When Does Coverage Begin?

Kimble County, Junction Texas – Even a place that is rural and secluded has to deal with insurance issues.  One of those issues at some point on a claim will be – when does coverage begin on the policy at issue.  This is discussed in a 1996, Texarkana Court of Appeals opinion styled, McKillip v. Employers Fire Insurance Company.

In March 1992, Wife who was in the process of obtaining a divorce, was told by her husband that State Farm was cancelling her auto policy.  Wife contacted an Allstate agent to obtain a new policy.  On April 3, 1992, Wife met with agent and completed an auto insurance application. requesting coverage for uninsured/underinsured motorist coverage, bodily injury, and PIP.  Wife testified that when she paid her down payment, Agent told her she was “now insured” and gave her temporary proof of insurance.

Agent submitted Wife’s application and premium to the Texas Auto Insurance Plan (TAIP). On April 9, 1992, TAIP assigned Wife’s application to Employers which issued a policy with an effective date of April 14, 1992.

On April 11, 1992, Wife was seriously injured in an auto accident.  The responsible driver did not have sufficient liability coverage.  Wife sought payment from Employers based on uninsured/underinsured coverage and PIP.  Employers denied the claim on the ground that the accident occurred before the policy was in effect.

Wife brought suit against Employers for breach contract, negligence, and violations of the DTPA.  Wife contended that coverage began on April 3, 1992, when she met Agent, completed the application, and the Agent told her that she was insured.

The trial court granted summary judgment in favor of Employers and against Wife on all causes of action.  Wife appealed.

This appeals court held that summary judgment in favor of Employers on breach of contract is affirmed.  Summary judgment on the negligence and DTPA claims are reversed and remanded for trial.

The assigned risk plan is a legislative creation governed by statute.  Carriers provide liability insurance under the assigned risk plan are subject to TAIP rules.  TAIP’s manager, not the submitting agent, decides which insurer will be assigned a policy.  Under the Insurance Code, an agent is defined as a person who: solicits insurance on behalf of an insurer; transmits an application or policy to or from an insurer; receives or delivers a policy on behalf of an insurer; examines or inspects any risks; receives, collects or transmits premiums; or adjusts a loss on behalf of an insurer.  An insurance agent can act as an agent for both the insured and insurer.  (Some states make a distinction between an agent and a broker.  This distinction is not found in the Texas Insurance Code.)  TAIP’s unique operating procedures prevented the agent from performing any of these actions on Employers behalf.

When Agent made the representation, Employers was not the insurer at the time and the application had not been submitted.  The alleged misrepresentations cannot be imputed to Employers since Agent was not acting as Employers agent as a matter of law.  An agent writing a policy through TAIP is not the agent for the ultimate insurer.  Therefore, summary judgment against Wife on the causes of action for breach of contract and imputed liability for the actions of the agent was proper.

Because Employers did not properly moved for summary judgment on the DTPA and negligence claims, those claims are reversed.