Opinion ID: 30554
Heading Depth: 2
Heading Rank: 4

Heading: Texas Insurance Code Misrepresentation Claim

Text: 42 Having resolved the issues of policy coverage, we turn to Performance's extracontractual claims and consider, first, whether the district court properly granted Mid-Continent summary judgment on the misrepresentation claim. 43 Performance argues that the district court erred in granting summary judgment to Mid-Continent because Mid-Continent's agent made misrepresentations about the scope of policy coverage. Mid-Continent responds that Performance has not shown both that Morgan was an agent and that the statements were false. The district court determined that Morgan's statements were too general to be actionable and that the statements were non-actionable because they were true. 44 The Texas Insurance Code makes false statements by an agent of an insurance company actionable. 19 See Tex. Ins. Code Ann. art. 21.21, § 4(1) (Vernon 1981 & Supp.2003). To make out a prima facie case of misrepresentation, an insured must show that the person making the statement was an agent of the insurance company and that the statement was false. See Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 98-99 (Tex.1994); Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688, 690-91 (Tex.1979). 45 First, Performance set forth sufficient evidence to create a genuine issue of material fact as to whether Morgan was an agent of Mid-Continent. A person may be deemed an agent if an insurance company has authorized that person to sell its policies. See Tex. Ins.Code Ann. art. 21.02 (Vernon 1981 & Supp.2002) (defining an agent as [a]ny person who solicits insurance on behalf of any insurance company...). The Texas Insurance Code does not require either expressly or by implication that an agent have actual authority before an insurance company can be found to have vicariously committed a deceptive act or practice. Bar Consultants, 577 S.W.2d at 693. That is, an insurance company may be liable for the misstatements of an agent simply because it authorized the agent to sell its policies, even if it did not authorize the agent to make the misstatements. See id. Performance put forth the affidavit of Michael Avellar, which states that he purchased insurance policies from McKane Morgan and that, in purchasing the policies, he dealt with McKane and Morgan. Mid-Continent argues that [t]he record contains no evidence of the nature or type of agency relationship which exists between Mid-Continent and McKane Morgan. However, it is clear from the Avellar affidavit that McKane Morgan was authorized to sell Mid-Continent policies, and Mid-Continent does not dispute this fact. Further, the key case Mid-Continent cites supports Performance, for it holds that a person who sells an insurance policy should be considered an agent whose misrepresentations are attributable to the insurer. See Coats, 885 S.W.2d at 98-99. This is enough to create a fact issue on the question of agency. 46 Second, Performance has created a genuine issue of material fact as to whether Morgan's statements were actually false. The only evidence in the record documenting what Morgan said is Avellar's affidavit. According to Avellar, Morgan stated that an inventory shortage, without more, would not be covered by the employee dishonesty coverage we were purchasing but that the employee dishonesty policy would cover inventory losses when there was evidence of criminal activity by an employee. Avellar continues: [s]he advised me that when there was independent evidence of employee theft, the inventory shortage would be covered in its entirety. Mid-Continent does not appear to dispute that Morgan made these statements. 20 The statements could be interpreted one of two ways. First, the statements could convey that the entire amount of an inventory shortage is covered when there is any evidence of employee dishonesty. Second, the statements could convey that an inventory shortage is covered only when the entire shortage is substantiated by proof of employee dishonesty. Either way, because we conclude that there is no coverage without some evidence linking the dishonest employee to the entire amount of the loss, Morgan's statements were arguably false. We thus reverse summary judgment in favor of Mid-Continent on the misrepresentation claim. 47