Houston Attorneys Obtain Dismissal Against Third-Party Coverage Claims

Deceptive Trade Practices Act Claims Against Third-Party Claimant

Around July 2024, Plaintiff took her 2017 Toyota Sequoia to Mr. Detail for a brake fluid flush, a coolant flush, and an oil change. Mr. Detail completed the agreed services to Plaintiff’s vehicle. About 7 days later, while returning to Texas from a road trip to Florida, Plaintiff’s vehicle overheated in Winnie, Texas.  Plaintiff alleged that her vehicle suffered a blown head gasket due to issues with the coolant system directly resulting from Mr. Detail’s previous coolant flush service.

After the incident, Plaintiff presented her claims for property damages to the insurer of Mr. Detail, Ohio Security Insurance Company, as a third-party claimant. In October 2024, Plaintiff filed her lawsuit against OSIC’s insured, Mr. Detail, for negligence, breach of warranty, DTPA breach of warranty, DTPA laundry-list violations, and unconscionable action or course of action. Additionally, Plaintiff brought and asserted claims and the following causes of action against OSIC and Liberty: (1) Texas Deceptive Trade Practices Act Laundry-List Violations and (2) Unconscionable Action or Course of Action.

In her Petition, Plaintiff alleged that Plaintiff was suing Defendants—in addition to Mr. Detail—because Defendants independently, separate and apart from the conduct of their insured, caused Plaintiff injury by independently violating the DTPA, separate and apart from the DTPA violations of Mr. Detail.

Rule 91a: Dismissal of Causes of Action With No Basis in Law or Fact

Plaintiff had no legal standing to bring direct claims against Defendants as a third-party claimant. Plaintiff’s claims against Defendants violate the no direct-action rule in Texas. The law is well settled that Texas is not a direct-action state. See Pain Control Institute, Inc. v. GEICO Gen. Ins. Co., 447 S.W.3d 893 (Tex. App. .— Dallas 2014, no pet.); Jones v. CGU Ins. Co., 78 S.W.3d 626, 629 (Tex. App.— Austin 2002, no pet).

Under the no direct-action rule, Plaintiff does not have standing to bring suit against Liberty and OSIC, Mr. Detail’s insurance carrier, because Texas law only allows a plaintiff to bring a suit directly against the tortfeasor’s insurance carrier if: “(1) the insurance company is by statute or contract directly liable to the person injured or damaged; or (2) the tortfeasor’s liability has been finally determined by agreement or judgment.” Pena v. Am. Residential Servs., LLC, No. H-12-2588, 2013 WL 474776, at *1 (S.D. Tex. Feb. 7, 2013); Tex. R. Civ. P 38(c), 51(b).

In other words, a third-party claimant has no direct cause of action against a liability insurer until the claimant has obtained a judgment against an insured party. See State Farm Cnty. Mut. Ins. Co. v. Ollis, 768 S.W.2d 722, 723 (Tex. 1989) (per curiam) (“[A third-party injured by an insured] cannot enforce the policy directly against the insurer until it has been established, by judgment or agreement, that the insured has a legal obligation to pay damages to the injured party.”); see also Aviles v. Aguirre, 292 S.W.3d 648, 649 (Tex. 2009); Angus Chemical Co. v. IMC Fertilizer, Inc., 939 .W.2d 138, 138 (Tex. 1997).

Additionally, In Transport Ins. Co. v. Faircloth, the Supreme Court of Texas decided whether there was any evidence of an actionable violation of the Texas Insurance Code, the Deceptive Trade Practices–Consumer Protection Act (DTPA), or common-law duties in connection with an insurer’s negotiation of a settlement with a minor.  See 898 S.W.2d 269, 271 (Tex. 1995).  Faircloth sued Transport Insurance Company, Lindsey & Newsom Claim Services, and Janet Jones (collectively, Transport) for their alleged misconduct in procuring the settlement of her claim against Allied Van Lines.  Id. at 271.  The Supreme Court held, “an action pursuant to Section 17.46(b)(23) of the DTPA was not available to Faircloth because an insurer negotiating with a third party is neither inducing a “consumer” into a transaction nor withholding information concerning “goods and services.””  Id. at 274.

Plaintiff, a third-party claimant, does not have standing to bring DTPA claims against Defendants (liability insurers of the alleged tortfeasor) before Plaintiff has established by judgment or agreement that the insured (alleged tortfeasor) has a legal obligation to pay damages to the injured party (Plaintiff). The Court granted Defendants’ Motion to Dismiss claims pursuant to Texas Rule of Civil Procedure 91a. The Court also awarded Defendants attorney fees.