Let’s say your insurance agent is in Aledo, Arlington, Azle, Grand Prairie, Fort Worth, Mansfield, Weatherford, or anywhere else in Texas. Now, let’s say he does something wrong in the way he handles your insurance needs. Can he be held liable for what he does or fails to do for you?
The answer is yes. An agent can be held accountable on a number of different theories of law related to insurance. He can also be held accountable under the most fundamental of legal theorys, that being “negligence.”
The Lectric Law Library defines negligence as, “The failure to use reasonable care. The doing of something which a reasonably prudent person would not do, or the failure to do something which a reasonably prudent person would do under like circumstances. A departure from what an ordinary reasonable person would do in the same community.”
In Texas case law, negligence, in the insurance context as in others, consists of three elements:
1) a legal duty owed by one person to another;
2) a breach of that duty; and 3) damages proximately resulting from the breach.
These three elements are cited often in Texas case law. One of these cases is a 1990, Texas Supreme Court case, Greater Texas Transportation Company v. Phillips.
In the context of insurance agents, one of the more major problems that arise is an agent misrepresenting what an insurance policy covers. In this context, courts have adopted the tort of “negligent misrepresentation” as described by the Restatement of Torts, Section 552. This is approved by the courts in the Texas Supreme Court case, Chicago Title Insurance Company v. McDaniel, decided in 1994.
Section 552(1) provides:
One who, in the course of his business, profession or employment, or in any transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
One example of the above is found in the 2002 case, Nast v. State Farm Fire & Casualty Company. In this case, Nast stated a negligence claim against their State Farm Fire & Casualty Company agent for affirmative misrepresentations about coverage, saying they were not eligible for flood insurance and that neighbors who had flood insurance had purchase “fake” insurance from a “shyster.”
An experienced Insurance Law Attorney can be very helpful in discussing potential claims against insurance agents. Usually, the biggest problem with these claims against agents for their misrepresentations, is proving the misrepresentation. These matters are usually swearing matches between the agent and the insured. This is where an attorney can use his experience to find ways to prove it is the agent who is on the wrong end of the swearing match.
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