Agent Misrepresentation Of Policy

Insurance attorneys in Irving and Dallas need to know the remedies when an insurance agent makes a misrepresentation about a policy. The United States District Court, Southern District of Texas, Houston Division, issued an opinion that is worth reading. The style of the case is Changiz M. Khoei, et al., vs. Stonebridge Life Insurance Company. Here is the relevant information.
Khoei sued Stonebridge alleging wrongful denial of benefits. Khoei claimed benefits for injuries sustained while they were sitting in a car. Stonebridge denied the claim on the grounds that the policy was for death and dismemberment, covering loss of life, loss of one or both hands or feet, and loss of the sight in one or both eyes. Khoel sued for violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act. (DTPA)
In August 1992, a telemarkerter contacted Khoei about purchasing insurance and allegedly told Khoei that he could purchase a comprehensive policy that would cover accidents and risks not already covered by his auto and health policies. The telemarketer “implied” that the policy would cover accidents up to the policy limits. The telemarketer did not say the policy covered only loss of life or of a foot, hand, or sight of an eye.
Stonebridge moved to dismiss Khoei’s claim under the DTPA and Texas Insurance Code relating to the telemarketers alleged misrepresentations on the basis of limitations. Texas law governs the limitations period for the claims. Under Texas law, the limitations period does not begin to run until the cause of action accrues. Generally, this happens when facts come into existence that authorize a party to seek judicial remedy. In most cases, a cause of action accrues when a wrongful act causes a legal injury regardless of of when the injury is learned or whether damages occurred. This discovery rule provides a “very limited exception to statutes of limitations.” The discovery rule applies only when the injury suffered is both “inherently undiscoverable” and objectively verifiable. An injury is not “inherently undiscoverable” simple because a person failed to discover it within the applicable limitations period. Rather, the focus is on the nature of the injury itself — whether it is of the type that generally is discoverable by the exercise of reasonable diligence.
Texas DTPA and Insurance Code claims must be filed with two years of the violation or within two years after the person “discovered or in the exercise of reasonable diligence could have discovered” the violation. Claims that an insurer misrepresented policy coverage in selling the policy accrue when the policy is issued. Misrepresentation claims accrue when the policy is issued because the insured has a duty to read the policy and is responsible for understanding the policy’s terms and conditions. If the written policy is different from the representations, the insured has sufficient facts to seek legal remedy based on the insurer’s alleged misrepresentations about the policy.
The Khoeis’ claims that the telemarketer misrepresented the policy coverage are barred by limitations. Those claims accrued at the latest in 1993, the year the Khoeis obtained the certificate relating the policy terms. Those terms unambiguously covered only death and dismemberment, and unambiguously defined that to mean loss of life, loss of one or both feet or hands, or complete loss of sight in one or both eyes. The Khoeis had the facts needed to seek judicial remedy when they received the policy certificate. The discovery rule does not apply because the alleged misrepresentations were not inherently undiscoverable when the claim accrued.