Who Are Those Who Can Sue Under An Insurance Policy

To answer the question above, let’s first look at third parties.  In the 1994, Texas Supreme Court opinion styled, Allstate Insurance Company v. Watson, the Court declined to let a third party tort claimant sue the tortfeasor’s liability insurer.  The Court held that the third party could not sue as a “person” under the statute.  This conclusion was in part based on the court’s construction of the statute, and in part based on the Court’s concern that creating a duty owed by the insurer to the injured third party would conflict with the duties owed by the insurer to the insured.

In 1995, the Texas Legislature codified the holding in Watson.  The unfair settlement practices prohibition, in Texas Insurance Code, Section 541.060(b),  now specifically states that it “does not provide a cause of action to a third party asserting one or more claims against an insured covered under a liability insurance policy.”

What about persons who rely on representations made by the insurance company?

Normally, a third party cannot use this statute to sue another party’s insurer for failing to pay a claim.  Nevertheless, a number of cases allow the third party claimant to sue when the insurer makes a misrepresentation that results in damages to the claimant.

As an example in the 1989, 1st Court of Appeals  in a case styled, Hermann Hospital v. National Standard Insurance Co., a hospital had standing to sue an insurer that falsely represented that a patient had coverage, thereby inducing the hospital to render services.  The Court emphasized that the hospital was  not suing on the insurance policy but instead was suing for damages it suffered by relying on the representations of coverage made by the insurer.  The Court also found it significant that as a practical matter the relationship between insurance companies and health care providers is a direct one, with the health care provider acting i reliance on the representations of coverage made by the insurers.  In other cases, health care providers have not fared as well.  In two cases, doctors were not allowed to recover for the insurers’ unfair insurance practices.  Both of these cases are from the 5th Circuit.

In the 1995, San Antonio Court of Appeals opinion styled, Webb v. International Trucking Co., a third party driver could recover property damages under the statute from the other driver’s insurer when the insurer misrepresented to the injured party that it would pay for repairs.

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