Who Can Sue? … A “Person” Or A “Consumer”

Is a Grand Prairie resident who purchases an auto policy a person or a consumer for purposes of Texas law? What about residents of Arlington, Fort Worth, Weatherford, or Dallas? Why does it matter?
The Texas Insurance Code allows “persons” to bring claims against insurance companies and their agents. The Deceptive Trade Practices Act (DTPA) gives this power to “consumers”. The DTPA, Section 17.45(4) defines consumer as one who seeks or acquires goods or services.
Someone suing under the Insurance Code does not have to prove he is a consumer. This is told to us in the 1987, Texas Supreme Court case, Aetna Casualty & Sur. Co. v. Marshall.
Insureds and beneficiaries of insurance policies meet both definitions. This is because of the direct relationship with the insurance company, and any misconduct by the insurance company affects them directly, plus they are the ones who sought or acquired the insurance services.
Other potential plaintiffs may be “persons” but not “consumers”. An example of this is the insurance agent in Crown Life Ins. Co. v. Casteel, decided in 2000. The agent could sue under the Insurance Code as a person harmed by the insurance company conduct, but not as a consumer, because he did not seek or acquire the insurance coverage. He could not sue under the DTPA since it only applies to consumers.
In the 1995 case, Transport Insurance Company v. Faircloth, another Texas Supreme Court case, the court held that third parties negotiating a settlement with an insurance company do not seek to purchase or lease any of the services of the insurance company; they only seek proceeds of the policy. Thus, they are not consumers.
This restriction applies to the following DTPA sections that expressly include the word “consumer”, and those that refer to “goods and services.” Texas Business & Commerce Code, Section 17.46(b)(5), (7), (9), and (23).
It should be noted that for each of the DTPA sections that apply only to “consumers” there is a prohibition in the Insurance Code that can apply to the same conduct. As an example, DTPA Section 17.46(b)(24) prohibits nondisclosures to consumers. Looking at Insurance Code Sections 541.061(2) and (3), they prohibit failing to state information, and stating information in a misleading manner, both of which may address nondisclosures. Likewise, in place of the DTPA misrepresentation sections that apply only to consumers, a person may rely on Insurance Code Sections 541.060(a)(1) and 541.061(1).
An experienced Insurance Law Attorney will be able to know which sections of the DTPA and the Texas Insurance Code apply to any given situation.
The importance here is that suing under the wrong section will end up in getting a case thrown out of court. Also, the goal would be to maximize the recovery to be allowed and by filing a lawsuit under all applicable theories under the law helps achieve that result and discourages wrong conduct on the part of the insurance companies.

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