarative sentence. It did not do so. We conclude there are still limited instances in which a third party plaintiff can recover against an insurance company under the joint authority of the Insurance Code and the DTPA. We also conclude this is one of them.
This San Antonio Appeals Court pointed out that Section 17.46(b)(12) was a valid claim in this case. It also pointed out that Section 17.50(a)(4) of the DTPA incorporates the Insurance Code to permit a third party recovery by one who has been injured by another’s engaging in:
1) any of the practices declared to be unfair or deceptive in the Insurance Code;
2) conduct defined in rules or regulations lawfully adopted by the Board under the DTPA as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance; or 3) any practice defined by Section 17.46 of the DTPA as an unlawful deceptive trade practice.
This San Antonio Appeals Court case has numerous other legal issues in it, but the parts talked about here are relevant to persons with third party claims. An experienced Insurance Law Attorney should be consulted if you find yourself in a situation where you might have a third party claim.