Articles Posted in Life Insurance

Court’s have described actual authority this way:
“Actual” authority, which includes both express and implied authority, usually denotes that authority a principal:  (1) intentionally confers upon an agent; (2) intentionally allows the agent to believe that he possesses; or (3) allows the agent to believe that he possesses by want of due care … “Implied” actual authority exists only as an adjunct to express actual authority … because implied authority is that which is proper, usual, and necessary to the exercise of the authority that the principal expressly delegates …

It may be obvious that a person was the insurer’s agent and was acting as agent — e.g., a person licensed to sell the company’s policy was engaged in selling the policy.  In addition, the statutes make clear that anyone engaging in the listed activities on behalf of an insurer will be treated as agent for that insurer.
As the Texas Supreme Court stated in the 1994, opinion styled, Celtic Life Insurance Company v. Coats. the court explained under the predecessor statute, agents are defined generally, and the statute lists various acts performed in the ordinary course of providing insurance — such as soliciting insurance; transmitting an application; receiving, collecting, or transmitting a premium; and adjusting a loss.  Anyone who performs these acts “shall be held to be the agent of the company for which the act is done, or the risk is taken, as far as relates to all liabilities, duties, requirements and penalties set form in the statute.
Another example is found in the 1979, Texas Supreme Court opinion styled, Royal Globe Insurance Company v. Bar Consultants, Inc.  There, an agent who issued a policy and signed it on behalf of the insurer was the insurer’s agent.  The insurer was vicariously liable for the agent’s misrepresentation that the policy covered property damage caused by vandalism.

Being able to hold the agent liable for any wrongs committed is important from a strategic standpoint in a lawsuit.
The first step to determine whether an insurer is vicariously liable is to determine whether the person who engaged in the conduct was acting as the insurer’s agent.
The question — “Who are agents?” was answered, until recently by one statute.  Formerly, article 21.02 broadly defined “agents” to include any person who performed certain actions on behalf of an insurance company.  As part of the ongoing codification of Texas statutes, the old article 21.02 is now found in Texas Insurance Code sections 4001.003 and 4001.051.

Life Insurance claims have periods the same as other forms of insurance.
Here is a 2023 opinion dealing with limitation issues and examines how courts look at these cases.  The opinion is from the First Court of Appeals and is styled, J.R. Argo v. USAA Casualty Insurance Company.
This claim arises out of a home owners claim but the limitations issue would be the same with a life insurance case.

Insurance companies, like other entities, can only act through it’s agents.  Insurance companies rely on agents to sell their policies, to under write potential insureds, and to investigate and adjust claims.  Insurance companies may be vicariously liable for another’s misconduct if that other person is the insurer’s agent and if that agent acted within the scope of his or her authority.  This is discussed in several cases starting with the 1994 Texas Supreme Court opinion styled, Celtic Life Ins. Co. v. Coats, then the 1979 opinion styled, Royal Globe Ins. Co. v. Bar Consultants, Inc.  This is also discussed in the 1989 Houston 14th Court of Appeals opinion styled, Paramount Nat. Life Ins. Co. v. Williams.
The Texas Supreme Court explained in the Celtic case as follows:  An insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent’s authority.  This rule is based on notions of fairness: “since the principal has selected the agent to act in a venture in which the principal is interested, it is fair, as between him and a third person, to impose upon him the risk that the agent may exceed his instructions.”
The analysis for deciding if an agent is vicariously liable for the conduct of another has two steps:

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).

A question for lawyers who handle life insurance claim denials has to do with whether or not mental anguish is recoverable against the life insurance company who denied the claim.  This is addressed in a 1995, Texas Supreme Court opinion styled, State Farm Life Ins. Co. v. Beaston.
In 1982, Terri and David Beaston bought life insurance policies from Ted Heaton, a State Farm Life Insurance Company agent.  The Beastons failed to pay the premium on David’s policy due on December 28, 1983.  His policy lapsed as of December 28, 1983, and the thirty-one day grace period expired on January 28, 1984.  Three days after the expiration of the grace period, David died in an automobile accident.  State Farm refused to pay the benefits under his life insurance policy, claiming that coverage had expired before his death.
Terri brought suit asserting that the Texas Insurance Code had been violated.  She also contended that the terms of the policy guaranteed payment of a dividend at death which should have been used to pay a part of the premium that was in arrears and thereby “cure” the policy’s lapse.

Life insurance attorneys often have to make a decision on whether or not to file suit against the agent who sold a policy.  In that regard, what are the time limits for doing so.
This case involves claims for life insurance benefits and disability benefits.  The policies at issue were purchased in 2005.  A lawsuit was filed in 2018.
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