Consumer Rights Rule Statements Flashcards
Misrepresentation
Under the DTPA, a person who makes a misrepresentation that a consumer relies on or who fails to disclose material information with the intent to induce the consumer into the transaction may be liable for any damages produced by the misrepresentation.
Consumer
Under the DTPA, a consumer is someone who seeks or acquires, by purchase or lease, any good or services.
Goods
Goods are defined to include all tangible chattels and real estate.
Professional Services under DTPA
The DTPA does not apply to a claim for damges based on the rendering of a professional service, the essency of which is the providing of advice, judgment, opinion, or similar professional skill.
However, the professional services exemption does not apply to an express misrepresntion of material fact that cannot be characterized as advice, judgment, or opinion.
DTPA Prohibited Practices
Assuming a plaintiff qualifies as a “consumer,” his cause of action must be based upon one of five categories of actionable conduct as described below. The same conduct may be a violation of more than one category.
- Laundry List (focuses on misrepresentation)
- Breach of warranty
a) Express Warranty
b) Implied Warranties
i) Implied Warranty of Merchantability
ii) Implied warranty of fitness for a particular purpose
iii) Implied warranty of title
- Unconscionable Action or Course of Action (conduct that takes advantage of the consumer’s lack of knowledge, ability, experience, or capacity to a grossly unfair degree)
- Violations of Insurance Code Chapter 541 (Violations of Chapter 541 of the Insurance Code involving unfair methods of competition and unfair or deceptive acts must be established by means other than the DTPA. Much like breach of warranty claims, once a violation has been established, it is actionable under the DTPA.)
- Tie-in Statute
DTPA Prohibited Laundry List Items
Many, but highly testable items are misrepresentation; Misrepresenting standard, quality, grade, etc.; Representing that an agreement confers or involves rights; and Failing to disclose information
DTPA Prohibited: Breach of Warranty
a) Express Warranty
b) Implied Warranties
i) Implied Warranty of Mechantability (ordinary purpose for which such goods are used; applies to merchants; does not apply to used goods)
ii) Implied warranty of fitness for a particular purpose (rises when (a) the seller has reason to know the buyer’s particular purpose for the goods and that the buyer is relying on the seller’s judgment, and (b) the buyer in fact relies on the seller’s skill or judgment to select suitable goods);
iii) Implied warranty of title (includes warranty fo suitability, workmanlike performance of service, workmanlike warranty of good and workmanlike construction and habitability).
DTPA Prohibited: Unconscionable Action or Course of Action
“Unconscionable action or course of action” means an act that to a consumer’s detriment, takes advantage of the lack of knowledge or capacity of the consumer to a grossly unfair degree.
DTPA Prohibited: Violations of Insurance Code (Ch 541)
Texas Insurance Code Chapter 541 is liberally construed for protection against unfair methods of competition and unfair or deceptive acts or practices within the insurance industry. Tex. Ins. Code Ann. § 541.001. This chapter was enacted concurrently with the DTPA, and many of the provisions regarding the private cause of action granted, pre-suit notice requirement, and potential settlement offer defenses are essentially the same as in the DTPA. A qualifying consumer may bring a claim for damages under both the DTPA and Chapter 541.
The elements of the private cause of action under Chapter 541 are:
i) The plaintiff is a “person”;
ii) The defendant is a “person”;
iii) The defendant committed either:
a) A violation of Chapter 541, Subchapter B; or
b) A violation of the DTPA laundry list on which the plaintiff relied to his detriment; and
iv) The defendant’s violation was a producing cause of actual damages to the plaintiff.
Chapter 541 Insurance Code Prohibited Practices
The following acts are considered violations of the Chapter 541, Subchapter B.
a. Misrepresentation
The Insurance Code prohibits insurers from misrepresenting:
i) The terms of the policy;
ii) The benefits or advantages promised by the policy;
iii) The dividends or share of surplus to be received by the policy;
iv) Dividends or share of surplus previously paid on a similar policy; and/or
v) The financial condition of an insurer or the legal reserve on which a life insurer operates.
Insurers are also prohibited from using a name or title of a policy that misrepresents the true nature of the policy. Tex. Ins. Code Ann. § 541.051.
b. False information and advertising
The Insurance Code prohibits an advertisement, announcement, or statement containing an untrue, deceptive, or misleading representation regarding the insurance business. Tex. Ins. Code Ann. § 541.052.
c. Defamation
Passing on false or derogatory information about another insurer, directly or indirectly, is considered a violation of the statute. This rule applies to any oral or written statements, including statements in any pamphlet, circular, article, or literature. Tex. Ins. Code Ann. § 541.053.
d. Boycott, coercion, or intimidation
An insurer may not use coercion, intimidation, or boycott to create an “unreasonable restraint of or a monopoly in the business of insurance.” Tex. Ins. Code Ann. § 541.054.
e. Filing a false financial statement
An insurer may not, with the intent to deceive, file false public statements regarding the financial condition of the insurer. Tex. Ins. Code Ann. § 541.055.
f. Prohibited rebates and inducements
The Insurance Code states that it is an unfair method of competition and deceptive practice to knowingly make, permit the making of, or offer to make an insurance contract, other than as plainly expressed in the issued contract. Similarly, it is prohibited to directly or indirectly pay, give, allow or offer to pay, give, allow (i) a rebate of premiums payable on the contract, (ii) a special favor or advantage, or (iii) valuable consideration or inducement not specific in the contract as inducement to enter into an insurance contract. The Code also prohibits the issuance or delivery or the permitting of an agent, officer, or employee to issue or deliver as an inducement to insurance:
i) Company stock or other capital stock;
ii) A benefit certificate or share in a corporation;
iii) Securities; or
iv) A special or advisory board contract or any other contract promising returns or profits.
Tex. Ins. Code Ann. § 541.056.
g. Unfair discrimination in life insurance and annuity contracts
The Insurance Code prohibits disparate treatment by an insurer regarding individuals of the same class and equal life expectancy. Tex. Ins. Code Ann. §541.057.
h. Deceptive name, word, symbol, device, or slogan
Insurers may not use names, words, symbols, or slogans that may be untrue, or cause confusion as to the insurer’s identity and/or affiliations. Tex. Ins. Code Ann. § 541.059.
i. Unfair settlement practices
The Texas Insurance Code prohibits the following unfair settlement practices in connection with first party insurance claims:
i) Misrepresenting coverage to a claimant;
ii) Failing to make in good faith an attempt to a prompt and equitable settlement once liability has become reasonably clear;
iii) Failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy for the insurer’s denial of a claim or offer of a compromise settlement of a claim;
iv) Failing within a reasonable time to affirm or deny coverage of a claim;
v) Refusing to pay a claim without conducting a reasonable investigation;
vi) Trying to enforce a full and final release of a claim from a policyholder when only partial payment has been made;
vii) Delaying or refusing settlement of a claim solely because there is a different type of insurance available to satisfy all or part of the loss; and
viii) Requiring a claimant as a condition of settling a claim to produce the claimant’s federal income tax returns, unless:
a) A court orders the claimant to produce those tax returns;
b) The claim involves a fire loss; or
c) The claim involves lost profits or income.
DTPA Prohibited: Tie-in Statute Violations
The DTPA provides redress for violations through other statutory legislative enactments or regulations that cross-reference the DTPA, considered “tie-in” statutes because they allow consumers to tie in to the more beneficial DTPA remedies. DTPA § 17.50(h).
A violation of a tie-in statute is considered a violation of the DTPA.
A non-exhaustive list of the most common DTPA tie-in statutes follows.
- Texas Business Opportunity Act
- Health Spa Act
- Home Solicitation Act
- Lemon Law
- Manufactured Housing Standards Act
- Self-Storage Facility Liens
- Telephone Solicitations
- Texas Debt Collection Act
- Unfair Claims Settlement Practices Act
Preemption and Exemption
Provisions of the DTPA may be preempted by state or federal law, provided the statute expressly provides for preemption or it is implied by the regulation. The DTPA is also preempted by federal laws such as ERISA and the Airline Deregulation Act.
Texas law exempts certain acts of health care providers and veterinarians from provisions of the DTPA.
The Federal Fair Debt Collection Practices Act (“FDCPA”)
The Federal Fair Debt Collection Practices Act (“FDCPA”) provides standards for the protection of any person against a “debt collector.” The FDCPA does not preempt existing state laws regarding the conduct of debt collection activity except to the extent of a direct conflict with the FDCPA and then only to the extent of that conflict. A state law is not inconsistent if it provides greater protection to the consumer. FDCPA, 15 U.S.C. §1692n.
DTPA: Economic Damages
“Economic damages” refer to compensatory damages for pecuniary loss. A consumer may recover the greater of the benefit-of-the-bargain damages (i.e., the difference between the value of the goods or service as represented and the value as actually delivered) or out-of-pocket damages (i.e., the difference between the price paid and the value of goods or services as delivered), but not both.
The benefit of the bargain measure of damages can include damages from loss of use, which can be calculated based on the cost of temporarily obtaining a replacement for the defective product. Loss of use damages may be recovered under the benefit-of-the-bargain calculation of damages regardless of whether the consumer actually rented or obtained a replacement.
The costs of repair are also recoverable so long as the repair is feasible without economic waste and the award would not result in double recovery.
Economic damages do not include exemplary damages or damages for pain and suffering, mental anguish, loss of consortium, disfigurement, physical impairment, or loss of companionship.
DTPA: Mental Anguish
If the actionable conduct was committed “knowingly” or “intentionally,” then the consumer may also recover damages for mental anguish. Even so, to recover for mental anguish, the consumer must still present direct evidence showing a high degree of mental pain and distress that causes a substantial disruption in the consumer’s daily routine.
DTPA: Discretionary additional (“treble”) damages
If the defendant’s conduct was committed “knowingly” or “intentionally,” then the trier of fact may award additional damages to the consumer. The limit on these additional damages is three times the economic damages if the conduct was committed “knowingly,” or three times the sum of economic damages and damages for mental anguish if the conduct was committed “intentionally.” Because of this, the potential recovery under the DTPA is often referred to as “treble damages.”
