Unfair and prohibited trade practices in Texas

The chapter is easier when conduct is classified by what it distorts. Misrepresentation distorts the contract. False advertising distorts the seller or product. Unfair discrimination treats comparable risks differently without a sound basis.

The rule in one view

The unfair trade practices are a family of named acts

Misrepresentation is the first and widest. It is an unfair method of competition to circulate an estimate, illustration or statement misrepresenting the terms, benefits or dividends of a policy, to misrepresent the financial condition of an insurer or the legal reserve system it operates on, or to use a policy name that misrepresents its true nature.

False advertising is misrepresentation aimed at the public. Publishing or circulating an advertisement, announcement or statement containing an untrue, deceptive or misleading assertion about the business of insurance is prohibited, whether it appears in print, on radio or television, through the Internet, or in any other manner.

Defamation is aimed at a competitor. A statement that is false, maliciously critical of or derogatory to the financial condition of an insurer, and calculated to injure a person engaged in the business of insurance, is an unfair practice.

Boycott, coercion and intimidation require concerted action. The prohibition reaches an act committed through concerted action or an agreement to commit one, that results in or tends to result in unreasonable restraint of or monopoly in the business of insurance. A single agent acting alone is doing something else.

The prompt payment clock runs in three steps and then charges interest

Step one is acknowledgement. Not later than the 15th day after receiving notice of a claim, the insurer must acknowledge receipt, commence any investigation, and request from the claimant all the items, statements and forms it reasonably believes will be required.

Step two is the decision. The insurer must notify the claimant in writing of acceptance or rejection not later than the 15th business day after receiving everything it required, and a rejection must state the reasons. If it cannot decide in time it must say why, and then decide within 45 days.

Step three is the money. Where the insurer has notified the claimant that it will pay, it must pay not later than the fifth business day after that notice, or after the claimant performs any act the payment was conditioned on.

Missing the deadline is expensive. An insurer not in compliance owes the claim, plus interest on it at 18 percent a year as damages, plus reasonable attorney fees. Separately, unfair claim settlement practices such as failing to attempt a prompt fair settlement where liability has become reasonably clear are prohibited in their own right.

Unfair discrimination is between like risks; sound actuarial principles are a defense

One subchapter lists protected characteristics outright. A person may not refuse to insure, refuse to continue coverage, limit the amount or kind of coverage, or charge a different rate because of race, color, religion, national origin, age, gender, marital status, geographic location, or disability.

The other subchapter is comparative. A person may not discriminate unfairly between individuals of the same class and of essentially the same hazard, in premium, in benefits payable, or in any term or condition of the policy.

The defense is actuarial, not commercial. A refusal, a limitation or a different rate does not violate the comparative prohibition if it is based on sound actuarial principles. Underwriting is lawful; arbitrary distinction is not.

The rebating chapters carry the same idea for life and for health, prohibiting distinctions between insureds of the same class and equal expectation of life, or of the same class and hazard, in rates, dividends or benefits. Unfair discrimination and rebating sit side by side in the Code because both give one buyer terms another buyer cannot get.

How the distinction appears in a question

Prompt claim payment provisions are also part of fair treatment. Their clocks and remedies differ from the marketing-practice labels, so do not answer a claim-delay question with rebating or a sales-misstatement question with prompt-payment language.

A practical way to study it

For study purposes, reduce unfair and prohibited trade practices in texas to the decision the examiner is testing. Write the trigger on one side of a card and the consequence on the other. Then change one fact in the scenario and decide whether the answer changes. That method is slower than rereading once and much faster than relearning the distinction after a practice test.

Name the victim of the distortion. If the falsehood changes what the buyer thinks the policy does, start with misrepresentation. If the issue is unequal treatment, compare the risk classes and ask whether an actuarial basis is supplied.

Where the summary stops

The Code contains overlapping remedies and detailed definitions. A single fact pattern may support more than one legal theory in practice, while a licensing item is written to identify the clearest named act.