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Insurance Law
South Texas College of Law Houston
Platts Jr., Henry S.

DTPA trumps everything.

Need to know the law of when a case was decided. The DTPA is amended yearly.
Ex. Case filed in 80’s is based on law of the 80’s.

1995 and 2003 DTPA are the ones to be concerned about.

Federal laws (Magnus and Moss) try to get information out. Clear disclosures. Full warranties and limited warranties are examples.
Congress thought if someone had a choice of full or limited warranties they would choose full warranties which would force other businesses to follow in order to compete. Fallacy is that no one offered full warranties to begin with.

Unique American (Texas) Approach as compared to rest of world-
Put everything into a private civil justice system.

Under DTPA before you can sue you have to give notice to defendant and an opportunity to settle.

1995 first big tort reform for DTPA. Did not like any treble damages, using against professionals, in injury cases (personal injury),

Pre 1995 DTPA –Page 574
Post 1995 DTPA (current) –Page 553

Current DTPA consists of 2000 and 2003 changes.

Only change in between 1995 and 2000 changes is the
Laundry List
(1) Laundry List 17.46(b)
Misrepresentation. Was there any misrepresentation. No intent required. Requirement to disclose. If you know it, disclose it. So there is a duty to warn. Did it have the capacity to deceive the consumer? Does not matter if there is more than one interpretation.

Understand that when dealing with laws from different years in the DTPA the numbers have actually changed. Ex. In 2001 #23 became #24.
In 2002 everything was renumbered right back. Ex. Failure to disclosure goes from #23 to #24.

Two things did not change in 1995 act.
1) Kept 17.44 Page 558. This prevented the elimination of all the precedence done under the DTPA.
17.44- “This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches
2) Didn’t change the definition of consumer. Is broad enough to.
17.45 (4) Page 5, 558.
17.45 (4)
“Consumer” means an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services, except that the term does not include a business consumer that seeks, or acquires by purchase or lease, any goods or services, except that the term does not include a business consumer that has assets of $25 Million or more, or that is owned or controlled by a corporation or entity with assets of $25 Million or more.
Who can’t sue. Excludes federal government, unincorporated business, trusts,


???????- If you didn’t consummate the transaction then you couldn’t sue.

Page 6
– Overruled this definition of consumer. You need “good faith intent” and “capacity.” So now for example you can sue as a consumer if you read an advertisement drive an hour away to the dealership to buy a car and the dealership will not sell the car as it was intentionally advertised for. They were just trying to lure you out there. No longer have to consummate the transaction to sue under the DTPA.

This bothered people.

Holeman v. Landmark Chevrolet Corporation
Page 10
– Dealership was selling cars at “all offers.” Every deal will be accepted no matter at a loss or profit.
One guy offered $100 for 8 cars.

Were not consumers because they were not using Martin’s “good faith.”

Plaintiffs are always allowed to deal with the language.

Kennedy v. Sale
Page 15

Acquires by Purchase = does not matter who pays to be a consumer.

Employees can be consumers. Doesn’t matter who pays for a purchase.
This is the leading case dealing with “acquires by purchase.”
“Free” and a “gift” does not mean something is excluded from the DTPA.
What does it mean to acquire?

Wellborn v. Sears Roebuck & Co.
Page 18
Acquired = Intended Beneficiary

Establishes the standard of acquired in the definition of consumer.
Woman bought a garage door opener. Her son tried to slide under the closing door while playing. He was subsequently killed.
Was he a consumer?

Although her son did not enter into a contractual relationship with Defendants, he acquired the garage door opener and the benefits it provided. He was an “intended beneficiary.”

Intended Benefit-
Incidental Benefit-

Real Life Application:
Must show the intent of the different parties (usually the person who bought product) for the intended use of the product. The intended beneficiaries/incidental beneficiaries.

Problem 1:
Write or type one page dissent of why this person should have been a consumer.

Exxon Corporation v. Dunn
Page 20

Dunn brings in car for gas fill up and battery recharging. He pays for it. Next day he brings in car to get A/C repaired. They can’t repair it and so he sues.

Birchfield v. Texarkana Memorial Hospital
Page 21

About whether a hospitalized child was a consumer in a hospital though the parents paid the bills. Cites Kennedy, the consumer does not have to be the one who pays for the goods or services.

Sherman Simon Enterprises, Inc. v. Lorac
Page 21

Almost everything is goods or services

Exceptions to goods are Intangibles

Intangibles = Real Estate, Copyright, Stocks, etc.

E.F. Hutton & Co. v. Youngblood
Page 25

Kinnard v. Circle K Stores, Inc.
Page 29

Lady bought a winning lottery ticket at a Circle K. The attendant did not process the ticket numbers properly causing the Plaintiff to not win.
Court said her buying the ticket from the store was an incidental service.

Riverside National Bank v. Lewis
Page 31
Old DTPA View so ignore.

Is money a good?
Under UCC money is a good. However court incorrectly interprets that money is not a good. So money is not a good.

Is lending money a service?
No according to the court.

Farmers and Merchants State Bank v. Ferguson
Page 35

Flenniken v. Longview Bank and Trust Co.
Page 40

Can you sue a bank case?

Flenniken hires a builder to build a house. Flennikens sends note to bank for money to pay builder. Builder does not build house. Flennikens don’t pay. Bank forecloses on house. Flennikens sue for wrongful foreclosure.

Are Flennikens consumers?
What consumer thinks is happening is what is important.
Anytime the money is being borrowed to purchase goods or services the bank becomes subject to the DTPA. From consumers perspective there is only one transaction. The purchase of a good or service.

The house was the good.

Walker v. Federal Deposit Insurance Corporation
Page 42

Even if you are a consumer (going to buy something) there has to be a problem (misrepresentation) with the goods.

Read exemption provision 17.49 and cited numbers.

Riddick v. Quail Harbor Condominium Assoc.
Page 44

Case shows the court skipping over whether the plaintiff qualified as a consumer by denying consumer status b/c a deceptive trade practice is not shown.

Eckman v. Centennial Savings Bank
Page 47

Business Consumer-
Has assets of $25 Million or more, or that is owned or controlled by a corporation or entity with assets of $25 Million or more.

Have to raise “business consumer” as a charge or defense.

Whom You May Sue under DTPA

DTPA 17.49(c)-

4 Causes of Action against Professionals (Attorneys)
Failure to disclose

Except as specifically provided by Subsection (b) and (h), Section 17.50, nothing in this subchapter shall apply to a cause of action for bodily injury or death or for the infliction of mental anguish.
(b) = general damage provision
(h) = Tie in statute (brought through another statute) if you can tie in another statue you can get “Actual Damages” under the DTPA.

Nothing in this subchapter shall apply to a claim arising out of a written contract if:

(1) the contract relates to a transaction, a project, or a set of transactions related to the same project involving total consideration by the consumer of more than $100,000;

(2) in negotiating the contr

buyer would still have bought.

Problem 7
Page 106

Dealer is in superior bargaining position. Buyer sets the price. Didn’t intend to induce.

Problem 9
Page 107

Was there based on the representation of who owned the chain. Felt national chain gas stations are safer. Basis for him as a consumer. Stretching it though.


Taking advantage of the Lack of (1) knowledge, (2) ability, (3) experience, or (4) capacity or a person to a grossly unfair degree. Don’t need reliance like in laundry list.

Is a catch all but the courts don’t like to use it.

First Title Co. of Waco v. Garrett
Page 97

Liberally construe the statute to protect the consumer.
Bennett v. Bailey
Page 108

Chastain v. Koonce
Page 111

Unconscionability is objective. Doesn’t matter why you did it. Conscious or unconsciously. Just has to be to a grossly unfair degree.

Latham v. Castillo
Page 114

Attorney fails to file a claim. He told his client that he had filed. As a result the statute of limitations goes by. The client files an unconscionability claim.

Applies to attorneys, doctors. If you sue an attorney for malpractice, within that lawsuit you must try original lawsuit and show that you would have won that lawsuit. [suit within a suit]—A real problem. Don’t have to show this in the DTPA.

Got to show something about the consumers capacity, knowledge about things to show the trust factor. The less they know or should know then the higher the trust factor involved. The higher the trust factor (unable to check on something) the more likely it is unconscionable.

You want DTPA suit against an attorney. Gives you damages that other areas of law will not get you, and the ease in which it done.

Assignee Liability

1) Assignee violates Act – Flennigan
2) Assignor violates Act –

An assignment is a three-part transaction.
The “assignor” assigns to the “assignee” the performance due the assignor from the “obligor.”
Example: Contractor contracts to paint Owner’s house for $10,000. Contractor then assigns to Bank Contractor’s right to receive the $10,000 when due (note). Contractor is the assignor, Bank is the assignee, and Owner is the obligor.)

Ex. Consumer deals with Dealer who gets a note through the note.

Assignee stands in the shoes of the assignor.

Rule 433 on Page 122

Theory of “Inextricably Intertwined” – Must be proved to show that an assignor and assignee are both liable because of their equal responsibility to obligor. A way to show as assignee is responsible in addition to assignor. Is not a theory of liability.
May matter as to defining a consumer. Does not matter for derivative liability. Is irrelevant for DTPA claims.
For example in the Guerra case the bank could not be held liable just because they held the note. The court didn’t want them being an insurer for the assignors work.

Guerra case and Qantel case discuss this theory.

Alderman says this is wrong and has nothing to do with the DTPA.


Not a DTPA created cause of action. Can’t just go to the act.

La Sara Grain Co.
Page 129

DTPA does not create warranty, define warranty, so a warranty claim must be established independently of the DTPA Act.