Insurance attorneys know that Section 541.051 broadly prohibits making any statement misrepresenting the terms of a policy, or the benefits, advantages, or dividends of a policy, making misrepresentations about the financial condition of an insurer, misrepresenting the true nature of any policy or class of policies, or making any misrepresentation to a policy holder for the purpose of inducing or intending to induce the policyholder to allow an existing policy holder to lapse, forfeit, or surrender his insurance. This provision is sometimes referred to as the “anti-twisting” provision, because the latter portion is aimed at preventing one insurer stealing away the insureds of another insurer by making misrepresentations.
Section 541.052 prohibits making any advertisement or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business that is untrue, deceptive, or misleading.
Section 541.061 prohibits misrepresenting an insurance policy by:
1) making an untrue statement of material fact;
2) failing to state a material fact necessary to make other statements made not misleading, considering the circumstances under which the statements were made;
3) making a statement in such a manner as to mislead a reasonably prudent person to a false conclusion of a material fact;
4) making a material misstatement of law; or
5) failing to disclose a matter required by law to be disclosed, including failing to make disclosure in accordance with another provision of the Insurance Code.
The statute thus forbids statements that are outright false, as well as those that are misleading.
According to the 1987, Texas Supreme Court opinion, Aetna Cas. & Sur. Co. v. Marshall, an insurer may be guilty of making a misrepresentation by contractually promising benefits and then refusing to pay them.
According to the 1994, Texas Supreme Court opinion, Celtic Life Ins. Co. v. Coats, an insurer also may be liable for misrepresenting that a policy offers benefits that it does not have.
The 2000, Austin Court of Appeals opinion, Stumph v. Dallas Fire Ins. Co., an insurer was liable for misrepresentations by its underwriter that the insured could continue to send premium payments to his agent, described by the underwriter as a “good man” but who had in fact been suspended.