Articles Posted in Insurance Agents

An insurance lawyer wants to be able to know when an agent can be held liable for his actions in selling an insurance policy.  A Houston Court of Appeals [1st Dist.] looked at this issue in 2003.  The style of the case is, Vecellio Insurance Agency v. Underwriters Insurance Company.

A man and woman were kidnapped, taken to a vacant house where the woman was raped and the man was murdered.  The property owner was sued and the insurer initially denied coverage because the agent failed to add the property to the homeowner’s policy as purportedly requested by the insured.  The insurer subsequently provided a defense under a reservation of rights and ultimately settled the lawsuit.  The insurer then brought a common law indemnification claim against the agent for the money spent defending and settling the underlying lawsuit.  The jury found in favor of the insurer, awarding almost $560,000.  The agent appealed asserting that the trial court erred by failing to require the jury to first find that the agent committed a tort for which the insurer could be liable for addressing the indemnification issue.

In a case of first impression for Texas jurisprudence, the Houston First Court of Appeals reversed the trial court’s ruling and remanded, agreeing with the agent that the insurer must first have the jury establish that the agent committed a tort for which the insurer could be held vicariously liable.  The court noted that the availability of causes of action based on common law indemnity were very limited in Texas and “there is no right of indemnity against a defendant who is not liable to the plaintiff.”  The jury charge submitted over the agent’s objection sought to have the jury determine whether the insurer had a duty to defend due to the “misconduct” of the agent, without defining what it meant by misconduct, or without first having the jury determine that the agent herself was liable to the insured, before addressing the insurer’s vicariously liability for the agent’s actions.

Insurance law attorneys can tell war stories about situations where an insurance agent has been caught stealing from customers.  This was recently highlighted in an August 29, 2016, article published by the Insurance Journal.  The article is titled “California Insurance Agent Nabbed For Fraud Scheme Involving 100-Plus Policies.”

Vicki Lee McGinley, 58, a licensed insurance agent in California, was arrested by the Kern County Sheriff’s department on seven counts of identity theft and seven counts of insurance fraud after allegedly misrepresenting policy and premium information to clients resulting in losses to her employers and increased premiums for her clients.

The California Department of Insurance Investigation Division began an investigation after receiving a complaint from McGinley’s previous employer.

The answer to the question can be found by Arlington insurance lawyers in the 1994, Texas Supreme Court opinion styled, Celtic Life Insurance Company v. Coats.

The insured’s owner met with a soliciting agent of Celtic to discuss the potential purchase of insurance. The owner advised the agent he wanted a policy providing benefits for psychiatric care equal to or better than the $20,000 coverage provided under the company’s existing policy. The owner explained to the agent that the coverage was needed because his oldest son had previously required psychiatric care, and he was concerned that his youngest son might require similar care. The agent advised the owner that he understood his needs. The agent then proposed the purchase of a specific policy written with Celtic with a maximum lifetime hospital benefit of $1,000,000. However, the agent did not point out the the psychiatric benefits under the policy were limited to $10,000. The policy was purchased by the insured.

The policy issued and premiums were paid. Later, the owner’s son was admitted to the hospital for psychiatric care. The owner filed a claim and assured by the agent the care would be covered. Celtic, however, paid only $10,000 of the $27,000 in medical expenses.

Dallas insurance lawyers need to be able to discuss with clients when an insurance agent may or may not have liability for their actions or lack thereof. A 2003, Beaumont Court of Appeals case is good reading on this subject. The case is styled, Stroman Realty, Inc. v. State Farm Lloyds.

Stroman sued State Farm for breach of contract, violations of the Texas Insurance Code, and breach of the duty of good faith and fair dealing. State Farm filed a motion for summary judgment.

Stromans’ Insurance Code claims focused on alleged false, misleading, or deceptive representations on the part of Barnhill as the insurance agent representing State Farm Lloyds. However, an examination of the deposition of Wayne Stroman, president of Stroman Realty, Inc., upon whose testimony they rely, provides no support for Stromans’ allegations. By Stroman’s own testimony, he was responsible ultimately for there not being named as an insured on any insurance policy. The entirety of Stroman’s testimony consisted of admitting to being unaware of even very basic or generalized knowledge of the insurance circumstances. Stroman’s deposition contains many responses using the ambiguous word “we” with regard to insurance coverage for his many companies and business interests. Stroman was under the mistaken impression that his company was covered by liability insurance as an entity separate and distinct from Stroman Realty, Inc. But nowhere in Stroman’s deposition testimony does he explicitly state that he or anyone else in his employ ever made a specific request to Mack Barnhill to cover Ad-Net, Inc. in a separate liability insurance policy. Nor does his deposition indicate that at any time Stroman specifically requested that Barnhill add Ad-Net, Inc. to the existing policy for Stroman Realty, Inc.

The Insurance Journal published an article in June 2016 that points out the minority of insurance agents. However, insurance attorneys all over the state can describe situations where an agent simply cheats people. The Journal article is titled, Texas Insurance Agent Arrested In Scam Targeting Elderly Clients.

A Lubbock, Texas-based insurance agent has been arrested on charges of defrauding elderly victims through an annuity scam.

The Texas Department of Insurance reported that Joseph Allen Gaines was arrested last month on charges that he kept clients’ money that was intended to be used to purchase annuities.

Arlington insurance lawyers need to understand the situations where an insurance agent has responsibility to his customer and when not. A 1996, Fort Worth Court of Appeals cases discusses this issue. The case is styled, Sledge v. Mullin.

On January 25, 1988, Ruby Sledge notified her insurance agent, Mullin, that she had acquired a 1980 Chevrolet Citation and that she was selling a 1975 Nova to her son, Dale. Ruby had three cars insured with Republic Insurance Company and advised Mullin that she could not afford to insure a fourth car. Ruby instructed Mullin to substitute the Citation for the Nova on her policy. Ruby’s son, Dale, was involved in an accident on February 4, 1988. Republic denied coverage for the claim and Ruby and Dale sued Republic claiming coverage and alternatively sued Mullin for negligence and violations of the Texas Insurance Code and the DTPA for not properly advising Ruby and for not ensuring that the Nova remained covered.

In a prior appeal, the Court determined that because Ruby instructed Mullin to cancel the insurance on the Nova, there was no coverage by Republic for the collision. Ruby contends that Mullin should have told her that the policy’s provisions automatically extended insurance coverage to any car she acquired, such as the Citation, for the first thirty days of her ownership, and that if she had been so advised she would have had coverage on all four cars on the date of the collision. There was no evidence, however, that Ruby would have elected to accept that “automatic” insurance coverage. Further, in the absence of a showing that there is a special business relationship between an insured and its agent in which they share an expectation that the agent habitually will satisfy all of the customer’s insurance needs without consultation, that there is no legal duty on the part of an insurance agent to expand the insurance protection of its customer, even if the agent had knowledge of the customer’s needs for additional insurance. In this case, there was no special relationship between Mullin and Ruby, Mullin simply complied with Ruby’s specific instructions.

Grand Prairie insurance lawyers will often run into situations where a person says, “My agent didn’t tell me about that.” A Houston Court of Appeals [1st Dist.] opinion discusses some of what an agent is responsible for telling a customer. The case is styled, North American Shipbuilding v. Southern Marine & Aviation Underwriting.

This case involves a builder’s risk insurance policy to insure the hull of a ship during construction. North American purchased the builder’s risk policy through the insurance brokerage firm of Adams & Porter. Adams & Porter purchased the policy through a wholesale broker, Southern Marine, from the Underwriters. The policy insured against “all risks of physical loss of or damage to the vessel occurring during the currency of this policy except: … in the event that faulty design of any part or parts should cause physical loss or damage to the vessel.”

North American tested the welds on the hull. Certain welds failed the test. The cause was improperly mixed welding gas that North American had received from Swisco. North American replaced all the welds. North American then demanded $1,056,795.00 from Underwriters. The Underwriters denied coverage. North American sued the Underwriters for breach of insurance contract, breach of duty of good faith and fair dealing, fraud, violations of the Texas Insurance Code, and punitive damages. North American sued Southern Marine for breach of duty of good faith and fair dealing, fraud and intentional misrepresentation, negligent misrepresentation, common law negligence, violations of the insurance code and punitive damages. Both the Underwriters and Southern Marine filed motions for summary judgment. The trial Court granted summary judgments for the Underwriters and Southern Marine on all claims. North American appealed.

Texas insurance lawyers need to know when an insurance agent is liable for what he says or does not say and when he is not liable. This is partially illustrated in a 2000, San Antonio Court of Appeals case styled, Nwaigwe v. Prudential Property & Casualty Insurance Company.

Moses Nwaigwe was a landlord who purchased a fire insurance policy issued by Prudential. A fire destroyed the property (which was empty at the time) and Prudentail denied Nwaigwe’s claim for property damage based on the policy’s vacancy clause which excluded fire coverage for a building vacant for sixty consecutive days immediately before the loss. Nwaigwe sued Prudential and his insurance agent for violations of the Insurance Code and Deceptive Trade Practices Act (DTPA), breach of common law duty of good faith and fair dealing, fraudulent misrepresentation, negligence, and gross negligence. Prudential and the agent were granted summary judgment and Nwaigwe appealed.

The trial Court’s grant of summary judgment was affirmed by the San Antonio Court of Appeals. Nwaigwe claimed that the failure by the carrier and the agent to advise him of the vacancy clause constituted deceptive conduct which constituted violations of the DTPA and the Insurance Code. The San Antonio Court observed that “no specific misrepresentations were made concerning coverage, and no material information was withheld from Nwaigwe with the intent to induce him to enter into the transaction.” Having decided that there were no mispresentations, the Appellate Court dismissed all of Nwaigwe’s claims and upheld the trial Court’s verdict.

The Insurance Journal published an article in May 2016, that insurance lawyers and consumers will find interesting. The article is titled, Fraud Lead to 20 Year Prison Sentence for Houston Insurance Agent.

Harris County District Attorney Devon Anderson that a Houston-based insurance agent has been sentenced to 20 years in prison after a Texas Department of Insurance investigation uncovered an annuity scam, in which she bilked almost a dozen elderly clients out of more than $3 million.

TDI investigators built their case against Celia Castillo after getting complaints about the legitimacy of the investment products she was selling.

As any insurance lawyer working in Grand Prairie can tell you, the insurance can be held liable for improper action or inaction. This is illustrated in the 1998, Texas Supreme Court case styled, Liberty Mutual Insurance Company v. Garrison Contractors.

Garrett, an agent of Liberty Mutual whose duties included soliciting and obtaining policy sales for Liberty, as well as explaining policy provisions and premium calculations to customers, sold Garrison a three-year multi-line insurance policy from Liberty. The policy featured a retrospective premium plan. When the policy period ended, Liberty billed Garrison $159,371 in retrospective premiums. Garrison refused to pay and Liberty sued to collect premiums. Garrison asserted a counterclaim against Liberty and filed a third party claim against Garrett, individually, claiming that Liberty and Garrett misrepresented the retrospective premium terms. The trial court granted Liberty’s and Garrett’s Motion for Summary Judgment and entered judgement in favor of Liberty for the premiums sought.

The Court of Appeals affirmed in part and reversed in party. Liberty and Garrett applied to the Texas Supreme Court for writ of error.