Legal Memorandum: Joinder of Persons in TX

Issue: Under Texas law, when is a plaintiff entitled to join as a defendant a defendant’s insurer, for misrepresentations in the certificate of insurance?

The rules of civil procedure provide that an insurer may be joined as a defendant with its insured, if the insurer "is by statute or contract directly liable to the person injured or damaged."  See Tex. R. Civ. P. 51(b).  Moreover, as is explained more fully below, anyone who is subject to service of process "shall be joined as a party" if there is a substantial risk that persons who are already parties would be "subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations" if the absent party is not joined.  See Tex. R. Civ. P. 39(a). 

The Insurance Code regulates "trade practices in the business of insurance by defining, or providing for the determination of, all such practices in this state which constitute . . . unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined."  See Tex. Ins. Code art. 21.21.  It can hardly be doubted that an insurer who issues false certificates of insurance is engaging in "unfair or deceptive acts or practices," for such an action clearly misrepresents an insurance policy, by "making an untrue statement of material fact," and "failing to state a material fact that is necessary to make other statements made not misleading."  See id. § 4 (11)(a), (b).

If there were any doubt that issuance of false certificates of insurance is actionable, the regulatory definitions governing insurance practices make it clear that such actions are deceptive and unlawful.  Thus, 28 Tex. […]