Insurance Misrepresentation

Dallas insurance lawyers need to know insurance misrepresentation when they see it. The Texas Insurance Code Section 541.061(2) makes it illegal for an insurance company to fail to disclose relevant information. The Texas DTPA does the same thing in Section 17.46(b)(24). There are several sections of the insurance code that make misrepresentation illegal, most of which is found in Chapter 541.
Section 541 prohibits making any statement, whether it is oral or in writing, misrepresenting the terms of a policy, the benefits, advantages, or dividends of a policy, among other things. The purpose of the statute of in preventing one insurer to make misrepresentations in efforts to induce a policyholder from changing to another company.
Section 541.052 prohibits making any advertisement or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business that is untrue, deceptive, or misleading, whether it be oral or in writing.
Section 541.061 prohibits misrepresenting an insurance policy by:
a) making an untrue statement of material fact;
b) failing to state a material fact necessary to make other statements made not misleading, considering the circumstances under which the statements were made;
c) making a statement in such a manner as to mislead a reasonably prudent person to a false conclusion of a material fact;
d) making a material misstatement of law; or e) failing to disclose a matter required by law to be disclosed, including failing to make disclosure in accordance with another provision of the Insurance Code.
The result is that the Insurance Code forbids statements that are outright false, as well as those that are misleading.
Here are a couple of examples:
In the 1987, Texas Supreme Court case, Aetna Casualty and Surety v. Marshall, the court found an insurer may be guilty of making a misrepresentation by contractually promising benefits and then refusing to pay them.
The Texas Supreme Court in 1979, in Royal Globe v. Bar Consultants, and in 1994, in Celtic Life v. Coats, found that an insurer also may be liable for misrepresenting that a policy offers benefits that it does not have.
A 2000, Austin Court of Appeals found in Stumph v. Dallas Fire Insurance, that an insurance company was liable for misrepresentations by its underwriter that the insured could continue to send premium payments to his agent, described by the underwriter as a “good man” but who had in fact been suspended.
All the above are just some examples of how an insurance company can be guilty of misrepresentation and more important, such violations can result in the insurer having to pay for their wrong and more.