Texas Insurance Code And The Texas Deceptive Trade Practices Act

Here is some information that all Dallas and Fort Worth insurance lawyers should know.
The Texas Insurance Code sections and Deceptive Trade Practices Act(DTPA) were adopted together by the Texas Legislature in the 1970’s as part of a reform legislation package. They are interrelated and incorporate each other.
Texas Insurance Code, Section 541.008 tells us the provisions of the Code are to be liberally construed and applied to promote its underlying purposes to define and prohibit unfair and deceptive practices in the business of insurance.
In 1981, the Texas Supreme Court stated that the similar liberal construction mandate in the DTPA requires that the statute be given “its most comprehensive application possible without doing any violence to its terms.” The Texas Supreme Court has continued to apply the same reasoning in insurance cases.
Both the Insurance Code and the DTPA provide that the statutory remedies are cumulative of other remedies. This was stated by the Texas Supreme Court in 1988, in the case, Vail v. Texas Farm Bureau Mutual Insurance Company. Texas Insurance Code, Section 541.453 says a person may not recover damages and penalties for the same act or practice under both this statute and another law.
Pursuant to Texas Insurance Code, Section 541.001, the statute regulates unfair practices “in the business of insurance.”
Although the statute does not define the phrase, some cases have addressed its scope. Under Vail and Liberty Mutual Insurance Co. v. Garrison Contractors, Inc., the business of insurance includes the investigation and adjustment of claims and losses. It also includes soliciting and obtaining insurance policy sales, explaining policy terms to prospective buyers, and explaining premium calculations.
The Texas Supreme Court in one case, determined that surety contracts are not included in the meaning of “business of insurance.”
Section 541.151 allows a claim for a person who sustains actual damages caused by another person engaging in any unfair insurance practices or deceptive trade practices. To qualify under the statute, a claimant must be: (1) a “person” as defined by the statute; and (2) injured by another’s unfair or deceptive acts.
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.”
Categories of persons who have standing to sure 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 insurance company, when recognizing a duty to the claimant would conflict with the duties the insurance company 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. This can be confusing – and why an experienced Insurance Law Attorney should be consulted.

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