Who Can Sue An Insurance Company?

Benbrook insurance lawyers need to know who can properly be a plaintiff in a lawsuit against an insurance company. In order to sue an insurance company, the plaintiff must have “standing.”
A 1996, 5th Circuit Court of Appeals opinion states that an intended beneficiary under a policy of insurance has standing to sue under the Texas Insurance Code statutes. After reviewing Texas cases and other 5th Circuit cases, the court concluded that “if the Texas Supreme Court were presented with the question before us it would hold that standing under (Section 541) 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:
(a) the claimant was not privy to the written agreement between the insured and insurer;
(b) the contract was made at least in part for the claimant’s benefit; and (c) the contracting parties intended for the claimant to benefit by the 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 stated in 1993, San Antonio Court of Appeals case.
To contrast the above ruling, a 1994, Texas Supreme Court case styled, Allstate Insurance Company v. Casteel, needs to be read. There the 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.
An insurance agent has standing to sue when the insurance company’s conduct causes the agent harm.
The courts do not allow a third party tort claimant to sue the tortfeasor’s liability insurance company. The courts have 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 insurance company to the injured third party would conflict with the duties owed by the insurance company to the insured.
The Texas Insurance Code, Section 541.060(b) now specifically states that the statute “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.” Thus, the third party in that situation does not have standing.

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