Two Texas agencies agree between themselves to refuse to write policies for any customer who continues to do business with a particular lender, in order to drive business away from that lender. Which prohibited practice does this describe?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 541.054, it is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to commit through concerted action, or to enter into an agreement to commit, an act of boycott, coercion, or intimidation that results in or tends to result in the unreasonable restraint of, or a monopoly in, the business of insurance. An agreement among agencies to refuse business tied to a particular lender is concerted action aimed at restraining that business. Practical consequence: the prohibition reaches the agreement itself, so it applies even if the boycott never succeeds in driving the lender out of the market.
Why the other options are wrong
- A) Defamation under TIC 541.053 concerns statements that are false, maliciously critical of, or derogatory to an insurer's financial condition, not an agreement to refuse business.
- C) Unfair discrimination under TIC 544.002 concerns refusing coverage or charging a different rate because of characteristics such as race, color, religion, national origin, age, gender, or disability, not a concerted refusal to deal.
- D) Rebating under TIC 541.056 concerns giving a valuable consideration not specified in the policy as an inducement to buy; forgoing business is not giving an inducement to an insured.
Memory hook
A concerted refusal to deal is boycott, not discrimination.