What If You Did Not Purchase The Insurance Policy – Can You Still Sue?

Being the person or entity that purchased the insurance policy does not mean that you cannot still make a claim under the policy and thus, sue if necessary.

The Texas Insurance Code grants standing to “persons”, the Texas Deceptive Trade Practices Act (DTPA) gives standing to “consumers.”  A consumer is one who seeks or acquires goods or services according to the DTPA, Section 17.45(a).

Pursuant to the 1987, Texas Supreme Court opinion styled, Aetna Casualty & Surity Company v. Marshall, a person suing under the Insurance Code does not have to prove he is a consumer.

Other plaintiffs may be “persons” but not “consumers.”  As an example, the insurance agent in the 2000, Texas Supreme Court opinion styled, Crown Life Insurance Company v. Casteel, could sue under the Insurance Code as a person harmed by the insured’s conduct, but not as a consumer, because he did not seek or acquire the insurance coverage.  Thus, he also could not sue under the incorporated provisions of the DTPA that apply only to consumers.

Similarly, in the 1995, Texas Supreme Court opinion styled, Transport Insurance Company v. Faircloth, the court held that third parties negotiating a settlement with an insurer do not seek to purchase or lease any of the services of the insurer; they only seek the proceeds of the policy.  The court concluded, “A party whose only relation to an insurance policy is to seek policy proceeds is not a “consumer.”

This restriction applies to DTPA sections that expressly include the word “consumer,” and those that refer to “goods and services.”  This is supported by the DTPA, Section 17.46(b)(5), (7), (9), and (23) and by the 2000, Texas Supreme Court opinion in Crown Life.

For each of the DTPA sections that apply only to “consumers” there is a prohibition in the Insurance Code that can apply equally to the same conduct.  For example, DTPA, Section 17.46(b)(24) prohibits nondisclosures to consumers.  Insurance Code, Sections 541.061(2) and (3) also prohibits failing to state information, and stating information in a misleading manner, both of which may address nondisclosures.  Likewise, in place of the DTPA misrepresentation provisions that apply only to consumers, a person may rely on Insurance Code, Sections 541.060(a)(1) and 541.061(1).

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