BROWN BROWN OF TEXAS INC v. OMNI METALS INC (2008)

OPINION

The central issue in this appeal is whether a person who is not a party to an insurance policy can nonetheless recover from the insurance company or its agent because of incorrect information regarding the scope of coverage. Here, the noninsured person sued the insurance company and its agent on negligence and DTPA theories based on the insurance agent's oral statement and written certificate of insurance, which both erroneously represented that coverage existed for the uninsured person's property. We hold that because the existence of coverage is a question of law to be determined by interpreting the insurance policy itself, a person who is not a party to an insurance policy cannot recover from the insurance company or its agent based on information outside of the actual policy. See Via Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex.2006) (holding that party may not rely on certificate of insurance, but must ask for insurance policy itself).

Facts

Appellee Omni Metal, Inc. is a buyer and seller of steel coils. Port Metal Processing, Inc. stored steel belonging to Omni, processed that steel into coils, and temporarily stored the finished coils for Omni. Port Metal purchased insurance from appellant Transcontinental Insurance Company originally through the Russell Lee Jacobe Insurance Agency. The Jacobe agency was acquired on November 1, 1994 by Poe & Brown of Texas, Inc., which is now known as appellant Brown & Brown of Texas, Inc.

Blake McKnight, Port Metal's president, testified that he asked Danny Sparks, an agent for Jacobe and later Poe & Brown, to insure the Port Metal warehouse and its inventory, including steel that Port Metal's customers were storing at the warehouse. However, the original policy written in 1992 excluded from coverage property held in storage or property for which a storage charge is made, as did the 1993, 1994, and 1995 renewals. McKnight said he asked Sparks about the exclusion and was told that it meant Port Metal could not store property on its premises that was unrelated to its business. Sparks testified that by June 1993 he knew Port Metal was charging a storage fee to its customers like Omni and that he failed to explain to McKnight that the insurance policy excluded the steel Port Metal was storing at Omni. McKnight testified that he did not read the 1995 insurance policy in effect at the time of the fire and that he was aware that Poe & Brown had recommended that he review the policy carefully.

Omni's president, Arthur Tomes, spoke on several occasions with McKnight and inquired if Omni's steel at Port Metal's warehouse was insured. Omni's bank required that Omni request certificates of insurance from Jacobe and later Poe & Brown to document Port's Metal's coverage. The 1993 certificate contains the incorrect statement that Port Metal's insurance coverage “INCLUDES PROPERTY OF OTHERS IN CUSTODY OF INSURED.” The 1994 and 1995 certificates contain the alleged misrepresentation that the insurance covers “all risk.” All three certificates contain the following disclaimer: “THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS ON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.”

Tomes testified at trial that he did not read the disclaimer and that it would not have made a difference to him if he had read the disclaimer:

Q. Now when you received, or when Omni would receive a certificate of insurance, what was done with it?

[Tomes] They would be put in a file.

Q. All right. Did you personally read and review every single certificate of insurance that came across to Omni?

[Tomes] No.

Q. Why not?

[Tomes] I would never-I mean, I'm assuming that what we are expecting to get under coverage-the coverage would be what they told us it was and that, you know, those would just be put in the file for our edification.

If someone asked us-or the bank or someone else, I mean, I would-I wouldn't read a policy. I don't think anybody reads their insurance policies from front to bottom.

Q. Did you actually receive the insurance policy rather than the certificate of insurance?

[Tomes] No.

Q. Did you ever ask for an insurance policy?

[Tomes] No.

Q. Did you ever ask for an insurance policy from Poe & Brown related to Port Metal Processing?

[Tomes] No.

Q. Why not?

[Tomes] Because we would think that the certificate of insurance would be adequate to cover what we needed.

Port Metal's warehouse burned down on December 5, 1995 and Omni lost $2,600,000 in steel. Transcontinental Insurance Company denied coverage on Omni's steel that was stored at Port Metal. Omni filed suit, and settled separately with Port Metal, Electrical Wire & Cable Company, Inc., Electrical Redesign Company, Lighting Surplus, Harry Schubeck, Jr., and Textron, Inc. for a total of $1,660,000. Omni spent $740,000 in attorney's fees in that suit that were not legally recoverable.

Omni's suit against Transcontinental and Poe & Brown was severed from the claims against the parties who settled. In the severed suit, Omni raised claims against Transcontinental and Poe & Brown of misrepresentation, failure to disclose, and violations of the DTPA. Transcontinental and Poe & Brown successfully moved for summary judgment on the basis there was no misrepresentation or false or misleading act. The summary judgment was appealed to the Fourteenth Court, which reversed and remanded. Omni Metals, Inc. v. Poe & Brown, Inc., No. 14-00-01081-CV, 2002 WL 1331720 (Tex.App.-Houston [14th Dist.] June 13, 2002, pet. denied). The Fourteenth Court held, among other things, that (1) Transcontinental and Poe & Brown had a duty to disclose additional coverage information to Omni, (2) fact issues existed concerning misrepresentations made to Omni, and (3) fact issues existed concerning misrepresentations made to Port Metal, on which Omni relied.

On remand, the jury found the following:

1. Transcontinental and Poe & Brown made negligent misrepresentations on which Omni justifiably relied.

2. Damages for the negligent misrepresentations of $704,267 (value of steel), $370,964.72 (expenses incurred in selling the steel), and $740,000 (attorney's fees incurred by Omni in the lawsuit against the parties who caused the fire).

3. Transcontinental and Poe & Brown engaged in an unfair or deceptive act that damaged Omni.

4. Damages for the unfair or deceptive act of $704,267 (value of steel), $370,964.72 (expenses incurred in selling the steel), and $740,000 (attorney's fees incurred by Omni in the lawsuit against the parties who caused the fire).

5. Transcontinental and Poe & Brown knowingly engaged in their conduct.

6. Treble damages for the knowing conduct of $1,620,000 for Poe & Brown and $1,080,000 for Transcontinental.

7. Attorney's fees of $161,050.07 (preparation and trial), $50,000.00 (appeal to court of appeals), and $25,000.00 (appeal to supreme court).

8. Transcontinental's and Poe & Brown's negligence caused the injury.

9. Transcontinental was 40% responsible and Poe & Brown 60% responsible.

Discussion

On appeal to this Court, Poe & Brown raises four issues: (1) the evidence is factually and legally insufficient to establish: (a) it made a negligent misrepresentation and engaged in a DTPA unfair or deceptive act; (b) the representation caused Omni's damages; (c) Omni justifiably relied; and (d) it acted knowingly; (2) the DTPA does not apply to Omni because Omni is not a consumer under the DTPA or an insured or third party beneficiary under the insurance policy; (3) attorney's fees in another lawsuit are not recoverable as proper damages; and (4) the trial court erred in not giving Poe & Brown a proper credit for the $1,660,000 settlement in the other lawsuit.

Transcontinental raises the following eight issues: (1) Omni failed to submit a separate issue in the charge on Poe & Brown's actual or apparent authority; (2) as a matter of law, Poe & Brown had no actual authority to act as Transcontinental's agent; (3) Omni's misrepresentation claim is not viable in light of the fact that no one at Omni read the certificates of insurance and the certificates disclaim any representation regarding coverage; (4) statements by Port Metal's president, Blake McKnight, to Omni are not actionable against Transcontinental; (5) Omni may not recover attorney's fees ($740,000) for pursuing a separate tort action; (6) additional damages of $1,080,000 are erroneous because Transcontinental had no contact with Omni and there is no evidence Transcontinental knew of any wrongful act; (7) the trial court erred in not giving a $1,660,000 settlement credit to Transcontinental that Omni received from responsible third parties; and (8) the trial court erred in not admitting evidence of a prior federal judgment.

Omni's reliance

In both Poe & Brown's issue 1 and Transcontinental's issues 3 and 4, the two appellants argue that Omni could not detrimentally rely on either the certificates of insurance or the statements from Danny Sparks that McKnight passed on to Tomes. In light of the supreme court's Via Net, we agree. 211 S.W.3d at 314.

Both the negligent misrepresentation and DTPA¹ claims submitted to the jury in questions 1² and 3³ require detrimental reliance. See Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 693 (Tex.2002). It has long been the law that a party to an arm's length transaction must exercise ordinary care and reasonable diligence for the protection of his own interests, and a failure to do so is not excused by mere confidence in the honesty and integrity of the other party. Thigpen v. Locke, 363 S.W.2d 247, 251 (Tex.1962). Even a party to a contract must exercise due diligence to protect its own interests. See Barfield v. Howard M. Smith Co., 426 S.W.2d 834, 840 (Tex.1968).

Insurance policies are interpreted according to the rules of contract construction. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex.2003). If the insurance policy is worded so that it can be given a definite meaning or a certain legal meaning, then the policy is not ambiguous. Id. If the policy is not ambiguous, then the court construes the policy as a matter of law. Id. No party to this appeal has claimed that the insurance policy is ambiguous, so the issue of whether the insurance policy provided coverage for Omni is one for the court to decide as a matter of law. Here, Omni was not even a party to the insurance contract, yet Omni neither requested a copy of the insurance policy, nor read the certificate of insurance that clearly stated that the certificate could not change the terms of the insurance policy. Tomes, Omni's president, testified that he chose instead to rely on “what we are expecting to get under coverage-the coverage would be what they told us it was.”

The supreme court in Via Net acknowledged there is little use for certificates of insurance if a contracting party must verify them by reviewing the full insurance policy. 211 S.W.3d at 314. Nevertheless, the court proceeded to say that “those who take such certificates at face value do so at their own risk.” Id. Here, Omni chose to rely on oral representations, something even a party to a contract cannot do when the oral representation directly contradicts the express, unambiguous terms of a written contract. See DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858-59 (Tex.App.-Houston [14th Dist.] 2003, pet. denied) (en banc).

Following the reasoning of Via Net, we hold as a matter of law that Omni could not detrimentally rely on either the certificates of insurance or the oral representations in order to recover on its negligent misrepresentation and DTPA claims. We sustain (1) Poe & Brown's issue 1 as it relates to the legal sufficiency of the negligent misrepresentation and DTPA claims and (2) Transcontinental's issues 3 and 4. We do not reach the factual sufficiency portion of Poe & Brown's issue 1, and we will discuss the portion of Poe & Brown's issue 1 relating to the additional award of $1,620,000 in DTPA treble damages later.

Recovery of $740,000 in attorney's fees

In both Poe & Brown's issue 3 and Transcontinental's issue 5, the two appellants challenge the damage award of $740,000 in attorney's fees, which was the unrecoverable amount of attorney's fees that Omni incurred in its suit against Port Metal, Electrical Wire & Cable Company, Inc., Electrical Redesign Company, Lighting Surplus, Harry Schubeck, Jr., and Textron, Inc. Omni received this “damage” award against the two appellants by relying on the wrongful-act exception recognized by the Eastland Court of Appeals. See Baja Energy, Inc. v. Ball, 669 S.W.2d 836, 838-39 (Tex.App.-Eastland 1984, no writ). Without deciding whether we agree with this wrongful-act exception, we sustain Poe & Brown's issue 3 and Transcontinental's issue 5 because we have already reversed Omni's DTPA claim on which this damage award of attorney's fees was predicated.

Award of additional DTPA treble damages

In a portion of Poe & Brown's issue 1 and in Transcontinental's issue 6, the two appellants challenge the additional DTPA treble damage award of $1,620,000 for Poe & Brown and $1,080,000 for Transcontinental for engaging in knowing conduct under the DTPA.⁴ As with the attorney's fees damage award, the treble damage award was predicated on awarding DTPA damages under jury question 3, which we have already reversed. Accordingly, we sustain the portion of Poe & Brown's issue 1 related to the legal sufficiency of the treble damages and Transcontinental's issue 6.

Settlement credit and exclusion of prior federal judgment

In both Poe & Brown's issue 4 and Transcontinental's issue 7, the two appellants contend the trial court erred in refusing to give them a judgment credit for the $1,660,000 settlement Omni previously received from Port Metal, Electrical Wire & Cable Company, Inc., Electrical Redesign Company, Lighting Surplus, Harry Schubeck, Jr., and Textron, Inc. In Transcontinental's issue 8, it contends the trial court erred in refusing to admit into evidence a prior federal court judgment in its favor in a suit between Port Metal and Transcontinental. These issues are moot in light of our disposition on the other issues in this appeal.

Conclusion

We reverse the judgment of the trial court and render judgment that Omni take nothing.

DISSENTING OPINION

This case concerns the liability of an insurance company's agent for the dissemination of false or misleading information regarding insurance coverage. The majority holds that the recipient of such information-whether a policy holder or a third party beneficiary of the policy-can never rely on any information provided by the insurer or the agent except the policy itself and can never recover damages from the insurance company or the agent for any misrepresentation that caused him harm; all recovery against insurance companies is strictly limited to the coverage provided by the policy. The majority opinion states:

The central issue in this appeal is whether a person who is not a party to an insurance policy can nonetheless recover from the insurance company or its agent because of incorrect information regarding the scope of coverage. Here the noninsured person sued the insurance company and its agent on negligence and DTPA theories based on the insurance agent's oral statement and written certificate of insurance, which both erroneously represented that coverage existed for the uninsured person's property. We hold that because the existence of coverage is a question of law to be determined by interpreting the insurance policy itself, a person who is not a party to an insurance policy cannot recover from the insurance company or its agent based on information outside of the actual policy. See Via Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex.2006) (holding that party may not rely on certificate of insurance, but must ask for insurance policy itself).

Brown & Brown of Texas, Inc. v. Omni Metals, Inc., No. 01-05-01190-CV, slip op. at 1-2 (Tex.App.-Houston [1st Dist.] Mar. 20, 2008, no pet. h.) (emphasis added). The majority's holding relies solely on the broadest possible reading of dicta in a per curiam Texas Supreme Court opinion, Via Net v. TIG Insurance Company,¹ which addresses the statute of limitations in a contract case. The majority opinion is sweeping and unsupported by an argument from applicable law or by a colorable argument for a judicial change in the law; it is contrary both to the law of the case set by the Fourteenth Court of Appeals in Omni Metals, Inc. v. Poe & Brown of Texas, Inc.² and to binding precedent; and it has negative implications for insurance law, negligent misrepresentation law, and Deceptive Trade Practices Act³ claims.⁴

Therefore, I disagree with the majority's holding and respectfully dissent.

Discussion

This case is on appeal from a trial court judgment in favor of Omni Metals following remand from the Fourteenth Court of Appeals. The Fourteenth Court reversed a summary judgment granted to Poe & Brown, Brown & Brown's predecessor, on Omni Metals' negligent misrepresentation and DTPA claims arising out of oral and written representations made by Poe & Brown to Omni Metals and Port Metals that Port Metals had bailee insurance for goods stored at Port Metals. See Omni Metals, Inc. v. Poe & Brown of Texas, Inc., No. 14-00-01081-CV, 2002 WL 1331720 (Tex.App.-Houston [14th Dist.] 2002, pet. denied) (not designated for publication). The bailee policy did not, in fact, cover Omni Metals' losses because of an exclusion for stored goods for which Port Metals charged a storage fee.

The Fourteenth Court first held in Omni Metals that, having disclosed that Port Metals had bailee insurance which covered “all risks,” Poe & Brown had a duty to disclose the storage fee exclusion, of which it was aware but Omni Metals was not. Id. at *3-4 (holding that, in a commercial context, “when one makes a representation, new information must be disclosed when that new information makes the earlier representation misleading or untrue”). The court relied upon Hoggett v. Brown, 971 S.W.2d 472 (Tex.App.-Houston [14th Dist.] 1997, pet. denied) (holding that actionable fraud by non-disclosure arises when one has a duty to disclose, which may arise (1) when there is a fiduciary relationship or (2) “when one voluntarily discloses information,” without disclosing the whole truth or (3) when one “makes a representation” and “new information makes the earlier representation misleading or untrue” or (4) “when one makes a partial disclosure and conveys a false impression”). The Fourteenth Court further held that a fact issue existed as to “whether [Poe & Brown] misrepresented coverage because, under the circumstances, the ‘all risk’ certificate of insurance was false and misleading.” Omni Metals, 2002 WL 1331720, at *4-5 (holding that “a fact issue exists as to whether appellees misrepresented the coverage afforded by the policy”). The court followed Black v. Victoria Lloyds Insurance, 797 S.W.2d 20 (Tex.1990), in holding that a fact issue exists concerning misrepresentation of liability insurance coverage for personal use when an insurance company represents that “complete ․ insurance” has been provided when it has not. Omni Metals, 2002 WL 1331720, at *5; see Black, 797 S.W.2d at 24 (holding that insurance identification card provided to driver of leased vehicle by lessor's insurance company, which stated only that policy complied with “the compulsory laws of the State of Texas,” but did not indicate that driver of leased vehicle did not have liability insurance coverage for personal use of vehicle, raised fact issue concerning misrepresentation of insurance coverage).

The Fourteenth Court further held that a fact issue existed as to whether Poe & Brown could be held liable to Omni Metals if it “misrepresented coverage to Port Metal” by telling Port Metal's president that the policy would cover “[p]roduct owned by my customers for processing in-located in my facility.” Omni Metals, 2002 WL 1331720, at *8. The Court pointed out that “[c]ertain persons, other than the direct recipient of a misrepresentation, can sue for negligent misrepresentation.” Id. at *7 (citing Restatement (Second) of Torts § 552(2) (1977) (describing persons who may sue for negligent misrepresentation as including person or persons “for whose benefit and guidance [the defendant] intends to supply the information or knows that the recipient intends to supply it” and “through reliance upon it in a transaction that [the defendant] intends the information to influence or knows that the recipient so intends or in a substantially similar transaction”)).

Finally, in response to Poe & Brown's argument that Omni Metals had a duty to read the policy itself, the Fourteenth Court held, “Omni's failure to read the policy does not support the granting of summary judgment.” Omni Metals, 2002 WL 1331720, at *8. In other words, the court held that Omni Metals had no legal duty to read the policy upon which judgment against it could be based. Again, the Fourteenth Court relied on the Texas Supreme Court's opinion in Black, 797 S.W.2d at 21-25. See Omni Metals, 2002 WL 1331720, at *8.

Nevertheless, in this appeal from the trial court judgment that followed on remand from the Fourteenth Court, the majority opinion contradicts the ruling of the Fourteenth Court on all the foregoing points, which constitute the law of the case. First, it disregards the duty of full disclosure by a person who makes a false or misleading partial disclosure without citing any law to support its negation of that duty and in contradiction to well-established law and the law of the case. Second, in its place, the majority opinion creates-after the trial of the case on negligent misrepresentation principles-a retroactive duty of due diligence on the part of the recipient of misrepresented coverage information that is entirely unprecedented in law and contrary to the well-established law of negligent misrepresentation and the law of the case. The majority opinion thus reverses not only bedrock principles of the law of negligent misrepresentation, it also eliminates the statutorily conveyed right of a person harmed by an insurance company's dissemination of false or misleading information to sue the company or its agents under the DTPA. See Tex. Bus. & Com.Code Ann. § 541.151; Tex. Civ. Prac. & Rem.Code Ann. § 17.46.

The majority opinion effectively holds that, as a matter of law, an insurer may make any misrepresentation it likes in a certificate of insurance or in any other communication regarding insurance coverage and no one for whose benefit the information is provided may rely upon the oral or written representation. Rather, the recipient of information provided by an insurance company or its agent is protected only insofar as the terms of the policy provide. This is caveat businessman and caveat consumer with a vengeance.

The majority opinion contains no authority in support of the creation of a duty of a third party beneficiary of an insurance policy to determine the existence and extent of coverage of its claims by reading the policy and no authority for its holding that a person who is not a party to an insurance policy may not rely on any false or misleading oral or written representation regarding insurance coverage made by an insurance company or its agent, but may rely solely on the actual terms of the policy. The only authority is Via Net, which the majority opinion does not quote and which, in fact, establishes no such duty and contains no such holding.

Via Net was a breach of contract case. The sole issue was whether the discovery rule applied to defer the running of the statute of limitations on a breach of contract claim brought by a third party against an insured and its insurance agent. The agent had represented in a certificate of insurance furnished to the plaintiff that the plaintiff had been added to the insured's general liability policy as an additional insured when it had not. Via Net, 211 S.W.3d at 312. The supreme court held that the failure of an insured to add a third party as an additional insured is not an “inherently undiscoverable” breach of the contract to add the third party and, therefore, “by its nature, unlikely to be discovered within the prescribed limitations period despite due diligence,” as required to apply the discovery rule to toll the running of limitations on the breach. Id. at 313, 315.

The court further held that, in that case, the third party insured did not act diligently to protect its interests, as required by parties to a contract reached at arm's length. Id. at 314. The court observed, “If a contracting party responds to [a request for information needed to verify contractual performance] with false information, accrual may be delayed for fraudulent concealment,” but it stated that, in the context of a contract case in which the discovery rule is asserted to halt the running of the statute of limitations on a claim of breach, a party's “failing even to ask for such information is not due diligence.” Id. at 314. The court further observed that, in that case, the third party insured “argues that it acted diligently by obtaining a certificate of insurance listing it as an additional insured.” But, “[g]iven the numerous limitations and exclusions that often encumber such policies, those who take such certificates at face value do so at their own risk.” Id. at 314. The court also pointed out that the third party insured had learned of the breach within a few months of its occurrence. Id. It then held that the discovery rule did not apply in that case, but it specifically limited its holding by stating, “We do not hold today that the discovery rule can never apply to breach of contract claims,” but merely that “the discovery rule is inapplicable to defer accrual of the claim asserted here.” Id. at 314, 315.

Here, unlike the plaintiff in Via Net, Omni Metals is not suing Brown & Brown for breach of contract. Nor does it claim that it had a contract with either Port Metals or Poe & Brown, which one or the other, or both, breached. Nor does it claim that the discovery rule applies to this case. It claims-as the Fourteenth Court correctly understood and the jury found-that Poe & Brown made a negligent misrepresentation of insurance coverage to it and to Port Metals upon which it relied in the course of its business dealings, that, having made a misrepresentation that was false or misleading (because a bailee in Omni Metals' position was not covered by Port Metal's bailee policy), Poe & Brown had a duty to disclose the complete and correct information, and that Poe & Brown failed to do so, making itself liable to Omni Metals for the damages Omni Metals suffered as a result of the misrepresentation, namely the value of its goods stored at Port Metals.

The issue is, thus, not the failure of the plaintiff to discover a breach of contract, but failure of the defendant to disclose information necessary to make its response to a request for information relied on in the course of business dealings not false and misleading-precisely the situation the supreme court in Via Net acknowledged could, if intentional, constitute fraudulent concealment, even for purposes of triggering the discovery rule. See id. at 314. Moreover, this is exactly the type of negligent misrepresentation and DTPA case that is controlled by Black and Hoggett, the cases upon which the Fourteenth Court relied for its holding in Omni Metals in overturning the summary judgment entered in favor of Poe & Brown and remanding the case for the trial from which this appeal is taken. See Omni Metals, 2002 WL 1331720, at *3-5; Black, 797 S.W.2d at 24; Hoggett, 971 S.W.2d at 487. The majority opinion, however, disregards the applicable law set out in Omni Metals and the cases cited therein; it ignores the fact that Via Net was a case construing the application of the discovery rule in a breach of contract dispute; it disregards the strictures placed on the scope of the Via Net opinion in Via Net itself; and it sweepingly characterizes Via Net as “holding that [a] party may not rely on [a] certificate of insurance, but must ask for [the] insurance policy itself,” in any circumstances whatsoever. Brown, 01-05-01190-CV, slip op. at 2. It then extends Via Net even further than it has already extended it, to apply not only to contract cases, and not only to parties to a contract, but to negligent misrepresentation and DTPA cases brought by anyone. And it takes as its sole support for this sweeping expansion of protection for insurance companies and their agents the supreme court's statement in dictum in Via Net that a party to an insurance contract charged with due diligence takes an insurance certificate at face value at its own risk. See Brown, 01-05-01190-CV, slip op. at 2; Via Net, 211 S.W.3d at 314.

The holding in this case directly contradicts not only the law of the case and established negligent misrepresentation and DTPA law, it is of such sweeping breadth as a general principle of law as to apply to a wholly undetermined variety of situations. Usually pronouncements of that breadth are left to legislatures. To take just one example, the holding that a person who is not a party to an insurance policy can never under any circumstances whatsoever rely on an insurance company's misrepresentation of insurance coverage “based on information outside of the policy itself”-i.e., based on an oral or written misrepresentation-but can rely only on the policy itself contradicts well-developed Employee Retirement Security Act (ERISA) law governing thousands of cases. See Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (2006).

It is well established that ERISA broadly preempts claims against insurance companies and their agents regarding insurance coverage provided by an employer to its employees, but it exempts from preemption causes of action for misrepresentations regarding coverage made by insurance companies or their agents to third-party providers of services. Id. at §§ 1132, 1144 (providing for preemption and exclusion of claims by ERISA). Thus, if an insurance company, or its agent, represents to a third-party service provider that the beneficiary of an employer-provided insurance policy subject to the Act is covered by the policy, and if the insurance company is wrong, the claim is not preempted by federal law, and the insurer can be sued by the service provider under state law and can be held liable for the cost of the services provided. See Memorial Hosp. v. Northbrook Life Ins. Co., 904 F.2d 236 246 (5th Cir.1990).

The United States Court of Appeals for the Fifth Circuit has explained, citing this Court:

Article 21.21 of the Texas Insurance Code 5 provides a right of action and allows treble damages and attorneys' fees to “any person who has been injured” by certain enumerated “unfair methods of competition and unfair and deceptive acts or practices in the business of insurance.” Tex. Ins.Code Ann. art. 21.21 § 16(a) (Vernon 1981). A cause of action under article 21.21 against an insurance carrier for false representation of coverage by its agents to a hospital is recognized by Texas courts. See Hermann Hosp. v. National Standard Ins. Co., 776 S.W.2d 249 (Tex.App.-Houston [1st Dist.] 1989, no writ). 6

Id. at 246. The majority's opinion in this case contradicts Memorial Hospital v. Northbrook, and it implicitly overrules the case out of this court upon which Northbrook relies, Hermann Hospital v. National Standard.

In Hermann Hospital, we held that a hospital has standing to sue for damages it suffers by relying on an insurance company's misrepresentation as to coverage and benefits. We stated, “The supreme court has held that misrepresentations as to coverage and benefits are precisely the sort of conduct that give rise to a cause of action under” article 21.21, section 16(a) of the Texas Insurance Code, now section 541.151. 776 S.W.2d at 252 (citing Aetna Cas. & Surety Co., 724 S.W.2d 770, 772 (Tex.1987)). We explained:

We find that as a practical matter, the relationship between insurance companies and providers of health care is a direct one, with the health care provider acting in reliance on the representations of coverage made by the carriers. Hospitals and other health care providers must, and do, rely upon the insurance carriers representations of coverage in making their decision regarding admission of potential patients. If insurance coverage and benefits can be verified, the hospital will usually accept an assignment of benefits to insure it is paid for any services rendered. If insurance coverage and benefits cannot be verified, or if no coverage exists, the medical provider can then make alternative financial arrangements. To insulate the insurance carriers from liability leaves the medical care provider without recourse against the party causing its damage, if it acts on the representations of coverage. Had the insurance carrier not falsely or negligently provided information, appellant could have sought alternative means to ensure that it received payment for services before rendering them.

Hermann Hosp., 776 S.W.2d at 252 (emphasis added). Both the holding and the rationale of Hermann Hospital are directly applicable to the instant case.

In Hermann Hospital, we not only held that the plaintiff had standing to bring a DTPA claim against the insurance company under former article 21.21 of the Texas Insurance Code, we went on to reject the additional argument-made by Poe & Brown in this case, rejected by the Fourteenth Court of Appeals, but accepted by the majority of this panel-that an insurance company “renders a gratuitous service when verifying insurance coverage and thus, cannot be held to owe a legal duty to those seeking information.” Id. at 253. And we rejected that argument on the very ground cited by the Fourteenth Court in establishing the law of this case in Omni Metals: “It is well settled that even though one does not have a duty to act, if one acts voluntarily, he must do so with due care and is generally liable for negligence.” Id. (quoting Great Am. Mortgage Investors v. Louisville Title Ins. Co., 597 S.W.2d 425, 430 (Tex.Civ.App.-Fort Worth 1980, write ref'd n.r.e.)). We stated, “Therefore, the fact that this service is gratuitous does not negate the legal duty owed by [insurance companies and their agents] to those for whom they verify coverage.” Id. Nevertheless, in this appeal, the majority opinion simply overrides, and thus overrules, all of this law without making any attempt to distinguish it or even to acknowledge its existence.

Conclusion

Because I believe the majority opinion is unprecedented, contrary to the established law of the case upon which the case was tried below, contrary to the established law of this State, sweeping in its consequences, and profoundly damaging to the fabric of the law, I respectfully dissent. I would address the merits of the trial court's judgment under the law of the case.

SAM NUCHIA, Justice.

Justice KEYES dissenting.