Articles Posted in Insurance Agents

Lawyers who handle life insurance cases need to be aware of the various ways a life insurance agent can be held responsible for wrongful acts.
While an individual agent is subject to being sued under the statutes here is a specific example of that happening.  This is from the 1998 Texas Supreme Court opinion styled, Liberty Mut. Ins. Co. v. Garrison Contractors, Inc.
In the Garrison opinion, an agent personally carried out the transaction that formed the core of the unfair insurance practices complaint.  The agent was responsible for explaining premiums and was required to have a measure of expertise.  He was a “person” engaged in the “business of insurance” and could be liable under the statute.  On the other hand, clerical employees, who have no responsibility for policy sales and servicing and no special insurance expertise, are not “engaged in the insurance business,” and thus would not be personally liable under this rationale.  The same reasoning should apply to other statutes, like the unfair discrimination statute, that include similar defenses.

Texas Life Insurance Attorneys need to be aware of the agency principals whereby an agent can be held liable for his or her actions.
An agent may be liable for violation common-law or statutory duties to the insured.  For example, an agent who undertakes to get insurance may be liable for negligently failing to get proper insurance for the insured.  An example of this is found in the 1987 opinion from the San Antonio Court of Appeals styled, Rainey-Mapes v. Queen Charters, Inc.  An agent may also me liable for negligently failing to notify the insureds that their policy is about to expire.  This is discussed in the 1985 Texas Supreme Court opinion styled, Kitching v. Zamora.
Statutes prohibiting misrepresentations, unfair settlement proctices, and unfair discrimination apply to “any person” engaged in the business of insurance and include agents and brokers.  Statutes on these issues are Sections 541.002(2), 541.151, 544.051(6), and 544.052.

Life insurance lawyers need to know the legal theories whereby a life insurance agent can be held liable for the wrongs they commit.  These agent responsibility don’t just extend to life insurance agents but to agents in other areas of insurance.
As the contracting party, the insurance company of course may be liable based on the contract with the insured.
An insurer also may be statutorily liable.  For example, “any person” engaged in the business of insurance may be liable for unfair insurance practices according to Texas Insurance Code, Section 541.151.  The term “person” is defined to include various insuring entities under Section 541.002(2).

Most insurance lawyers would think an insurance agent is the agent of the insurance company.  But, there are situations where the insurance agent is the agent of his customer.

Here is a 2023 opinion wherein this topic is discussed.  The opinion is from the Thirteenth Court of Appeals and is styled, Bill Wendlandt, 120-MP Victoria Ltd, and Laurent Tower, LLC, v. Certain Underwriters at Lloyd’s, London, Subscribing To Policy Nos. AOP-170109 And AQS-170213, et al.

This is an appeal from a summary judgement in favor of Underwriters.

Suing insurance agents who do wrong is something an insurance lawyer needs to look at closely.  Here is a 2022, opinion from the Southern District of Texas, McAllen Division, that deals with an insurance agent.  The opinion is styled, J & G Trejo Enterprises, Inc. d/b/a Best Medical Supply vs. Western World Insurance Company.

This is an opinion decided on a motion for summary judgment.

The loss here is an MRI machine held off premises that was destroyed in a fire on August 21, 2021.  Due to a sublimit of liability for business personal property held offpremises, Defendant paid only the cap ($10,000.00) on the claim, whereas Plaintiff assessed its own actual loses at around $200,000.00.

Life Insurance lawyers who read this Blog, or for that matter, anybody who reads this Blog eventually learns that there are many wrongs an insurance agent will commit to get a sale.  Most of their income from an insurance company is based on getting a percentage of the premiums.  In other words, most agents work on a commission basis.

The Texas Department of Insurance regulates life insurance agents and the Texas Insurance Code also regulates insurance agents.

Today’s short focus is on a different form of fraud which is sometimes committed by an agent when selling life insurance.

Insurance agents can be responsible for their own actions under the Texas Insurance Code.

Just as an insurance company is liable for its own misconduct, so too agents may be personally liable for their misdeeds, even when acting on behalf of an insurance company.  In general, an agent is individually liable for his or her own tort or statutory violation.  This is discussed in the 1985, Texas Supreme Court opinion, Weitzel v. Barnes, and in the 1983, Texas Supreme Court opinion, Light v. Wilson, and the 1991, Austin Court of Appeals opinion, State Farm Fire & Casualty v. Gros.

It is not normal for the agent to be liable for breach of contract based on the insurance policy, because the contract of insurance is not between the insured and the agent.

Insurance agent misrepresentations are not always held against the insurance company, but most the time the agents misrepresentations are held against the insurance company.  A 1979 opinion from the Texas Supreme Court is a good illustration of the company being liable for the misrepresentations of the agent.  The opinion is styled, Royal Globe Ins. Co. v. Bar Consultants, Inc.

Bar Consultants operated a bar near the University of Texas known as “The Bucket.”  The president of Bar Consultants, John Barber, testified that he purchased a policy of insurance from Tully Embrey, an agent of Royal Globe.  The policy contained a vandalism and malicious mischief endorsement.  Barber testified that he had a lengthy discussion with Embrey about the problem of vandalism at which time Embrey assured him that he was “totally covered” from losses caused by vandalism.  This testimony was uncontradicted.

After extensive damage to an area of the bar, a claim was filed and Royal Globe eventually denied the claim.  A lawsuit was filed and a trial found in favor of Bar Consultants.

Insurance agent liability is an issue for Insurance Law Attorneys to be know about when investigating a case.  A 2004, opinion from the United States 5th Circuit provides some input on how to look at cases that might involve wrongs by the insurance agent.  The opinion is styled, Hornbuckle v. State Farm Lloyds.

This is a claim on a homeowners policy wherein a claim was made for benefits and the adjuster assigned to the claim, Kirkpatrick, along with State Farm was sued for mishandling the claim.  The case was filed in State Court and removed to Federal Court by State Farm, after which Hornbuckle filed a Motion to Remand.  State Farm claimed Kirkpatrick was sued for the sole purpose of defeating diversity jurisdiction and asserted that no independent causes of action were viable against Kirkpatrick.  The facts are worth reading, however the focus here is how the Court viewed the case.

In the opinion the Court states that Hornbuckle fails to bring forward any substantial evidence to support a claim against Kirkpatrick.  Contrastingly, with their notice of removal and in their response to the motion to remand, the Hornbuckle’s attach, among other things, the entire Hornbuckle deposition and other summary judgment type evidence, and assert that removal was proper because Kirkpatrick was fraudulently joined in that there was no arguably reasonable basis for predicting Hornbuckle could recover against him, and that in any event, removal was objectively reasonable.

Insurance agents misrepresenting the terms and conditions of an insurance policy is a common complaint.  Here is a 1994, Texas Supreme Court opinion styled, Celtic Life Insurance Company v. John D. Coats, Jr.

This case presents three issues relating to an insurance company’s liability for its agent’s representations: first, whether the company’s liability depends on its authorization of misrepresentations; second, whether reliance on the representations is an element of recovery; and third, whether the insured’s damages should be trebled when the misrepresentations were not committed “knowingly.”

This blog will focus on the first issue regarding the agents misrepresentations and the liability of insurance company.

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