DESCRIBING YOUR COVERAGE IS NOT A MISREPRESENTATION

The United States Western District of Texas recently issued a decision addressing the implication of an insurance agent’s statement, “yes, you have that coverage” without referencing applicable exclusions.  In Finger Goil & Gas Inc. v. Mid-Continent Casualty, 2023 WL 581650, Finger Oil was drilling for natural gas in Jackson County, Texas when a valve failed and the well blew out.  Finger Oil notified its insurance agent, who contacted Mid-Continent, and asked whether it had Blow Out and Cratering Coverage.  Mid-Continent and the agent replied that the policy did have those coverages, so Finger Oil thereafter hired contractors to repair the well.  However, the policy also had an exclusion for “Damage to Property,” that included damage to property Finger Oil owned and repaired, and costs or expenses incurred in connection with controlling any well.  Mid-Continent denied coverage, claiming this exclusion, and Finger Oil sued for misrepresentation, Deceptive Trade Practices Act violations, breach of contract, and failure to timely investigate.

Mid-Continent argued that it had accurately provided a general statement of the policy’s coverage, not given a misrepresentation of the policy’s terms. In fact, it was helpful for Mid-Continent’s case that the agent had included the disclaimer “[p]lease note that each claim is based on its own merit.”  The Court agreed and granted Mid-Continent a dismissal, holding  that Mid-Continent had accurately described what coverage the policy had, while not leading Finger Oil to wrongly believe the policy protected against a particular risk that was in fact excluded.