St. Mary's Law Journal


In Vail v. Texas Farm Bureau Mutual Insurance Company, the Texas Supreme Court held a private cause of action for unfair insurance claim settlement practices exists under the Texas Deceptive Trade Practices Act and Insurance Code (DTPA). The DTPA and Insurance Code have repeatedly been used against the insurance industry in the areas of first and third-party claims, particularly in cases involving sales misrepresentations and post-loss claims misconduct. The goal of DTPA is to provide adequate safeguards to aggrieved consumers and, therefore, a broad interpretation of the act allows the courts to provide consumers a remedy and deter the continuance of deceptive practices. The court, in allowing a first party claim against an insurance company, is finally granting relief previously available to most other insured individuals but not to first party claimants.

The individual who pays premiums to obtain and retain coverage now has a remedy against the insurance company that wrongfully denies claims. This remedy goes beyond suing for the premium plus interest and attorney’s fees or seeking a cease-and-desist order issued by the State Board of Insurance if the insurer’s conduct is “frequent.” Since DTPA’s purpose is to protect the consumer and deter deceptive or unfair acts and practices, a private cause of action given to a first-party claimant, with the prospect of treble damages, will enhance DTPA’s deterrence objective. Faced with this possibility, more insurance companies might be willing to settle before trial, thus eliminating the flood of litigation which some predict may be the result of this decision.


St. Mary's University School of Law