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St. Mary's Law Journal

Publisher

St. Mary's University School of Law

Abstract

Texas’ Assigned Risk Plan provides motor vehicle liability coverage to high-risk drivers who can’t obtain private insurance. However, there are two unresolved questions concerning assigned risk in Texas. The first is whether an independent insurance broker who drafts a policy for a high-risk driver is the agent of the insured or of the insurer. Several jurisdictions have determined that the assigned risk broker is the agent of the insured, and Texas should follow suit. Generally, the driver contacts a broker to file an application under the Plan with the state. The insurer assigned to the case must issue a policy to the driver, but the insurer and broker usually have no ties warranting imposition of an agency relationship. Theories in opposition to this general rule usually require a fact intensive analysis or go against the assigned risk plan’s statutory language. The second question is whether the Plan imposes absolute liability on insurers who issue an assigned risk policy that wasn’t required to show proof of financial responsibility. Texas requires that all high-risk drivers apply for insurance through the Plan, but Texas only requires some high-risk drivers to show proof of financial responsibility. The Plan imposes absolute liability on the insurer who issues an assigned risk policy that certifies financial responsibility. Absolute liability does not attach in certain situations, including when the policy is filed improperly. If exceptions to absolute liability exist when proof of financial responsibility is required, logic dictates that the insurer shouldn’t be held absolutely liable where proof of financial responsibility is not required. Therefore, where there is no agency relationship between the broker and the insurer, or where proof of financial responsibility has not been required for the issuance of an assigned risk policy, the insurer should be allowed to plead any policy violation defenses.

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