The liability of an insurance agent for his actions in selling an insurance policy to someone in Grand Prairie, Arlington, Mansfield, Fort Worth, Hurst, Euless, Bedford, or anywhere else in Texas should be of interest to the person buying the insurance. Especially so if the agent does something wrong and as a result the insurance company denies a claim made by the customer.
That is what happened in the 1989, case, “Paramount National Life Insurance Company v. Frankie Williams.” This opinion was issued by the Houston, 14th District, Court of Appeals. Here are some of the facts.
Frankie Williams sued Paramount after the denial of two claims and the cancellation of her medical insurance policy. The jury found in her favor and Paramount appealed the decision.
On March 5, 1981, insurance agent, Cliff Cox, met with Frankie Williams and her husband Willie and took an application for a hospital insurance policy to be issued by Paramount. She was 64 years old and had a long history of medical problems which were described to Cox. Cox told the Williames he needed to know only about the preceding five years. He filled out the application and had them read and sign it. Paramount approved the application and issued the policy on March 20, 1981. She was hospitalized twice and filed claims totaling over $40,000 in connection with the hospitalizations. Paramount denied the claims and cancelled the policy on the grounds that Mrs. Williams had failed to disclose her full medical history on the insurance application and that the conditions for which she was treated were preexisting conditions.
The primary issue here was what occurred when agent Cox took the application for the policy. Williams did not contest Paramount’s description of her medical history. She contended she disclosed it all to Cox but he told her he needed to know only about the preceding five years. He then filled out the application and had Williams initial the answers and sign the application.
Mrs. Williams did sign a document, the Confirmation of Presentation, which was a representation by her to Paramount acknowledging the terms of the contract and limitations on Cox’s authority. Paramount maintained that Cox acted for Paramount in delivering the policy and collecting the premium but that he acted for Mrs. Williams and on her behalf when making the application for the insurance and in processing the policy and thus they are not liable for Cox.
As this court pointed out, and is now codified in the Texas Insurance Code, Section 4001.051, an agent binds an insurance company in any number of ways, several of which were present here.
Absent actual authority, liability may still arise if the agent had apparent authority to act for the carrier. Cox used Paramount forms when he took the application from Mrs. Williams. He signed the Confirmation of Presentation document as “Agent.” The document itself, which purported to ensure that there is a “complete and clear understanding between the parties,” was signed following the application visit, and refers to Cox’s relationship to Paramount as “your agent.” For example, one paragraph read, “Upon my request, your agent, whose signature appears below, visited with me to determine my interest in applying for insurance with your company.” the receipt for the initial premium was signed for Paramount by Cox as “Duly Licensed Representative.”
A statement in the Confirmation of Presentation that the company “is not bound by any knowledge of or statements made by or to the agent” does little to negate the apparent authority with which the company had clothed the agent.
The jury found that Paramount had breached its contract with Mrs. Williams by not paying her claim. Had the Williames not believed she was insured, they could have made different arrangements for her treatment.
This court upheld the ruling in favor of Frankie Williams.
The normal practice for an insurance company when denying a claim is to send a letter to their customer stating the reason for the denial. They normally will point to specific policy language or facts for the basis of their denial. Whenever this happens an experienced Insurance Law Attorney should be shown the letter. Often times the insurance company is wrong in their denial of the claim and you can get advice on the best next steps to take in favorably resolving the issue.
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