Lead Opinion
delivered the opinion of the Court,
We grant John D. Coats’ motion for rehearing and withdraw our prior opinion and judgment. The following is now the opinion of the Court.
This case presents three issues relating to an insurance company’s liability for its agent’s representations: first, whether the company’s liability depends on its authorization of misrepresentations; second, whethеr reliance on the representations is an element of recovery; and third, whether the insured’s damages should be trebled when the misrepresentations were not committed “knowingly.” The court of appeals affirmed the trial court’s judgment on a jury verdict against the insurer.
I.
Kenneth Harrell, a duly-appointed agent for Celtic Life Insurance Co.,
Harrell subsequently proposed that Coats purchase a specific policy written by Celtic— a policy that provided a maximum lifetime hospitalization benefit of $1 million. Harrell did not point out that psychiatric benefits under the policy were limited to $10,000.
Coats asked his business manager, Paula Englemann, to review Celtic’s brochure and discuss the matter further with Harrell. En-glemann noticed the $10,000 limit on benefits for psychiatric care, and questioned Harrell about its meaning. Harrell assured her that the $10,000 limit applied only to out-patient psychiatric care. Based on that representation, Englemann recommended to Coats that
In January of 1985, Kenneth Harrell obtained enrollment cards, filled out an application, and collected an initial premium in order to obtain Celtic coverage for Aloha’s employees. He then forwarded the enrollment cards, the application, and the premium check to Celtic. Celtic then sent an insurance policy to Harrell, who delivered it to Coats.
During the following August, Coats’ son was admitted to Shoal Creek Hospital for psychiatric care. Coats filed a claim for his son’s treatment; but despite Harrell’s continued assurances that the in-hospital psychiatric treatment was covered by the $1 million hospitalization limit, Celtic paid only $10,000 of the $27,000 in medical expenses.
Coats filed this suit seeking relief under article 21.21 of the Texas Insurance Code and the Texas Deceptive Tradе Practiees-Consumer Protection Act (DTPA), TexJBus. & Com.Code § 17.41-.63. After hearing the evidence, the jury made the following findings:
(1) Harrell made misrepresentations concerning the terms, benefits, provisions, or conditions of the insurance policy such as to be a producing cause of damages to Coats, but he did not do so knowingly;
(2) Harrell had authority to explain, on Celtic’s behalf, the benefits of the insurance policy; and
(3) Harrell did not have the authority of • Celtic to make representations concerning the insurance policy’s terms, benefits, provisions, or conditions which were outside the scope of the written document.
The jury also found that $17,000 would fairly and reasonably compensate Coats for his damages.
The trial court rendered judgment on the verdict in favor of Coats, and the court of appeals affirmed.
II.
Celtic argues that it should not be held responsible for Harrell's representations for two reasons: first, Harrell was a mere soliciting agent, and as such lacked authority to bind Celtic; and second, the jury’s answer to the third question — which was submitted over Coats’ objection — establishеs that Harrell was acting outside of his authority as Celtic’s agent. We reject both arguments.
In the contexts of life, health, and accident insurance, the Texas Insurance Code makes no distinction between recording agents and soliciting agents. See May v. United Serv. Ass’n of America,
There is no dispute that Harrell performed, on Celtic’s behalf, at least sоme of the acts listed in section 21.02. Thus, under that provision, Harrell was clearly Celtic’s agent.
An insurance company is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent’s authority. See, e.g., Royal Globe Ins. Co. v. Bar Consultants,
In the present case, the jury was asked whether Harrell had authority to explain, on Celtic’s behalf, the benefits of the insurance policy. The instructions accompanying this question exрlained that “authority” of an insurance agent can be actual or apparent; and in defining apparent authority, the instructions explained, among other things, that “[a]n insurance company may so clothe the agent with signs or indications of authority so as to lead a reasonably prudent person to believe that the agent actually has such authоrity.” The jury answered the question affirmatively.
Celtic does not contend that Harrell’s representations were so absurd that no reasonable person could have believed Harrell was acting within the scope of his authority.
Celtic’s liability is not affected by the finding that Harrell lacked authority to make representations outside the scope of the written document. In determining a principal’s vicarious liability, the proper question is not whether the principal authorized the specific wrongful act; if that were the case, principals would seldom be liable for their agents’ misconduct. Rather, the proper inquiry is whether the agent was acting within the scope of the agency relationship at the time of committing the act. See Leonard Lakin and Martin Schiff, The Law of Agency 144-45 (1984). The misrepresentation in the present case was made in the course of explaining the terms of the policy — a task the jury specifically found to be within the scope of Harrell’s authority. Thus, Celtic cannot escape liability on the basis that it did not authorize particular representations concerning the policy.
III.
Celtic asserts that Harrell is not entitled to recover under the DTPA because there has been no showing that Coats relied on Harrell’s representations. The trial court refused Celtic’s requested issue on reliance after Coats objected on the basis of Weitzel v. Barnes,
In Weitzel, we determined that the legislature had specifically rejected reliance as an element of recovery under the DTPA.
In the present case, the trial court submitted a question asking whether Harrell made any misrepresentations that were a “producing cause of damages” to Coats. This question, we hold, fairly presented the issue of producing cause to the jury. We decline Celtic’s invitation to overrule Weitzel.
IV.
Finally, Celtic argues that the trebling of actual damages was erroneous in view of the jury’s finding that Harrell’s misrepresentations were not made “knowingly.” Celtic points out that since 1979, the DTPA has required that conduct be committed knowingly before damages may be trebled. Tex. Bus. & Com.Code § 17.50(b)(1). Additionally, by amendment effectivе April 4, 1985, article 21.21 of the Texas Insurance Code has included a similar requirement of knowing conduct before damages may be trebled. Tex. Ins.Code art. 21.21 § 16(b)(1). Celtic argues that Coats’ cause of action did not accrue until August 1985, when his benefits were
We agree. A cause of action generally accrues at the time when facts come into existence that authorize a claimant to seek a judicial remedy. Murray v. San Jacinto Agency, Inc.,
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We conclude that Celtic is responsible for its agent’s misrepresentations. We modify the court of appeals’ judgment to reflect an award of only actual damages, rathеr than trebled damages; and because attorney’s fees were awarded on a percentage basis, we also modify the award of attorney’s fees. In all other respects, the judgment of the court of appeals is affirmed.
Notes
. See TexIns.Code art. 21.07, § 1(a) (requiring that any person desiring to act as an insurance agent be appointed by a duly-authorized insuranсe carrier).
. This figure apparently represents Coats’ expenses for psychiatric care, minus the $10,000 that Celtic actually covered. Celtic does not challenge this measure of damages.
. The acts listed include, among other things, soliciting insurance on behalf of an insurance company; transmitting an application or policy to or from the insurance company; receiving, collecting or transmitting an insurance premium; and adjusting a loss on behalf of an insurance company.
. Cf. Farley v. United Pac. Ins. Co.,
. Coats argues that his claim is governed by the version of the DTPA in effect at the time the misrepresentations were made; and that the DTPA incorporated the then-existing version of article 21.21, which did not include a "knowingly” requirement for trebled damages. See Vail v. Texas Farm Bureau Mut. Ins. Co.,
. Because of our holding on this issue, we do.not reach Celtic's argument that the courts below erred in awarding trebled prejudgment interest.
Dissenting Opinion
concurring.
I agree with the result in this case and join in Parts I аnd IV of Justice Spector’s opinion, but write separately to note that the mere authority of an agent to explain the terms of a policy does not render an insurer liable for all of that agent’s representations. Several states have limited the insurer’s liability to interpretations of the policy that are plausible or not patently absurd. See Mutual Benefits Life Ins. Co. v. Bailey,
I note that in Texas reliance is not an independent element of recovery under the DTPA. Weitzel v. Barnes,
In this case, though, we are unable to examine whether Harrell’s representations were in fact the producing cause of Coats’ damages because the reasonableness of Harrell’s explanation is not presented to us for review. Consequently, I join in the Court’s judgment.
Concurrence Opinion
concurs on rehearing,
I concur in the judgment of the Court and join in its opinion, so far as it goes. As the Court makes clear, our holding that an insurer is liable for the tortious misrepresentations of its soliciting agent made in the course of the agent’s authority is consistent with fundamental agency principles as applied in most other jurisdictions. On rehearing, however, Celtic, along with amicus curiae Jackson Nationаl Life Insurance Company, complains that our decision cannot be reconciled with the specific language of articles 21.02 and 21.04 of the Texas Insurance Code. Because I believe the Court should have addressed these contentions, I write separately.
Article 21.02 provides in part as follows:
Any person who solicits insurance on behalf of any insurance company ... shall be held to be the agent of the company for which the act is done, or the risk is taken, as far as relates to all the liabilities, duties, requirements and penalties set forth in this chapter. This article does not authorize an agent to orally, in writing, or otherwise alter, amend, modify, waive, or change a term or condition of an insurance policy or application for an insurance policy....
TexJns. Code art. 21.02 (emphasis added). Article 21.04 similarly provides as follows:
Any person who solicits an application for life, accident, or health insurance, or property or casualty insurance, shall, in any controversy between the insured or the insured's beneficiary and the company issuing any policy upon such application or between the insured or the insured’s dependents and that company, be regarded as the agent of the company, and not the agent of the insured, but such agent shall not have the power to waive, change or alter any of the terms or conditions of the application or policy.
Tex.Ins. Code art. 21.04 (emphasis added).
These provisions present a soliciting agent from contractually modifying the terms of a policy. Our decision does not conflict with this rule. We do not hold Celtic contractually liable because its agent modified the policy; rather, we hold Celtic vicariously liable under the Insurance Code and the Deceptive Trade Practices Act for its agent’s tortious misrepresentation.
Jackson contends that this is a distinctiоn without a difference. Imposing liability on Celtic for Harrell’s misrepresentations, according to Jackson, is tantamount to allowing the agent to modify the policy. I disagree. Although in this ease Coats recovered the expense of his son’s treatment as if it had been covered under the policy, he was able to do so only because the jury found that Harrеll’s conduct was a producing cause of such damages. That finding is not before us for review, as Celtic does not challenge the measure of damages. But Coats did not obtain a policy covering psychiatric treatment in excess of $10,000, and Harrell's misrepresentations did not, standing alone, make Celtic liable for non-covered treatments during the policy рeriod.
Our holding is merely an extension of the Court’s decision in Royal Globe Ins. Co. v. Bar Consultants,
. The extent of damages produced by a misrepresentation concerning the scope of coverage might depend on such factors as when the representation was made, whether the represented coverage was in fact available from other sources, the difference in vаlue between the policy as represented and the policy as actually delivered, and whether the insured incurred expenses that otherwise would not have been incurred based on the representation.
. The Court recognized this limitation even though at that time article 21.02 did not expressly so provide. The present language expressly limiting a soliciting agent's authority to alter or modify policy terms was added by the Legislature in 1985. See Acts 1985, 69th Leg., ch. 203, § 1, eff. May 24, 1985.