Who Is An Insurance Agent

For most lawyers practicing insurance law, the above question may be obvious.  But there are situations where it is not so obvious and even though one may assert the act of agency, it is not.  A Houston Court of Appeals [14th Dist.] opinion illustrates a situation where the alleged agent was held by the court, to not be an agent.  The case is styled, Harrison V. Wells Fargo Bank Texas, N.A.

Harrison was the beneficiary of a Section 142 trust established after she sustained a brain injury in a car accident.  Later, Harrison was the driver of the car in another accident in which her passenger was severely injured.  The passenger settled his claims against Harrison for her $100,000 auto liability policy, which had been obtained by the bank, plus $300,000 from Harrison’s trust.  Harrison sued the bank for Insurance Code violations, breach of fiduciary duty, negligence, and DTPA violations for alleged failure to obtain adequate limits of liability insurance for her.  The bank was granted a summary judgment on the Insurance Code violations.  The remaining claims were tried and the bank was found not liable.  Harrison appealed the findings.

This Houston Court of Appeals affirmed the findings of the trial court.  The evidence showed that after Harrison acquired automobile insurance, her mother sent the bill for the premium to the bank and the bank then forwarded the payment to the insurance company.  Insurance Code Section 4001.051 lists various acts performed in the ordinary course of providing insurance and states that any person who performs these acts shall be the agent of the company for which the act is done.  “Performing an act described in Section 4001.051, such as transmitting an insurance premium, subjects a party to liability as an agent there under only if the act is performed (a) in the course of providing insurance and (b) on an insurance company’s behalf.”  The evidence established that the bank was not engaged in the business of providing insurance and that its payment of premium was made solely pursuant to its role as a Trustee of the Section 142 trust.  The payment was not transmitted in the course of providing insurance or on any insurance company’s behalf.  Therefore, the payment did not render the bank an agent of the insurance company under Section 4001.051.

Here is what Texas Insurance Code, Section 4001.051 says:

Sec. 4001.051. ACTS CONSTITUTING ACTING AS AGENT. (a) This section applies regardless of whether an insurer is incorporated under the laws of this state or another state or a foreign government.

(b) Regardless of whether the act is done at the request of or by the employment of an insurer, broker, or other person, a person is the agent of the insurer for which the act is done or risk is taken for purposes of the liabilities, duties, requirements, and penalties provided by this title, Chapter 21, or a provision listed in Section 4001.009 if the person:

(1) solicits insurance on behalf of the insurer;

(2) receives or transmits other than on the person’s own behalf an application for insurance or an insurance policy to or from the insurer;

(3) advertises or otherwise gives notice that the person will receive or transmit an application for insurance or an insurance policy;

(4) receives or transmits an insurance policy of the insurer;

(5) examines or inspects a risk;

(6) receives, collects, or transmits an insurance premium;

(7) makes or forwards a diagram of a building;

(8) takes any other action in the making or consummation of an insurance contract for or with the insurer other than on the person’s own behalf; or

(9) examines into, adjusts, or aids in adjusting a loss for or on behalf of the insurer.

(c) This section does not authorize an agent to orally, in writing, or otherwise alter or waive a term or condition of an insurance policy or an application for an insurance policy.

(d) The referral by an unlicensed person of a customer or potential customer to an agent is not an act of an agent under this section unless the unlicensed person discusses specific insurance policy terms or conditions with the customer or potential customer.