Opinion ID: 1760157
Heading Depth: 1
Heading Rank: 11

Heading: Insurance Code Violations

Text: As consumers of INA's insurance services, the Investors claim that INA's use of unlicensed agents to solicit their surety bonds was unconscionable conduct under section 17.50(a)(3) of the DTPA. Under Article 21.01 of the Texas Insurance Code, the Investors were statutorily entitled to have licensed insurance agents present and solicit the surety bond applications and fees: It shall not be lawful for any person to act within this State, as agent or otherwise, in soliciting or receiving applications for insurance of any kind whatever, or in any manner to aid in the transaction of the business of any insurance company incorporated in this State, or out of it, without first procuring a certificate of authority from the Board. TEX. INS.CODE art. 21.01. Suretyship companies are expressly subject to these licensing requirements. Id. art. 1.14-1, § 2(a)(2), art. 21.14; see Great Am. Ins. Co., 908 S.W.2d at 422-23 (Tex.1995) (acknowledging that parts of the Insurance Code relating to unauthorized insurance apply to sureties). Although INA violated the Insurance Code by allowing Commonwealth's agents to solicit its surety bond applications and fees, there is no evidence that this was a producing cause of the Investors' damages. Had INA presented the surety bond applications with its own licensed agents, it would not have precluded Ace and Gunnels from making representations about the soundness of the Overlord programs or from touting INA's involvement in the programs. The Investors claim that INA's violation of the Insurance Code allowed Ace and Gunnels to also misrepresent the Investors' obligations under the surety bonds. They complain that Ace and Gunnels misled them to believe that in the event of default they risked, at most, the loss of their partnership interests. However, the jury found that INA made no misrepresentations about the terms or conditions of the surety bond. These jury findings are supported by the language of the PPMs themselves, which disclosed that the Investors were personally liable on the bonds. Since Ace's and Gunnels's solicitation of the surety bond documents and fees were not a producing cause of the Investors' damages, such conduct cannot support a recovery under the DTPA.