Insurance – Theories Of Recovery

Insurance lawyers want to pursue the best theories of recovery when a client has a claim wrongfully denied.  Some people just want to file a complaint with the Texas Department of Insurance.  But, there are better ways to improve the situation.

Recovery based on theories of misrepresentation were discussed in the last posting.

Another way of recovery is based on “non-disclosures.”  Closely related to misrepresentation is the theory that the insurance company, agent, or insured failed to disclose information.  For example, if an exclusion is not adequately disclosed, the insurance company may be liable for breach of contract by relying on the exclusion to deny a claim.  Failing to adequately disclose limitations or exception to coverage may also make the insurance company or agent liable for unfair insurance practices or deceptive trade practices.

Several statutory prohibitions are specifically aimed at settlement practices.  Liability may arise from failing to pay benefits that are owed under the policy, for failing to act promptly to settle once liability is reasonably clear, for paying too little, or for paying too slowly.  Liability may also arise from the insurance company’s failure to adequately investigate the claim.

Other disputes may arise that do not fit neatly within the preceding categories, such as unreasonable cancellation of a policy, unconscionable conduct, or unfair discrimination.

Theories of liability vary depending on who is seeking recovery.  It may make a difference whether the plaintiff is the insured, a named beneficiary, an intended beneficiary, or an injured person seeking recovery under another persons liability policy.  Questions also arise whether an agent can sue his own insurance company, and under what theories, and whether other persons affected by the insurance company’s conduct can sue.

Liability may also vary depending on who is the defendant.  Is it the insurance company, agents, or adjusters?  A review of the Texas Insurance Code and the Texas Deceptive Trade Practices Act help to focus the possibilities.