Opinion ID: 25527
Heading Depth: 1
Heading Rank: 4

Heading: the texas insurance code

Text: 24 The trial court's second summary-judgment order states, in pertinent part: 25 [T]he compelling question presented by Prudential is whether any cause of action survives the plaintiff's failure to obtain a finding from the state insurance commission that Prudential violated stated law when it cancelled the insurance agency agreement between the plaintiff and Prudential. Prudential asserts, and it is undisputed, that state law provides the formula and method for resolving this type dispute. And, Prudential has paid statutory obligations. It is undisputed that the sum of the plaintiff's tort claims arises from Prudential's termination of the insurance agency agreement between the plaintiff and Prudential. Thus, assuming that Article 21.11-1 of the Texas Insurance Code is applicable, an administrative resolution of the plaintiff's termination claim, combined with a failure to secure an administrative finding that Prudential violated state law, bars claims of misrepresentation, fraud, tortious interference, conversion, negligence, malice, and attorney's fees. See, Linick v. Employers Casualty, 822 S.W.2d 297 (Tex. App.--San Antonio 1991, no writ);Metropolitan Property and Liability Ins. Co. v. Bridewell, 933 S.W.2d 358 (Tex. App.--Waco 1996, no writ). 26 This court is also of the opinion that the Texas Insurance Code remedy subsumes all common law causes of action that might arise from an agreement such as that between the plaintiff and Prudential. Stated differently, the Court is of the opinion that the contractual agreement between the plaintiff and Prudential is governed by state statutory law and not state common law. See Tex. Ins. Code, Art. 21-11-1; 21.49-2B; see also Art. 21.11-1 § 7. Thus, any civil suit filed by the plaintiff is conscribed by the statutorily created remedies. Id. 27 Our review of the Texas Insurance Code provisions and the two cases on which Prudential and the trial court rely leads us to a different conclusion. 28 Article 21.11-1 of the Texas Insurance Code governs the cancellation of agency contracts by fire and casualty insurance companies. It provides notice and commission payment requirements that insurance companies must follow when terminating an agency contract. Tex. Ins. Code Ann., art. 21.11-1 § 1 (a)-(b). Article 21.49-2B also requires insurance companies to give notice to the insured of nonrenewal for that nonrenewal to be effective. Tex. Ins. Code Ann., art. 21.492B, § 5. The parties here do not dispute that Prudential complied with all these requirements. 29 However, Alpha/Omega asserts that its conversion and tortious interference claims are not based on violations of these Texas Insurance Code provision. Rather, Alpha/Omega asserts, its complaint is premised on Prudential's other actions. Specifically, Alpha/Omega complains about Prudential's converting its book of business and its soliciting Alpha/Omega's customers to place their insurance with another carrier. 30 We agree that Alpha/Omega's claims are not based on statutory violations. Thus, Prudential's and the trial court's reliance on Linick v. Employers Mut. Cas. Co., 822 S.W.2d 297 (Tex. App.--San Antonio, no writ) is misplaced. 31 In Linick, the issue was whether the judiciary or an administrative board, i.e., the State Board of Insurance of Texas, has primary jurisdiction over a civil suit for damages brought by a local recording agent against an insurance company for failing to comply with the Texas Insurance Code and an Agency-Company Agreement. 822 S.W.2d at 298. The primary jurisdiction doctrine was at issue because Linick involved a prior statutory provision, not applicable to this case, that stated: 32 If it is found, after notice and an opportunity to be heard as determined by the board, that an insurance company has violated [Article 21.11-1], the insurance company shall be subject to a civil penalty of not less than $1,000 nor more than $10,000, and it shall be subject to a civil suit by the agent for damages suffered because of the premature termination of the contract by the company. 33 Id. (quoting Tex. Ins. Code Ann, art. 21.11-1 § 5 (amended 1993)). It was undisputed in Linick that the plaintiff's only claim was one for damages statutory authorized by article 21.11-1, and that such a suit does not exist at common law. Id. at 300 (emphasis added). Thus, the sole issue was whether the plaintiff, before bringing suit to enforce this statutory remedy, had to exhaust its administrative remedies as contemplated by article 21.11-1 § 5 and plead all conditions precedents were satisfied before bring suit. Id. at 299. Ultimately, the court concluded that the plaintiff's failure to follow the statutorily required procedures resulted in the trial court's lack of jurisdiction over appellant's cause of action. Id. 34 Here, the trial court's reliance on Linick is incorrect for two reasons. First, unlike in Linick, the plaintiff here is not asserting a cause of action based on a violation of the Texas Insurance Code. In fact, Alpha/Omega emphatically denies that its complaint is about premature termination of its agency agreement or Prudential's failure to comply with the Texas Insurance Code. 35 Second, the Texas Insurance Code provision that the Linickcourt interpreted as requiring a board finding of a statutory violation before bringing suit was expressly changed by the Texas Legislature, in its very next session, to provide that [a]ny agent who has sustained actual damages as a result of a company's violation of this article may maintain an action against the company, without regard to whether or not there has been a finding by the board that there has been a violation of this article. Tex. Ins. Code Ann., art. 21.11-1 § 7 (emphasis added). Despite this change, the trial court here inexplicably framed the issue as whether any cause of action survives the plaintiff's failure to obtain a finding from the state insurance commission that Prudential violated state law. Then, citing Linick, the court concluded that an administrative resolution of the plaintiff's termination claim, combined with a failure to secure an administrative finding that Prudential violated state law, bars claims of misrepresentation, fraud, tortious interference, conversion, negligence, malice, and attorney's fees. While this order is somewhat ambiguous, it appears that the court applied the statutory administrative exhaustion requirement announced in Linickto Alpha/Omega's claims, even though the Texas Legislature had clarified that there was no administrative exhaustion requirement. In other words, the Court imposed a requirement from the Texas Insurance Code that was no longer the law. 5 36 We also find the trial court's reliance on Metropolitan Property and Liab. Ins. Co. v. Bridewell, 933 S.W.2d 358 (Tex. App.--Waco, 1996, orig. proceeding) unpersuasive. The only issue in Bridewell was whether a terminated insurance agency could be forced to arbitrate its common-law and statutory claims with its contract claim that was the subject of an arbitration agreement. 933 S.W.2d at 360. The Bridewell court held that the claims must be arbitrated together because, under the FAA, any doubts about whether a claim falls within the scope of an arbitration agreement must be resolved in favor of arbitration. See id. at 361. We fail to see how Bridewell's conclusion that the plaintiff's tort, statutory, and contract claims had to be arbitrated together supports the trial court's conclusion in this case that the Texas Insurance Code subsumes all common law causes of action. 6