Parker County insurance lawyers need to understand the responsibility that insurance agents have regarding getting coverage for one of their customers. A 1992, Texas Supreme Court case is good reading for understanding their responsibility. The style of the case is, May v. United Services Association of America. Here is some of the relevant information.
This case involves the scope of an insurance agent’s common-law duty to a customer in rendering advice about and procuring a policy for health insurance. May asserted only common-law causes of action, making no claim under the Texas Deceptive Trade Practices-Consumer Protection Act, or any other statute. While the jury found favorably for the Mays on a claim of the agent’s negligence, it failed to find for the Mays as to misrepresentation. On this verdict, the trial court rendered judgment for the Mays, but the court of appeals reversed. This court affirmed the judgment of the court of appeals because there was no evidence in the record before them that the agent breached the duty to use reasonable care, skill and diligence in procuring insurance in any way that proximately caused harm to the Mays.
On March 16, 1983, Faith May visited with insurance agent Wiley about the policy at issue. Wiley explained the basic provisions of the policy to her.
In a prior marriage, Faith May had lost an infant child. Because the Mays were planning to have children of their own, they were interested in maternity and dependent health coverage. They told Wiley that they were concerned about covering medical expenses associated with pregnancy and childbirth. Wiley added a handwritten maternity rider to the policy.
In mid-1984, the Mays received notice that the policy had cancelled, and that another underwriter, Hermitage Insurance Company (“Hermitage”), had agreed to underwrite a plan with identical benefits for all previously insured customers. Faith May was pregnant at the time. Upon learning of the change in underwriters, she telephoned Wiley to determine what effect the change would have on the Mays’ coverage. Wiley told her that Hermitage would continue to cover them on the same terms the previous policy. Jared May was born on August 1, 1984, with congenital heart and lung disorders that required immediate medical attention. Hermitage covered his medical expenses under the policy.
In July 1985, however, Hermitage also terminated the policy. Keystone Life Insurance Company (“Keystone”) then voluntarily assumed the group. Keystone, however, classified Jared May as a totally disabled dependent and, asserting the deferral provision of the policy, refused to cover any of his medical expenses. Pursuant to the terms of the policy, Hermitage covered Jared May for ninety days after termination, until September 30, 1985. Thereafter, however, Jared May was without insurance coverage until he died in November of 1987.
At trial the jury awarded May $140,000 for unpaid medical expenses.
This court said the following as justification for sustaining the appeals court reversal of the jury award for damages.
It is established in Texas that an insurance agent who undertakes to procure insurance for another owes a duty to a client to use reasonable diligence in attempting to place the requested insurance and to inform the client promptly if unable to do so.
In this case, Faith May testified that in seeking health insurance from Preston, she told Wiley that she had previously lost a child and wanted to make sure that any policy she purchased for herself and her husband “would cover my pregnancy and any testing that I may need to have, and then any child and any problems that he may have or any testing that a child would have at birth.” She also told Wiley that she and her husband “would like to have an insurance policy that we could afford, but we wanted to be guaranteed that it was a good policy.” In response to this request, Wiley procured for them the Double Eagle policy with the maternity rider. This policy, according to his testimony, achieved lower rates and lower deductibles by its group structure and by excluding persons who could not answer the health questions affirmatively.
The shortcoming of the policy, as events developed for the Mays, was the interaction of the termination and the deferral provisions. The deferral provision became applicable anew for all insured individuals when there was a change of underwriters. Thus, hospitalized or disabled individuals whose medical care was covered because they became disabled at a time when they were already covered under the policy, or because they were born to individuals who were covered under the policy, faced the risk that they would lose coverage if the current underwriter dropped the entire group and a new underwriter took over.
Thus, under the facts and pleading of this case, the agent escaped liability. It is likely that different pleadings by an experienced Insurance Law Attorney could have resulted in a more favorable result.
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