Negligent Misrepresentation

People in Grand Prairie, Dallas, Fort Worth, Arlington, Mansfield, Garland, Mesquite, Rowlette, De Soto, Cedar Hill, Duncanville, and other places in Texas would like to think that people are honest with them in their business dealings. The majority of the time, this is true. Rarely does someone intentionally lie about a subject, but occassionly a misrepresentation is made, not on purpose, but accidently. When this is done it is called negligent misrepresentation.
Here is an example of negligent misrepresentation. This is from a 2003 case styled, New York Life Insurance Company, et al v. Phillip M. Miller. This case was decided by the Texas Court of Appeals, Austin.
Here is some background:
The case involves a dispute between two life insurance agents over a large commission. Michael Coffey, the agent for New York Life Insurance Company (New York Life) was asked by a company to help set up a complex set of estate planning transactions that included a “split dollar conversion” of a $10 million New York Life policy. This transaction generated a large commission. Miller, also a New York Life agent, was the permanent servicing agent on the policy. Both Miller and Coffey were obligated under their respective contracts with New York Life to follow the rules for client contact. Miller alleged that, although Coffey did eventually contact him about his work on the policy, Coffey violated the rules by failing to contact him as soon as he began to work on the conversion. Miller sued New York Life for breach of its contract with him and for negligent misrepresentation and other causes of action. At trial, verdict was rendered for Miller. New York Life appealed. This appeals court reversed the judgment and Miller ended up taking nothing on his claim.
In this case the court spent a lot of time discussing the $10 million policy and New York Life rules of client contact. Relevant rules from the New York Life “Agent’s Handbook” were cited by the court in discussing the intent of the rules and how these rules could and should be interpreted. This handbook of course being relevant as to what agents of New York Life understood the rules to be.
The court after reviewing the rules then began a discussion as to what constitutes negligent misrepresentation. The following are quotes from the case. These quotes are taken from other cases dealing with this issue that were decided by the Texas Supreme Court and other courts of appeals in Texas.
“To establish a claim for negligent misrepresentation, Miller was required to prove that, without exercising reasonable care or competence, New York Life made a representation in the course of its business, or in a transaction in which it had a pecuniary interest, which contained ‘false information’ for the guidance of Miller in his business. He also was required to prove that he suffered pecuniary loss by justifiably relying on the information. Significantly, the sort of ‘false information’ contemplated in a negligent misrepresentation case is a statement of existing fact, not a promise of future conduct. Moreover, the tort of negligent misrepresentation frequently involves a defendant’s statement that a contract exists, upon which the plaintiff relies, only later to discover that the contract has been rejected or never completed. Thus, negligent misrepresentation is a cause of action recognized in lieu of a breach of contract claim, and is not usually available when a contract is in force between the parties.
There are two thoughs to take from this case. The first is that issues about negligent misrepresentation can be difficult and hard to understand and as a result an experienced Insurance Law Attorney should be consulted when you are dealing with insurance issues and something like this arises. Second, one needs to realize that insurance companies and their agents will sometimes be in situations where they are misrepresenting policy coverage to an insured. When this is done accidently or negligently there is legal recourse for this wrong.