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 sub–limit of liability for business personal property held off–premises, 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.
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.
Insurance lawyers often see situations where the agent selling the insurance policy made false representations regarding the policy at issue. Here is how the Courts look at these situations.
According to the 1990, Texas Supreme Court opinion styled, DeSantis v. Wackenhut Corp., a false representation must involve an existing or past material fact, rather than a statement of opinion, judgment, probability, or expectation in order to constitute actionable fraud. Statements concerning future contingent events, sales talk, “puffing,” and other similar statements are not considered actionable misrepresentations. This was stated in a 1978, Tyler Court of Appeals opinion styled, Hicks v. Wright and other cases. And according to a 1976, Dallas Court of Appeals opinion styled, Stone v. Enstam, representations concerning future events are not actionable unless at the time the statement or promise was made, the person making it did not intend to perform.
As to suing the insurance agent, a 1960, Fort Worth Court of Appeals stated in a case styled R. O. McDonnell Dev. Co. v. Schlueter, that all persons who commit fraud are liable for the consequences of such fraud. All parties to a fraudulent transaction are responsible for the acts or representations of the other participants undertaken based upon a mutual understanding or in furtherance of common plan, design or scheme.
Claims denial attorneys know that many claims arise because an insurance agent committed a fraud when selling the policy. A fraud cause of action requires proof of the following elements:
1. a material representation was made;
2. the representation was false;