1. Insurance Law 101
Stewart K. Schmella
McCormick, Lanza & McNeel, LLP
December 3, 2014
2. What is Insurance?
An insurance policy is a contract in which a promise is
conditioned upon the happening of a fortuitous event, an event
of chance.
In an insurance arrangement, the insurer assumes the risk
specified in a policy in exchange for a premium paid by an
insured.
In re Texas Ass’n of School Boards, Inc., 169 S.W.3d 653, 658-59
(Tex. 2005).
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3. Insurance vs. Gambling: Insurable Interest
Purpose: Discourage
use of insurance for
illegitimate purposes.
No insurable interest?
No right to recover
under policy.
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4. Different Types of Insurance: Auto
Liability
Collision
Comprehensive
Underinsured
Motorist
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5. Different Types of Insurance: Health
Medical
Vision
Dental
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6. Different Types of Insurance: Property
Homeowners
Renters
Flood
Valuable Personal
Property
Art
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7. Different Types of Insurance: Life
Term Life
Whole Life
Accidental Death and
Dismemberment (AD&D)
Short Term Disability
Long Term Disability
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8. Different Types of Insurance: Business
Commercial General
Liability (CGL)
Business Auto
Builder’s Risk
Employee Practices
Errors and Omissions
Directors and Officers
Workers’ Compensation
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9. First Party Insurance
The insured suffers loss
directly.
.
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10. Third Party Insurance
Other persons (not the
insured) sustain losses for
which the insured may be
legally responsible.
Claims-made vs.
occurrence-based.
Duty to defend vs. duty to
indemnify.
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11. Insurance Law: Three Broad Categories
Regulation of the business of insurance
Regulation of insurance policies
Regulation of claims handling practices
Texas Commissioner of Insurance Julia Rathgeber
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12. Texas Department of Insurance
Licensing
Compliance and enforcement
Financial regulation
Insurance fraud
Advertising
Technical Analysis
Workers’ Compensation
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13. The Insurance Policy
Elements:
Declarations
Coverage Agreement
Definitions
Conditions
Exclusions
Endorsements
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14. Claims Handling
The “special relationship.”
Insurer’s duty of good faith: settle claim
when the insurer’s liability is reasonably
clear.
The insurer must conduct a reasonable
and timely claims investigation.
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15. Insured’s Remedies
Breach of contract
Violations of Texas
Insurance Code
Violations of DTPA
The insured can recover
damages, attorney’s fees,
and statutory interest
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16. Moral hazard problem
Do insureds behave differently
because they have insurance?
Solutions: make the insured
share the risk.
Deductibles
Co-pays
Rate increases
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17. Questions?
Stewart K. Schmella
McCormick, Lanza & McNeel, LLP
4950 Bissonnet
Bellaire, Texas 77401
713-523-0400
sschmella@mlm-lawfirm.com
http://www.mlm-lawfirm.com
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Editor's Notes
Property: The insured derives pecuniary benefit or advantage by the preservation or continued existence of the property or would sustain pecuniary loss from its destruction.
Valdez v. Colonial Cty. Mut. Ins. Co., 994 S.W.2d 910, 914 (Tex.App.—Austin 1999, pet denied).
Life: (1) A close relative that wants the insured to live irrespective of money; (2) a creditor; and (3) one having a reasonable expectation of pecuniary benefit or advantage from the continued life of another.
Stillwagoner v. Travelers Ins. Co., 979 S.W.2d 354, 359 (Tex.App.—Tyler 1998, no pet.).