Failure Of Agent To Disclose Policy Exclusion

Mason County insurance lawyers learn pretty quick that an insurance agent does not have to tell a customer everything about the insurance policy they purchase.  This is illustrated in a 2000 San Antonio Court of Appeals opinion styled, Nwaigwe v. Prudential Property & Casualty Insurance Company.

Moses Nwaigwe sued Prudential and its agent, William Eckert (collectively “Prudential”), for failing to disclose a policy exclusion that the company used to deny a claim.  In response, Prudential moved for summary judgment on the grounds that it did not misrepresent the terms of the policy and that it had no duty to tell Nwaigwe about the vacancy clause.  The trial court granted the motion.  On appeal, Nwaigwe argues the summary judgment was improper because the motion failed to address his failure to disclose allegation.

In 1993, Nwaigwe purchased a fire insurance policy from Prudential to insure an occupied rental property.  The policy was issued and renewed twice, but Nwaigwe says he never received a copy of the policy.

In the spring of 1995, Nwaigwe evicted his tenants.  The property remained vacant and was destroyed by fire in 1996.  Prudential denied Nwaigwe’s claim for property damage based on the policy’s vacancy clause, which excludes fire coverage for a building vacant for sixty consecutive days immediately before the loss.

Nwaigwe says he did not know about the vacancy clause because the agent never told him about it and because Prudential never delivered a copy of the policy so that he would know about the exclusion.  He sued Prudential and Eckert for violations of the Insurance Code and Deceptive Trade Practice Act (DTPA), breach of the common law duty of good faith and fair dealing, fraudulent misrepresentation, negligence, and gross negligence.

Nwaigwe challenges the judgment on the basis that Prudential’s motion for summary judgment did not address the deceptive conduct he alleged; i.e., that Prudential failed to inform him of the vacancy exclusion in the policy.  Nwaigwe claims Prudential represented to him that his property was fully covered for fire loss during the policy period, and that this was deceptive conduct because the policy did not, in fact, cover his property if it was left vacant.  Nwaigwe contends this conduct violated the DTPA and the Insurance Code.

Prudential says it was entitled to summary judgment because it did not misrepresent the scope of coverage, and that absent a specific misrepresentation, an insurer is not liable under the DTPA.  Because the record establishes that no specific misrepresentation of coverage was made, Prudential says summary judgment was proper.  Nwaigwe says this law does not apply because misrepresentation is not an element of a failure to disclose claim.  This is pursuant to DTPA, Section 17.46(b)(23) (cause of action consists of intentional failure to disclose known information for purpose of inducing consumer to enter transaction he would not have otherwise entered).

Case law is factually very similar to this case.  Case law says the plaintiff alleged the insurer represented to him that it would cover his home against fire loss, and that this was a deceptive act because the insurer issued a policy that carried an exclusion for coverage if the home was not owner-occupied.  The only apparent distinction between the cases is that the plaintiff in other case law characterized his complaint as one of misrepresentation of coverage, while Nwaigwe attempts to characterize his complaint as one of failure to disclose an exclusion from coverage.  This appeals court believed this to be a distinction without a difference.  Nwaigwe’s complaint in this case is the same as other case law.  Accordingly, the question to be decided is the same-whether, at the time of the transaction, the insurer committed a deceptive act that produced actual damages to the plaintiff.  The Texas Supreme Court answered the question against the plaintiff.

The evidence establishes that at the time Nwaigwe purchased the policy from Prudential, no specific misrepresentations were made concerning coverage, and no material information was withheld from Nwaigwe with the intent to induce him to enter the transaction.  To the extent that knowledge of the 60-day vacancy clause might have been material to Nwaigwe’s decision to purchase the policy, it lost its materiality when Nwaigwe represented to Prudential that his property would not be unoccupied for more than thirty consecutive days per year.  This court agreed with Prudential that under the circumstances it had no duty to advise Nwaigwe that the policy included a vacancy exclusion.  Nwaigwe may have believed he was fully covered by the policy regardless of the property’s occupancy, but mistaken belief about the scope or availability of coverage is not actionable under the DTPA or Insurance Code.