Dallas Fort Worth Insurance Lawyer Blog
Insurance lawyers should understand the interaction between the Texas Insurance Code and the Texas Deceptive Trade Practices Act (DTPA).
Texas Insurance Code, Section 541.151(2) cross references and prohibits conduct defined in Section 17.46(b) of the DTPA. The DTPA statute applies to all types of consumer transactions, not just insurance, so many of the provisions are not directly relevant. The most relevant subsections prohibit:
DTPA, Section 17.46(b)(2) – causing confusion or misunderstanding as to the source , sponsorship, approval, or certification of goods or services,
DTPA, Section 17.46(b)(5) – representing that goods or services have … benefits, … which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not,
DTPA, Section 17.46(b)(12) – representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law,
DTPA, Section 17.46(b)(24) – the failure to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.
Section 17.46(b) is commonly called the “laundry list.” As explained in the 1984, Corpus Christi Court of Appeals opinion styled, McCrann v. Klaneckey, insurance transactions fit within these prohibitions because courts have held that insurance is a “service.”
To sue for conduct in violation of one of these provisions, the plaintiff must show that he relied on the act or practice to his detriment. This requirement is found in Texas Insurance Code, Section 541.151(2)
Pursuant to the 1987, Texas Supreme Court opinion styled, Aetna Casualty & Surety Company v. Marshall, an insurer’s breach of its contractual promise to pay future medical benefits was precisely the sort of conduct forbidden by DTPA, Section 17.46(b)(5).
It important to keep in mind that although the Insurance Code and the DTPA provisions both prohibit misrepresentations and nondisclosures, it can be important for a plaintiff to carefully choose the prohibition that best fits the evidence or that has an easier burden of proof. For example, an insured was able to prove the insurer violated the Insurance Code, Section 541.061 by failing to disclose information, but could not prove a violation of the DTPA, Section 17.46(b)(24), because there was no evidence that the insurer withheld the information with the intent to induce him to buy. This was discussed in the 2000, Corpus Christi Court of Appeals opinion styled, Colonial County Mutual Insurance Company v. Valdez.