Without any basis, a Texas agent tells a prospect that a competing insurer is "about to be shut down by TDI" in order to divert the prospect's business to his own agency. Under TIC 541.053, which prohibited practice has the agent committed?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
TIC 541.053 defines defamation as a statement that (1) is false, maliciously critical of, or derogatory to the financial condition of an insurer and (2) is calculated to injure a person engaged in the business of insurance; subsection (b) makes the provision apply to oral or written statements, including pamphlets, circulars, articles and other literature. Telling a prospect, with no basis, that a competitor is about to be shut down in order to divert the business satisfies both elements. TIC 541.051 also reaches misleading statements about an insurer's financial condition, but it does not require malice or a purpose to injure; the defamation provision does, and that added intent element is what makes this defamation rather than ordinary misrepresentation.
Why the other options are wrong
- A) TIC 541.051 does reach misleading statements about an insurer's financial condition, but 541.053 additionally requires that the statement be false, maliciously critical or derogatory AND calculated to injure, which is this fact pattern.
- B) Assertions of fact about a company's solvency are not protected opinion.
- D) Rebating involves giving value as an inducement, not attacking a competing company.
Memory hook
Bad-mouthing a competitor's solvency is defamation.