An intended beneficiary of an insurance policy may sue under the Texas Insurance Code for any resulting harm. This is made clear in the 1996, 5th Circuit Court of Appeals opinion styled, Palma v. Verex Assurance , Inc. After reviewing Texas cases and other Fifth Circuit cases, the court concluded that “if the Texas Supreme Court were presented with the question before us it would hold that standing under Article 21.21 is satisfied by not only those who can establish privity of contract or reliance on a representation of the insurer, but also by those who can establish that they were an intended third party beneficiary of the insurance contract.” The court set out the standards under Texas law for third-party beneficiary status this way:
1) the claimant was not privy to the written agreement between the insured and insurer;
2) the contract was made at least in part for the claimant’s benefit; and
3) the contracting parties intended for the claimant to benefit by written agreement.
Under these standards, the court held that a mortgagor- borrower was entitled to sue under the statute as a third-party beneficiary of a private mortgage insurance contract. This is also discussed in the 1993, San Antonio Court of Appeals opinion styled, Benefit Trust Life Insurance Co. v. Littles.
In contrast, in the 1994, Texas Supreme Court opinion styled, Allstate Insurance Co. v. Watson, the Texas Supreme Court held that an injured driver was not an intended beneficiary of the other driver’s liability policy, even though liability insurance is statutorily required for the benefit of non-negligent, injured drivers.
As should be obvious, most of the time beneficiaries of are listed on the policy and they can sue for wrongs committed by the insurance company. But, there are times when it is not so obvious.