Insurance Companies – Who Can Sue Them?

Who can sue insurance companies is sometimes obvious to much people but just in case it is not obvious, here is what the laws tell us.

Texas Insurance Code, Section 541.151 grants a cause of action to a person who sustains actual damages caused by another person engaging in any unfair insurance practice or deceptive trade practices.

To assert a cause of action the plaintiff must be: (1) a “person” as defined by the statute; and (2) injured by another’s unfair or deceptive acts.  This is shown in the 2000, Texas Supreme Court opinion styled, Crown Life Insurance Company v. Casteel.

The statute defines “person” to mean “an individual, corporation, association, partnership, reciprocal or interinsurance exchange, Lloyd’s plan, fraternal benefit society, or any other legal entity engaged in the business of insurance, including an agent, broker, adjuster or life insurance counselor.”  This is found in Section 541.002(2).  In the 1978, opinion styled, Ceshker v. Bankers Life Insurance Co., the court held that the language requiring that the person be “engaged in the business of insurance” does not apply to plaintiff’.

Categories of plaintiffs who have standing to sue under the statute include: (a) insured, (b) named beneficiaries, (c) intended third party beneficiaries, (d) agents, (e) claimants who relied on representations by the insurer.

Third party claimants may not sue the negligent party’s insurer, when recognizing a duty to the claimant would conflict with the duties the insurer owes to the insured.  Also, even those who have standing to sue as “persons” are not able to rely on the prohibitions that limit recovery to “consumers,” unless they fit within that classification.  These issues are discussed in the following sections.

Pursuant to the 1987, 14th District Court of Appeals, the statute protects insureds and named beneficiaries.  This is the case styled, Chaffin v. Transamerica Insurance Co.  Disagreements arise as Courts decide who else might be able to sue.

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