Texas Independent Agents Seek Fairness in Consumer Protection Statutes

Agents are treated unfairly by Texas statutes and the result is sky-rocketing errors and omissions insurance premiums, according to the Indepen-dent Insurance Agents of Texas. When rates in the E&O insurance program underwritten by Westport are compared across state lines, the cost of E&O insurance for agents in Texas is found to be 80 percent higher than the countrywide average.

David VanDelinder, IIAT executive director, said, “We believe much of this diVerence is because Texas agents are subject to both the DTPA [Deceptive Trade Practices Act] and Article 21.21 of the Insurance Code (revised chapter 54 under the recodified version of the Insurance Code). We want to address this inequity by requiring the same standards and defenses found in DTPA to be placed in Article 21.21.

“We also want to amend the Civil Practices and Remedies Code to permit an offset for the responsibility of the plaintiV, other parties to the lawsuit and other designated responsible parties,” VanDelinder said. “In so doing, insurance agents will have access to the same defenses and will be held to the same standards as other sellers of goods and services in the state.”

A more spe-cific premium comparison with neighboring states and three other states with large E&O insurance programs revealed even more dramatic differences. The premiums for a small agency with $1 million in premium volume varied by more than 200 percent.

“We were shocked,” VanDelinder said. “When we looked at the premiums in Florida, which shares our exposure to catastrophes that often generate E&O claims, our premiums are more than three times higher.”

The research done by IIAT also looked at the unfair trade practices laws in these states and found significant legal diVer-ences. “In every state we compared, no private cause of action against insurance agents is allowed in the insurance code. In addition, in every state compared, agents had access to proportionate responsibility rules when sued by consumers,” VanDelinder said.

In Texas, persons seeking relief in court against insurance agents for certain violations may currently choose to bring a cause of action under either the Insurance Code or the Deceptive Trade Practices Act of the Business and Commerce Code or both. These dual statutory provisions, originally enacted in concert to provide similar legal avenues and remedies for certain violations, now offer diVering defenses and damage limits.

Often, when a claim alleging a violation of Article 21.21 is plead against an insurance agent, violations of DTPA are also alleged. This creates a disincentive for attorneys to settle cases since they have multiple causes of action on which they may succeed, and since they are also entitled to recover their fees. Furthermore, all of the defenses available under DTPA are not also available under Article 21.21, so an agent may prevail under DTPA but not under Article 21.21.

Article 21.21 and the DTPA were enacted together in 1973 as parts of the same legislative bill. Originally, the statutes were largely identical. In the three decades since their original enactment, the DTPA has been amended substantially both by the legislature and through judicial interpretation. Whether through design or oversight, Article 21.21 has not been similarly amended, and the diVerences between the two statutes are now substantial.

Senate Bill 236 and House Bill 2155 seek to level the playing field for agents by incorporating language from the DTPA into the Insurance Code. The changes would give insurance agents the same defense tools available to other sellers in Texas and still protect consumers.

“Nothing in these bills would keep an injured party from suing an insurance agent,” VanDelinder said. “But when they do sue an agent, they would have to meet the same standards of proof as though they were suing a realtor or a car dealer. We only want agents to be treated fairly.”