Misrepresentations In Insurance

Dallas insurance attorneys know that misrepresentations in insurance are essentially the same as misrepresentations in any other area of law.
The Texas Supreme Court told us in 1990, that a false representation must involve an existing or past material fact, rather than a statement of opinion, judgment, probability, or expectation in order to constitute actionable fraud. This is from the case styled, DeSantis v. Wackenhut Corp.
The Tyler Court of Appeals in 1978, said that statements concerning future contingent events, sales talk, “puffing,” and other similar statements are not considered actionable misrepresentations. The Tyler case is styled, Hicks v. Wright.
A Dallas Court of Appeals in 1976, said representations concerning future events are not actionable unless at the time the statement or promise was made, the person making it did not intend to perform. This case is Stone v. Enstam.
There can be two types of fraud. These are nondisclosure and statutory.
In 1997, the Texas Supreme Court said fraud by nondisclosure, a subcategory of fraud, is created by a duty to disclose between the parties. When there is a duty to disclose information and party does not disclose it, the nondisclosure may be as misleading as a positive misrepresentation of facts.
The elements of a cause of action for fraud by nondisclosure are the following:
1. The defendant concealed from or failed to disclose certain facts to the plaintiff.
2. The defendant had a duty to disclose the facts to the plaintiff.
3. The facts were material.
4. The defendant knew (1) the plaintiff was ignorant to the facts; and (2) the plaintiff did not have an equal opportunity to discover the facts.
5. The defendant was deliberately silent when it had a duty to speak.
6. By failing to disclose the facts, the defendant intended to induce the plaintiff to take some action or refrain from acting.
7. The plaintiff relied on the defendant’s nondisclosure.
8. The plaintiff was injured as a result of acting without the knowledge of the undisclosed facts.
Statutory fraud is usually going to deal with transactions involving real estate and stock.
The elements of an action for statutory fraud are the following:
1. There was a transaction involving real estate or stock.
2. During the transaction, the defendant (1) made a false representation of fact (2) made a false promise, or (3) benefited by not disclosing that a third party’s representation or promise was false.
3. The false representation or promise was made for the purpose of inducing the plaintiff to enter into a contract.
4. The plaintiff relied on the false representation or promise by entering into the contract.
5. The reliance caused the plaintiff injury.
It is important for insurance lawyers to understand the various ways a misrepresentation can be made and to be able to discuss particular fact situations with their client.