Last Tuesday, the Houston Court of Appeals analyzed the impact of an insured’s failure to read a policy and whether he could be deemed to know its contents so as to defeat affirmative misrepresentation claims against an agent under the Texas Insurance Code and DTPA. The court found that fact issues precluded summary judgment.  In Wyly v. Integrity Insurance Solutions, 2016 WL 6108137 (Tex. App – Houston [14th Dist.] October 18, 2016), the insured sought insurance coverage for “all foreseeable loss” to an airplane in transit.  The agent secured a policy from an insurer through a broker.  But the policy contained an exclusion for “improper packing, preparation for shipment or loading by you or the shipper.” The fuselage was damaged in transit by a tie strap securing the plane to the trailer because the tail was not properly supported. The claim was denied based on the improper packing or preparation for shipment exclusion. 

The insured filed suit against the agent, broker and insurer. The trial court granted summary judgment in favor of all three but the insured only appealed the judgment as to the agent. On appeal, the court first examined whether there was an actionable misrepresentation of insurance coverage despite the exclusion. In doing so, the court agreed that “absent an affirmative misrepresentation, appellant’s mistaken belief about the scope of coverage is not actionable under the DTPA or the Texas Insurance Code.” The court found, however, that in this case the agent “did more than represent the policy provided ‘full coverage’ and there is no evidence that the appellant was aware of the exclusion.”  Accordingly, the court held that the trial court erred in finding there was no affirmative misrepresentation of insurance coverage.

The court then turned its focus to whether the insured’s failure to read the policy served to preclude his claims. The court examined Texas case law finding in part that an insured is deemed to know the terms of an insurance policy issued to them despite the insured’s failure to read the policy.  And, the court carefully examined Texas case law to address the interplay between “failure to read” and “deemed to know” rules when affirmative misrepresentation claims are involved.  The court concluded that: “Appellant’s failure to read the policy does not preclude his claims under the DTPA or the Insurance Code.  Because appellant’s claims are for alleged violations under the DTPA and Insurance Code based on an affirmative misrepresentation of coverage, the trial court could not have properly granted summary judgment on the basis that appellant was deemed to know the contents of the policy.” Accordingly, summary judgment in favor of the agent was reversed and remanded for further proceedings.

[Editor’s Note: This case presents a careful and detailed analysis of the “failure to read” and “deemed to know” rules frequently applied in Texas, and how the narrow exception based on “affirmative misrepresentation” can be applied.]

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