Bad Faith Insurance – Misrepresentation By Insurance

Texas Insurance Code, Section 541.060(a)(1), says it can be bad faith for an insurer to misrepresent to a claimant a material fact or policy provision relating to a coverage issue.

The 1990, Texas Supreme Court opinion, Black v. Victoria Lloyds Ins. Co., provides some guidance on this topic.

Wood Brothers purchased a liability insurance auto policy that excluded coverage while the automobile was not being used exclusively in the business of the insured.  Wood Brothers leased the automobile to Daniel.  Daniel did not request or receive a copy of Wood Brothers’ insurance policy.  Subsequently, Daniel’s daughter was involved in an accident while on personal business and was sued by the injured party.

The insurance card given to Daniel did not indicate that he did not have liability insurance coverage for personal use of his pickup.  Daniel pleaded that the issuance and contents of the insurance card were false and misleading and submitted an affidavit that, among other statements, included” that it was his understanding from his conversations with Wood Brothers, the payment of premiums, and from the insurance card issued by the carrier, that the liability insurance policy he purchased would cover accidents involving his truck whether it was used for business or personal use; that because of the carrier’s misrepresentation that “complete liability insurance” had been provided, he did not purchase any other liability insurance on his truck; and if he had been informed that personal use of his truck was not insured, he would have purchased additional insurance to provide coverage for personal use as required by law.

The Court held that the combined effect of the issuance and contents of the insurance card and Daniel’s affidavit raised a fact issue concerning misrepresentation of the liability insurance coverage for person use, precluding summary judgment.

This case is a case that may be helpful for a person facing a similar situation where an employee is leasing a vehicle for his employer and it is believe that the employer is providing insurance coverage.