Insurance Agent Responsibility

An insurance agent in Grand Prairie, Arlington, Hurst, Euless, Bedford, Fort Worth, Dalworthington Gardens, Mansfield, Crowley, or anywhere else in Tarrant County or Texas is capable of making a mistake. But what if the mistake results in one of his customers not having the coverage they need when a claim occurs?
This situation came up in the Fourteenth Court of Appeals case styled, West Houston Airport, Inc. v. Millennium Insurance Agency, Inc. The opinion in this case was issued on in 2010 and the opinion was essentially upheld by the Texas Supreme Court in August 2011.
The facts in this case are not in dispute. However, they are pretty involved and are hard to follow. Rather than spending several pages trying to make the facts understandable, what needs to be learned or realized from the case is the duty an insurance agent owes to one of his customers when it comes to procuring insurance for that customer.
The thing to know factually about this case is that an agent sold a policy of insurance that contained coverages less than the amount that was requested. So that brings up the question: What duties does an insurance agent / broker owe to one of his insureds when it comes to his obtaining insurance for the customer?
Texas courts have long recognized that an insurance broker owes the following duties to a client for whom the broker undertakes to procure insurance: (1) to use reasonable diligence in attempting to place the requested insurance; and (2) to inform the client promptly if unable to do so. This standard was set out in the Texas Supreme Court case, May v. United Service Association of America, in 1992. This standard was used again in the Fourteenth Court of Appeals in the case, Sonic Systems International, Inc. v. Croix, in 2008. An appeal from the Croix case was denied by the Texas Supreme Court.
In this case involving West Houston Airport, the customer had asked for a $1,000,000 in coverage and the agent wrote coverage for only $50,000. A lawsuit against the customer resulted in a judgment substantially above the $50,000.
Other than the common law duty set out above, the insurance agent can be liable for breach of contract and for violations of the Texas Deceptive Trade Practices Act (DTPA).
Under the DTPA, the agent could be held liable under the Section 17.46(b)(5) for representing that the policy had benefits it did not have. Also, under Section 17.46(b)(7) for representing that the policy was of a particular standard when it was of another. Also, under Section 17.46(b)(12) for representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve.
Under the Texas Insurance Code, the agent could be sued for violation of Section 541.061, for misrepresentation of the insurance policy.
Violations of the DTPA and the Texas Insurance Code and breach of contract allow recovery of attorney fees and court costs. In the appropriate situation, there is the potential for recovery of punitive damages.
Seeking the advice of an experienced Insurance Law Attorney is necessary to prove one of these types of cases. They are usually swearing matches as to what was asked by the customer and what was said by the agent. However, many times there are ways of using evidence to get beyond the “he said, I said” argument.