Insurance Policies Are Contracts

Someone in Grand Prairie, Arlington, Mansfield, Dallas, Fort Worth, Cedar Hill, Duncanville, De Soto, Benbrook, Burleson, Cleburne, Weatherford, Granbury, or just about anywhere else in Texas might ask; What is the difference between an insurance policy and a contract!
Here is the answer – An insurance policy is a contract. Insurance policies are contracts, and as such are subject to rules applicable to the rules governing contracts. The Texas Supreme Court had this argued before them in a 1994 case styled, Hernandez v. Gulf Group Lloyds. In the case, the Texas Supreme Court affirmed this legal position regarding insurance policies.
A person who is sueing, that is, seeking to recover on an insurance contract must prove that the contract was in force at the time of the loss. Also, the person who is claiming under a policy is required to produce the insurance contract upon which he sues or to prove its terms. That is what the Tyler Court of Appeals stated in 1975, in the case Hartford Accident and Indemnity Company v. Spain.
This is easy to do. Just have a copy of the insurance policy to show the Judge. If you do not have a copy because it has been lost, then a copy can be obtained from the insurance company through the law suit proceeding. To prove a breach of the insurance contract, the Dallas Court of Appeals, in 1992, in the case, St. Paul Insurance Company v. Rakkar, stated that the insured had to establish 3 points:
1) the existence of the insurance contract 2) compliance with the terms of the insurance contract; and 3) the insurance company’s breach of the insurance contract.
At the trial in the Rakkar case, the first and second of the above elements were satisfied by uncontested testimony that the house was insured at the time of the fire, that the insured had paid his premiums, that the insurer had refused to pay, and that the amount that would have been paid was the policy limits. The insurance company denied the claim, claiming the insured intentionally set the fire. When the jury rejected this insurance company defense, that established the third element – that the insurance company breached the contract.
The above has confirmed that an insurance policy is a contract and treated as such. What if an oral agreement is made with the insurance agent to get coverage?
An oral contract to insure is valid and enforceable. This is clearly the law stated in a line of cases going back as far as 1949, where the Texas Supreme Court stated this is the case styled, Pacific Fire Insurance Company v. Donald. Per Donald, the oral agreement “is presumed to be made in contemplation of a policy containing the terms and conditions in customary use, and impliedly to adopt the same, and it is on this ground that such agreements are sustained as complete and binding contracts.”
In the Donald case, the agent for Pacific Fire agreed to insure Donald’s hay. The agent’s usual practice was to send a bill the next month, or even the month after that. The hay burned before any bill was sent to Donald. The court found sufficient evidence of an oral contract based on the agent’s agreement to provide insurance. It did not matter that rates were not agreed to, because the rates were set by law. The change in the insured location also did not matter, because that would only effect the rate, not whether there was coverage.
What needs to be kept in mind, is that insurance policies are contracts and that even though insurance has a large set of laws regulating the conduct of insurance companies and their agents, and they also have the Texas Department of Insurance looking over their shoulder, that contract law and principles also apply to insurance policies.