Dallas insurance lawyers will find that misrepresentations by insurance agents and companies are a big area of litigation in insurance cases.
One of the most common reasons for an insurance dispute is the complaint that someone misrepresented something. Sometimes it is the company saying the insured made misrepresentations in the insurance application and other times it the insured saying the insurance agent or the company made a misrepresentation. After a claim is made, the insured may feel that the coverage accepted by the insurance company is less that the coverage promised at the time of the sale. Depending on the facts of the case, a representation by the insurance company or its agent may lead to liability for breach of contract, unfair insurance practices, deceptive trade practices, negligence or fraud.
There is a Houston [14th] Court of Appeals case decided in 2003, which says an insurance company can sue one of its own agents for misrepresentation, if the agents conduct results in liability for the insurance company. This happens quite frequently.
When discussing liability by insurance companies or agents for misrepresentations in insurance sales or in the claims handling process, it is important to point out that when the policy is an ERISA policy, that claims for misrepresentation do not apply. ERISA is a federal statute regarding insurance that is drastically different from insurance that is not regulated by ERISA.
Remedies under ERISA are limited to recovery of benefits, clarification of future rights to benefits as well as attorney fees, costs, and on rare occasion, equitable relief. This can be found at 29 U.S.C.A., Section 1132(a). Additional common law remedies such as punitive damages or statutory relief such as the provision for treble damages for certain types of violations found in the Texas DTPA are not available under ERISA.
Closely related to misrepresentation is the theory that the insurance company, insurance agent, or the insured failed to disclose information. For example, if an exclusion is not adequately disclosed, the insurance company may be liable for breach of contract by relying on the exclusion to deny a claim. Failing to disclose limitations or exceptions to coverage may also make the insurance company or the insurance agent liable for unfair insurance practices or deceptive trade practices.
The Texas Insurance Code contains several statutes that are specifically aimed at settlement practices of insurance companies. Liability may arise from failing to pay benefits that are owed under the policy, for failing to pay benefits that were promised by the agent, for failing to act promptly to settle once liability is reasonably clear, for paying too little, or for paying slowly, which may be a violation of the Prompt Payment of Claims Act. Liability may also arise from the insurance company’s failure to adequately investigate a claim that has been made.
It is suffice to say that there are many rules and regulations governing insurance companies. The purpose of these rules is to make sure that insurance companies treat their insured’s properly. The insurance company has armies of lawyers behind them and they are holding the money. It is their contract, that they drafted for their protection. They are in a far superior bargaining position to the insured. So, these laws are designed to protect the insured consumer and to try and level the playing field.
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