Insurance — Who Can Be Sued?

Everman insurance attorneys need to be aware of the people and entities that can be liable under the Texas Insurance Code. Section 541.151 provides that a person who has sustained damages caused by another’s engaging in unfair or deceptive insurance practices may sue the person engaging in those acts or practices. Section 541.002(2) defines “person” to mean “an individual, corporation, association, partnership, reciprocal or interinsurance exchange, Lloyd’s plan, fraternal benefit society, or any other legal entity engaged in the business of insurance, including an agent, broker, adjuster or life insurance counselor.”
In 1998, the Texas Supreme Court applied the plain language of the statute to hold that the term “person includes businesses and individuals “engaged in the business of insurance.” However, the statute would not apply to an insurance company employee that was not engaged in the “business of insurance.” The style of the opinion is, Liberty Mutual Insurance Company v. Garrison Contractors, Inc.
Engaging in unfair practices in “the business of insurance” is the key to liability. Those engaged in it may be liable. Those who are not may not be. Thus, when the Texas Supreme Court concluded that contracts of suretyship are not part of the business of insurance, the court also held that a surety could not be liable for unfair insurance practices. This was a 1995 opinion styled, Great American Insurance Company v. North Austin Municipal Utility District No. 1.
The Texas Supreme Court held in a 1988 case styled, Vail v. Texas Farm Bureau Mutual Insurance Company, that those involved in the investigation and adjustment of claims and losses are also liable under the Texas Insurance Code.
In 1998, the Texas Supreme Court ruled that an insurance agent whose job duties included soliciting and obtaining policy sales, explaining policy terms, and explaining premiums was engaged in the business of insurance and could be held liable under the Texas Insurance Code. This case is styled, Liberty Mutual Insurance Company v. Garrison Contractors, Inc.
An example where someone was not held liable under the Texas Insurance Code is found in the same Garrison opinion. The court ruled “On the other hand, an employee who has no responsibility for the sale or servicing of insurance policies and no special insurance expertise, such as a clerical worker or janitor, does not engage in the insurance business.”
An insured who prevails in a lawsuit against an insurance company under the Texas Insurance Code can obtain –
Actual Damages Additional Damages I The Defendant Acted Knowingly Court Costs Attorney’s Fees