Recourse For Insurance Companies Cheating

The Insurance Code sections and the Deceptive Trade Practices Act were adopted together in 1973, as part of a package to reform legislation, are interrelated, and incorporate each other.

Texas Insurance Code, Section 541.008 says the Insurance Code provisions are to be liberally construed and applied to promote its underlying purposes to define and prohibit unfair and deceptive insurance practices.  This is affirmed in the 1988, Texas Supreme Court opinion, Vail v. Texas Farm Bur. Mut. Ins. Co.

The same court in the 1981 case, Cameron v. Terrell & Garrett, Inc., stated that the similar construction mandate in the DTPA requires that the statute be given “its most comprehensive application possible without doing any violence to its terms.”  In the 1985, the Texas Supreme Court in Kennedy v. Sale, applied the same reasoning in insurance cases.

Both the Insurance Code and section 17.43 of the DTPA provide that the statutory remedies are cumulative of other remedies.  According to the Insurance Code, Section 541.453, a person may not recover damages and penalties for the same act or practice under both statutes.

The Insurance Code statute, 541.001, regulates unfair practices “in the business of insurance.”  That phrase is not defined.  Further, the Supreme Court in the 1995, opinion, Great Am. Ins. Co. v. North Austin Mun. Utility Dist. No. 1, has rejected the definition of “business of insurance” that appears elsewhere in the Insurance Code.

Although the statute does  not define the phrase, some cases have addressed its scope.  The “business of insurance” includes the investigation and adjustment of claims and losses, including soliciting and detaining insurance policy sales, explaining policy terms to prospective buyers, and explaining premium calculations.

It is noteworthy that the “business of insurance” does not include surety contracts.

Also noteworthy, the Texas Supreme Court in the 1987, opinion, Aetna Cas. & Sur. Co. v. Marshall, has held that the provisions of Section 541.061 prohibiting misrepresentations of insurance policies do apply to workers’ compensation insurers