Dallas Fort Worth Insurance Lawyer Blog

Mason County insurance lawyers learn pretty quick that an insurance agent does not have to tell a customer everything about the insurance policy they purchase.  This is illustrated in a 2000 San Antonio Court of Appeals opinion styled, Nwaigwe v. Prudential Property & Casualty Insurance Company.

Moses Nwaigwe sued Prudential and its agent, William Eckert (collectively “Prudential”), for failing to disclose a policy exclusion that the company used to deny a claim.  In response, Prudential moved for summary judgment on the grounds that it did not misrepresent the terms of the policy and that it had no duty to tell Nwaigwe about the vacancy clause.  The trial court granted the motion.  On appeal, Nwaigwe argues the summary judgment was improper because the motion failed to address his failure to disclose allegation.

In 1993, Nwaigwe purchased a fire insurance policy from Prudential to insure an occupied rental property.  The policy was issued and renewed twice, but Nwaigwe says he never received a copy of the policy.

Many people get their insurance through a broker.  Can a broker be liable the same as an agent.  The short answer is “yes.”  A 1995, Houston Court of Appeals [1st Dist.] discusses an issue with a broker.  The opinion is styled, Seneca Resources Corp. v. Marsh & McLennan, Inc.

Marsh & McLennan (M&M) brokered insurance for Seneca, an oil and gas company.  As part of its services, M&M provided summaries of insurance policies.  Seneca suffered a loss when a hurricane toppled a submersible drilling rig in the Gulf of Mexico.

The insurance summaries provided by M&M to Seneca indicated that Seneca had purchased “operator’s extra expense” named peril coverage which would have covered the cost of re-drilling the well.  However, the applicable policy did not, in fact, include named peril re-drill coverage as indicated by the summaries.

For most lawyers practicing insurance law, the above question may be obvious.  But there are situations where it is not so obvious and even though one may assert the act of agency, it is not.  A Houston Court of Appeals [14th Dist.] opinion illustrates a situation where the alleged agent was held by the court, to not be an agent.  The case is styled, Harrison V. Wells Fargo Bank Texas, N.A.

Harrison was the beneficiary of a Section 142 trust established after she sustained a brain injury in a car accident.  Later, Harrison was the driver of the car in another accident in which her passenger was severely injured.  The passenger settled his claims against Harrison for her $100,000 auto liability policy, which had been obtained by the bank, plus $300,000 from Harrison’s trust.  Harrison sued the bank for Insurance Code violations, breach of fiduciary duty, negligence, and DTPA violations for alleged failure to obtain adequate limits of liability insurance for her.  The bank was granted a summary judgment on the Insurance Code violations.  The remaining claims were tried and the bank was found not liable.  Harrison appealed the findings.

This Houston Court of Appeals affirmed the findings of the trial court.  The evidence showed that after Harrison acquired automobile insurance, her mother sent the bill for the premium to the bank and the bank then forwarded the payment to the insurance company.  Insurance Code Section 4001.051 lists various acts performed in the ordinary course of providing insurance and states that any person who performs these acts shall be the agent of the company for which the act is done.  “Performing an act described in Section 4001.051, such as transmitting an insurance premium, subjects a party to liability as an agent there under only if the act is performed (a) in the course of providing insurance and (b) on an insurance company’s behalf.”  The evidence established that the bank was not engaged in the business of providing insurance and that its payment of premium was made solely pursuant to its role as a Trustee of the Section 142 trust.  The payment was not transmitted in the course of providing insurance or on any insurance company’s behalf.  Therefore, the payment did not render the bank an agent of the insurance company under Section 4001.051.

An insurance lawyer wants to be able to know when an agent can be held liable for his actions in selling an insurance policy.  A Houston Court of Appeals [1st Dist.] looked at this issue in 2003.  The style of the case is, Vecellio Insurance Agency v. Underwriters Insurance Company.

A man and woman were kidnapped, taken to a vacant house where the woman was raped and the man was murdered.  The property owner was sued and the insurer initially denied coverage because the agent failed to add the property to the homeowner’s policy as purportedly requested by the insured.  The insurer subsequently provided a defense under a reservation of rights and ultimately settled the lawsuit.  The insurer then brought a common law indemnification claim against the agent for the money spent defending and settling the underlying lawsuit.  The jury found in favor of the insurer, awarding almost $560,000.  The agent appealed asserting that the trial court erred by failing to require the jury to first find that the agent committed a tort for which the insurer could be liable for addressing the indemnification issue.

In a case of first impression for Texas jurisprudence, the Houston First Court of Appeals reversed the trial court’s ruling and remanded, agreeing with the agent that the insurer must first have the jury establish that the agent committed a tort for which the insurer could be held vicariously liable.  The court noted that the availability of causes of action based on common law indemnity were very limited in Texas and “there is no right of indemnity against a defendant who is not liable to the plaintiff.”  The jury charge submitted over the agent’s objection sought to have the jury determine whether the insurer had a duty to defend due to the “misconduct” of the agent, without defining what it meant by misconduct, or without first having the jury determine that the agent herself was liable to the insured, before addressing the insurer’s vicariously liability for the agent’s actions.