Suing An Agent

Mansfield insurance attorneys understand the Texas Insurance Code definitions to be used and how they apply when suing an insurance agent. A 1997, Texas Supreme Court discusses this. The style of the case is, Liberty Mutual Insurance Company v. Garrison Contractors.
The primary issue in this case is whether an insurance agent employed by an insurance company is a “person” under section 541.002 of the Texas Insurance Code. The court of appeals held that Robert Garrett, a Liberty employee-agent, was a person under that provision, and accordingly subject to suit under the Insurance Code. This Court affirmed that decision.
The Court granted Liberty and Garrett’s application for writ of error primarily to consider whether an insurance company employee is a “person” under the Insurance Code.
The purpose of the code “is to regulate trade practices in the business of insurance by defining, or providing for the determination of, all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices defined prohibiting the trade practices so defined or determined.” It prohibits any person from engaging in deceptive trade practices in the insurance business, and provides a private cause of action against a person that engages in an act or practice declared in the section to be unfair or deceptive. In addition, the Texas Department of Insurance and the attorney general are authorized to take enforcement actions against any person who engages in deceptive acts or practices.
Person means any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors.
Liberty and Garrett contend that the definition only reaches business entities, and not the entities’ employees; employees, they contend, do not engage in the business of insurance, but engage in their employer’s business. They argue that no purpose is served by including employees like Garrett in the definition of “person” because an insurance company will always be liable for its employees’ activities in the course and scope of employment.
First, the legislative history of a 1985 amendment to the Insurance Code supports the conclusion that the term “person” is not limited to business entities. The Legislature amended it to provide a cause of action against “a person or persons” engaging in unfair or deceptive practices, rather than “a company or companies.”
The word “company” is commonly understood to mean “a business enterprise; firm.” Thus, the Legislature’s change of the word “company” to the term “person” is highly suggestive: if the Legislature intended the term “person” to have the narrow meaning that Liberty and Garrett would give it, this alteration would have been an empty gesture. The word “company” would have been broad enough to include the business entities that Liberty and Garrett contend are within the statutory definition.
Additionally, the Court has previously noted that the term “business of insurance” is “connected with and used with reference to a particular trade or subject matter.” Therefore, the Legislature has instructed the Court to assign the term “the meaning given by experts in the particular trade, subject matter, or art.” TEX. GOV’T CODE § 312.002(b). In this case, the Department of Insurance has appeared as an amicus curiae. The Department’s expertise in the insurance trade is unquestionable: it was “created to regulate the business of insurance in this state.” The Department maintains that an insurance company employee may engage in the business of insurance, and therefore, may be a “person” under the insurance code.
The Court discussed this further in the case, but one gets the idea that an agent can clearly be sued in his individual capacity.