Articles Posted in Life Insurance

Insurance companies, like other entities, can only act through it’s agents.  Insurance companies rely on agents to sell their policies, to under write potential insureds, and to investigate and adjust claims.  Insurance companies may be vicariously liable for another’s misconduct if that other person is the insurer’s agent and if that agent acted within the scope of his or her authority.  This is discussed in several cases starting with the 1994 Texas Supreme Court opinion styled, Celtic Life Ins. Co. v. Coats, then the 1979 opinion styled, Royal Globe Ins. Co. v. Bar Consultants, Inc.  This is also discussed in the 1989 Houston 14th Court of Appeals opinion styled, Paramount Nat. Life Ins. Co. v. Williams.

The Texas Supreme Court explained in the Celtic case as follows:  An insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent’s authority.  This rule is based on notions of fairness: “since the principal has selected the agent to act in a venture in which the principal is interested, it is fair, as between him and a third person, to impose upon him the risk that the agent may exceed his instructions.”

The analysis for deciding if an agent is vicariously liable for the conduct of another has two steps:

Lawyers who handle life insurance cases need to be aware of the various ways a life insurance agent can be held responsible for wrongful acts.

While an individual agent is subject to being sued under the statutes here is a specific example of that happening.  This is from the 1998 Texas Supreme Court opinion styled, Liberty Mut. Ins. Co. v. Garrison Contractors, Inc.

In the Garrison opinion, an agent personally carried out the transaction that formed the core of the unfair insurance practices complaint.  The agent was responsible for explaining premiums and was required to have a measure of expertise.  He was a “person” engaged in the “business of insurance” and could be liable under the statute.  On the other hand, clerical employees, who have no responsibility for policy sales and servicing and no special insurance expertise, are not “engaged in the insurance business,” and thus would not be personally liable under this rationale.  The same reasoning should apply to other statutes, like the unfair discrimination statute, that include similar defenses.

Texas Life Insurance Attorneys need to be aware of the agency principals whereby an agent can be held liable for his or her actions.

An agent may be liable for violation common-law or statutory duties to the insured.  For example, an agent who undertakes to get insurance may be liable for negligently failing to get proper insurance for the insured.  An example of this is found in the 1987 opinion from the San Antonio Court of Appeals styled, Rainey-Mapes v. Queen Charters, Inc.  An agent may also me liable for negligently failing to notify the insureds that their policy is about to expire.  This is discussed in the 1985 Texas Supreme Court opinion styled, Kitching v. Zamora.

Statutes prohibiting misrepresentations, unfair settlement proctices, and unfair discrimination apply to “any person” engaged in the business of insurance and include agents and brokers.  Statutes on these issues are Sections 541.002(2), 541.151, 544.051(6), and 544.052.

Life insurance lawyers need to know the legal theories whereby a life insurance agent can be held liable for the wrongs they commit.  These agent responsibility don’t just extend to life insurance agents but to agents in other areas of insurance.

As the contracting party, the insurance company of course may be liable based on the contract with the insured.

An insurer also may be statutorily liable.  For example, “any person” engaged in the business of insurance may be liable for unfair insurance practices according to Texas Insurance Code, Section 541.151.  The term “person” is defined to include various insuring entities under Section 541.002(2).