Dallas Fort Worth Insurance Lawyer Blog

What Is An Insurable Interest?

February 17, 2018 | Mark S. Humphreys

Does my potential new client have an insurable interest? That is a question insurance lawyers have to answer first when talking to someone who believes they are owed money on an insurance claim.

As stated by the Dallas Court of Appeals in 1993, in the opinion styled, Jones v. Texas Pacific Indemnity Co., “A party must have an insurable interest in the insured property to recover under an insurance policy.” It is not necessary that the party own the property to have an insurable interest. An insurable interest is an exposure to financial loss possessed by a person giving rise to a legal interest that the insured possesses a right to protect. An insured who owns a house or auto therefore has an insurable interest in the house or auto because the insured would be hurt financially if the house or auto were damaged or destroyed. This is also discussed by the Texas Supreme Court in the 1963, opinion styled, Smith v. Eagle Star Insurance Co. An insurable interest does not constitute an entitlement to insurance because the insurer is permitted to underwrite and price the risk sought to be insured. Even if an insurance policy is issued, it cannot be enforced by a party who has no insurable interest — even if that party is a named insured. This was discussed in the 1972, Amarillo Court of Appeals opinion styled, North River Insurance Co. v. Fisher.

An insurable interest is necessary for the following reasons:

Examples Of First Party Policies

February 15, 2018 | Mark S. Humphreys

Weatherford insurance lawyers need to recognize “first party” policies when they see them. Here are some examples:

The standard Texas Auto Policy covers accidental loss or damage to the covered auto. If an insured is involved in a single car accident resulting in property damage to the insured vehicle, the insured possessing this type of coverage may submit a claim directly to their insurer and receive compensation for the damage to their vehicle in accordance with the terms of the Texas Auto Policy.
Health insurance refers to coverage for medical and hospital expenses and may be issued on an individual or group basis. An insured who requires health care due to an illness or injury may submit a claim directly to their own insurer for the reasonable and necessary costs of the health care received. If the insured has paid for their health care, the insurer will reimburse the insured. It is also common practice for the health care provider to take an assignment of the insured’s interest in insurance benefits enabling the insurer to pay the care provider directly.

Third Party Claim Vs. First Party Claim

February 13, 2018 | Mark S. Humphreys

A question typically asked of Fort Worth Insurance Lawyers is, – What is the difference between a third party claim and a first party claim.

A “first party” claim is usually a policy that typically involves insurance that provides policy benefits directly to the insured or beneficiary in the event of a loss. The Texas Insurance Code, section 541.051(2) defines “first party claim” as a claim “by an insured or a policyholder under an insurance policy or contract or a beneficiary named in the policy or contract that must be paid by the insurance company directly to the insured or beneficiary. These types of policies generally include health insurance, life insurance, disability insurance, workers’ compensation insurance, auto property insurance, homeowner’s property insurance, and commercial property insurance. These examples are found in the 1997, Texas Supreme Court opinion styled, Universe Life Insurance Company v. Giles, wherein the court is describing differences between first party and third party insurance.

In contrast, “third party coverage” is generally considered to include forms of liability insurance. This type of insurance is designed to insure against a loss to third parties caused by the insured or another covered person for whom the covered person may be legally responsible. These types of policies include commercial general liability, auto liability, homeowner’s liability, professional liability, and directors and officers liability policies. This is also discussed in the Giles opinion wherein the court is describing differences between first party and third party insurance.

Language In A Disability Policiy

February 11, 2018 | Mark S. Humphreys

The language in a disability policy is important to read and understand. The Courts will do so very closely.

This is illustrated in a 2017, opinion from the U.S. 5th Circuit. It is styled, David M. Cox v. Provident Life & Accident Insurance Company. It is a summary judgement case that was decided by the lower court in favor of Provident. This Court reversed the lower court finding.

Cox had a disability policy with Provident. The Policies provided coverage for disability caused by injury or sickness and contain provisions tying the period of benefit payments to the cause of the insured’s disability. If the insured is rendered disabled at the age of 60 as a result of an accident or injury, the Policies provide for lifetime benefit payments. By contrast, if the insured is rendered disabled at the age of 60 as a result of sickness, the Policies provide that benefit payments will be paid only until age 65. The greater of the two applicable benefits periods applies when the disability results from a combination of the two.

Ratification Of Insurance Agent’s Conduct

February 10, 2018 | Mark S. Humphreys

Grand Prairie insurance lawyers need to be able to evaluate an insurance agent’s conduct to determine if the insurance company is liable for the agent’s conduct.

An insurance company may be liable for unauthorized conduct of an agent or other person, if the insurance company ratifies the conduct. Ratification may occur when the insurance company, though having no knowledge of the unauthorized act, retains the benefits of the transaction after acquiring full knowledge of it. The critical factor is the insurer’s knowledge of the transaction and its actions in light of that knowledge. Ratification extends to the entire transaction according to the 1980, Texas Supreme Court opinion, Land Title Co. of Dallas, Inc. v. F.M. Stigler, Inc.

One example of ratification is found in the 1989, Houston Court of Appeals [14th Dist.] opinion, Paramount National Life Insurance Co. v. Williams. Here, an insurance company issued a hospitalization policy, without further investigation, despite having an application indicating the insured’s advanced age and poor health, and despite having knowledge of the agent’s inexperience. By nevertheless accepting premiums, the insurance company ratified the agent’s misrepresentations made in the sale of the policy.

The Difference Between A Recording Agent And Soliciting Agent

February 8, 2018 | Mark S. Humphreys

Most experienced insurance attorneys in Dallas and Fort Worth can tell you the law in this area can be confusing, despite the relatively straightforward principles. Historically, there was a distinction between “recording” agents and “soliciting” agents. A recording agent had authority co-extensive with that of the company, so there was no question of the agent’s actual or apparent authority. This was discussed in the well known 1979, Texas Supreme Court opinion, Royal Globe Insurance Co. v. Bar Consultants, Inc. The court noted that the authority of a soliciting agent was much more limited than the authority of a recording agent. The same court went on to hold that the insurance company was liable for the agent’s misrepresentation of coverage.

This has led some courts to conclude mistakenly that an insurance company could be liable for misrepresentations by a recording agent, but not by a soliciting agent. This has been seen in the 1984, Houston [1st Dist.] opinion styled, Guthrie v. Republic National Insurance Co. This analysis was wrong, which was made clear when the Texas Supreme Court decided the 1994, opinion, Celtic Life Insurance Co. v. Coats, and rejected this argument.

In Celtic v. Coats, the court held the insurance company was liable for a misrepresentation by a soliciting agent. The focus was not on the agent’s status as recording or soliciting. Instead, the court applied the two-step analysis: was he the company’s agent; and was the misconduct within the actual or apparent scope of his authority? Both questions were answered affirmatively, so the insurance company was liable.

Can An Insurance Company Agent Change Insurance Policy Terms?

February 6, 2018 | Mark S. Humphreys

Another one of those questions that Insurance Law Attorneys ask themselves on many of the cases they see.

Pursuant to Texas Insurance Code, Sections 4001.051(c) and 4001.053, an agent is not authorized by statutes to alter or waive a term or condition of an insurance policy or an application for an insurance policy. Nevertheless, as can be seen in section 4001.051(b), an insurer will be liable “for purposes of the liabilities, duties, and penalties provided by” certain statutes. The referenced statutes include the prohibitions found in Chapter 21 and now found in the new codification at Sections 4001.051 and 4001.009. The Texas Supreme Court explained the interaction between these provisions under the older statutes as follows quoting from Royal Globe Insurance Co. v. Bar Consultants, Inc.:

We are not to be understood as holding that the statutory authority granted an agent under Article 21.02 authorizes that agent to misrepresent policy coverage and bind the company to terms contrary to those of the written policy; that question was decided by us in International Sec. Life Ins. Co. v. Finck, 496 S.W.2d 544 (Tex. 1973). However, an insurance company that authorizes an agent to sell its policies may not escape liability for the misrepresentations made by that agent which violate article 21.21 or section 17.46 merely by establishing that the agent had no actual authority to make such misrepresentation.

Can Insurance Company Be Responsible For The Wrongs Of An Agent

February 4, 2018 | Mark S. Humphreys

The above is a question most insurance lawyers will ask themselves when investigating a case.

An insurance company cannot escape liability by showing that it did not authorize the specific wrongful act. This is made clear in two Texas Supreme Court opinions. One is styled, Celtic Life Insurance Co. v. Coats, and it was issued in 1994. The other is styled, Royal Globe Insurance Co. v. Bar Consultants, Inc., issued in 1979.

As the Celtic court stated:

Apparent Authority Of Agents

February 3, 2018 | Mark S. Humphreys

An insurer also may be liable for unauthorized acts by an agent, if the agent is acting within the scope of his “apparent authority.” Actual authority is not required. The insurer will be liable when by its conduct it has given the agent the appearance of having authority, so that a reasonable person would suppose the agent had authority. This was the ruling in the 1979, Texas Supreme Court case, Royal Globe Insurance Co. v. Bar Consultants, Inc.

Apparent authority is an estoppel theory that holds the insurer liable because the insurer has clothed the agent with indicia of authority that would lead a reasonable person to believe the agent had authority. If the agent is acting within the scope of his apparent authority, not even instructions not to mislead, nor diligence in preventing misrepresentations, will shield the insurer from liability. Evidence of apparent authority may include:

application forms referring to the individual as the company’s agent, (see Paramount National Life Insurance Co. v. Williams and Tidelands Life Insurance Co. v. Franco)

Actual Authority Of Insurance Agent

February 1, 2018 | Mark S. Humphreys

Lawyers in general and insurance lawyers specifically know there are two types of authority — actual and apparent. In turn, actual authority can be expressed or implied. An agent’s authority can be actual authority expressly conferred by the insurer, or it can be actual authority implicit in the agent’s duties. The authority also can be apparent authority arising from acts by the insurer that give the agent the appearance of having authority.

Unfortunately, courts are not always precise in labeling the types of authority. Confusion creeps in when courts mistakenly call implied is not actual authority, or when they speak of implied authority as a form of apparent authority.

Courts have described actual authority this way: