ALLEGATIONS AGAINST INDEPENDENT ADJUSTERS SUFFICE TO STATE A CLAIM - MOTION TO REMAND GRANTED

Last Tuesday, the Houston Court of Appeals affirmed a trial court’s order granting an insurance agency’s motion to dismiss an insured’s breach of contract, breach of the duty of good faith and fair dealing and Texas Insurance Code and DTPA claims, finding that the claims had no basis in law and, awarding the agency its attorney fees in defending the lawsuit. In Texas City Patrol, LLC v. El Dorado Insurance Agency, 2016 WL 3748780 (Tex. App – Houston [1st Dist.] July 12, 2016), a Texas City Patrol (“Patrol”) employee was seriously injured in a hit-and-run accident. Their commercial auto insurer, Progressive, initially denied the claim after finding that the insured had rejected underinsured motorist coverage. The President of Patrol disputed that they had rejected coverage and met with an El Dorado Insurance Agency (“Agency”) employee who showed him what Patrol’s President believed to be a falsified application rejecting the coverage. On a later visit, another Agency employee showed him the file and he found another application where the underinsured motorist coverage had not been rejected. Progressive subsequently paid $30,000 on the underinsured motorist claim and $2,500 in personal injury protection benefits.

Patrol then filed suit against the Agency asserting causes of action for breach of contract, breach of the duty of good faith and fair dealing and various causes of action under the Texas Insurance Code and DTPA. The Agency filed a motion to dismiss the lawsuit as groundless in law or fact, under Texas Rule of Civil Procedure 91a, and the trial court granted the motion awarding the Agency $3,000 in attorney’s fees. This appeal followed. On appeal, the court first observed that the only contract at issue, was the insurance contract with Progressive and therefore, Patrol’s breach of contract cause of action against Agency had no legal or factual basis. The court also observed that under Texas law, an insurance agent’s only common law duties to a client are: 1) to use reasonable diligence in attempting to place the requested insurance and, 2) to inform the client promptly if unable to do so. Examining the common law claims for breach of the duty of good faith and fair dealing, the court observed that they arise out of Progressive’s insurance contract, that they are non-delegable and, that the trial court properly dismissed them.

Similarly, the court examined Patrol’s claims under the Texas Insurance Code for alleged violations of the Prompt Payment of Claims Act and found that Sections 542.055-060 only apply to insurers and that Patrol was not entitled to relief against the Agency under these sections. The same rationale was applied to certain unfair claim handling allegations under Texas Insurance Code Chapter 541. Lastly, the court examined allegations under Texas Deceptive Trade Practices Act and the requirement that the consumer’s “reliance” on the prohibited acts be a “producing cause” of the damages claimed. The court observed that Patrol’s President did not rely on the Agency’s alleged misrepresentations, but instead insisted on the opposite, that they had not rejected the coverage and Patrol received payment as a result.

Finding that the trial court had properly granted the Agency’s motion to dismiss, and observing that an award of attorney fees to the prevailing party under rule 91a “is mandatory, not discretionary” the award of attorney fees to the Agency and the motion to dismiss Patrol’s claims, were affirmed.