Deceptive Trade Practices Act (DTPA) And Insurance

Texas insurance lawyers need to understand the ways the Texas DTPA can help with insurance claims.
Texas Insurance Code, Section 541.151(2) cross-references and prohibits conduct defined in the Texas Business & Commerce Code, Section 17.46(b), commonly known as the Deceptive Trade Practices Act. This latter statute applies to all types of consumer transactions, not just insurance, so many of the provisions are not directly relevant. The most relevant subsections prohibit:
* Causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services.
* Representing that goods or services have … benefits, … which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not have.
* Representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.
* The failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.

This Section 17.46(b) is commonly called the “laundry list.” Insurance transactions fit within these prohibitions because courts have held that insurance is a “service.”
Pursuant to Texas Insurance Code, Section 541.151(2), to be successful in suing for conduct that violates one of the above provisions, the person suing must show that he relied on the act or practice to his detriment.
An example of violating one of the statutes above is illustrated in a 1987, Texas Supreme Court case styled, Aetna Casualty v. Marshall. In this case the Court said that an insurance company’s breach of its contractual promise to pay future medical benefits was precisely the sort of conduct forbidden by the Texas DTPA in Section 17.46(b)(5).
Another Texas Supreme Court opinion from 1979, styled Royal Globe v. Bar Consultants, Inc. says that misrepresenting that a policy affords coverage it does not have violates DTPA, Section 17.46(b)(12).
It is important for insurance lawyers to understand that although the Insurance Code and DTPA provisions prohibit misrepresentations and nondisclosures, it can be important for a person suing the insurance company to carefully choose the prohibition that best fits the evidence or that has an easier burden or proof. As an illustration of this, in the 2000, Corpus Christi Court of Appeals case, Colonial County Mutual Insurance Co. v. Valdez, the insured was able to prove the insurance company violated Insurance Code, Section 541.060 by failing to disclose information, but could not prove a violation of DTPA, Section 17.46(b)(24), because there was no evidence that the insurance company withheld the information with the intent to induce him to buy.