Insurance Law And Deceptive Trade Practices Act

Insured people in places like Grand Prairie, Arlington, Fort Worth, Dallas, Mansfield, Burleson, Crowley, Joshua, Keene, Alvarado, and other places in Texas would know very little about Texas Insurance Law or the Texas Deceptive Trade Practices Act. The two are connected and maybe this article will help to make that clear.
A large part of this information is taken from a lawyer resource called, Texas Practice Guide – Insurance Litigation.
The Texas Insurance Code, Section 541.151(2) cross-references and prohibits conduct defined in the Texas Business & Commerce Code, Section 17.46(b). This 17.46 is part of what is commonly called the Deceptive Trade Practices Act (DTPA). the DTPA applies to all types of consumer transactions, not just insurance, so many of the provisions are not directly relevant. The most relevant provisions prohibit:
1) causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services. This DTPA language is similar to that found in the Texas Insurance Code, Section 541.051.
2) representing that services have … benefits, … which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which it does not. This is similar to Section 541.052.
3) representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law. This is similar to Section 541.051.
4) the failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed. This is similar to Section 541.051.
Lawyers will tell you that Section 17.46(b) is referred to as the “laundry list” of things companies cannot legally do to consumers. Insurance transactions fit within these prohibitions because courts have held that insurance is a “service.”
Insurance Code, Section 541.151(2) tells us that a consumer can sue for violations of the acts prohibited by the insurance code as long as the person can show they relied on the illegal act or practice to their detriment.
The Texas Supreme Court, in 1987, in the case styled, “Aetna Cas. & Sur. Co. v. Marshall, ” ruled that the insurance company’s breach of its contractual promise to pay future medical benefits was precisely the sort of conduct forbidden, citing the DTPA, Section 17.46(b)(5), which prohibits misrepresenting “benefits.”
In 1979, the same court in, Royal Globe Ins. Co. v. Bar Consultants, Inc., ruled that by misrepresenting that the policy affords coverage it does not have violates, Section 17.46(b)(12) of the “laundry list” items.
It is important to keep in mind that an experienced Insurance Law Attorney should be consulted in cases where there seems to be improper conduct. Strategy becomes important in deciding what is the best way to pursue a remedy when a wrong is committed. By looking at a 2000, case, decided by the Corpus Christi Court of Appeals, it is important to realize that although the Insurance Code and DTPA provisions both prohibit misrepresentations and nondisclosures, it can be important for an insured to carefully choose the prohibition that best fits the evidence or that has an easier burden of proof. For example, in this case, the insured was able to prove the insurance company violated the Insurance Code, Section 541.061 by failing to disclose information, but could not prove a violation of DTPA, Section 17.46(b)(24), because there was no evidence that the insurance company withheld the information with the intent to induce the insured to buy the coverage.

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