ON MOTION FOR REHEARING
ENOCH, Justice.
Respondent’s motion for rehearing is overruled. We withdraw our opinion of November 24, 1993 and substitute the following opinion in its place.
The issue in this case is whether the legislature has conferred upon a third party claimant a direct cause of action against an insurer for unfair claim settlement practices under section 16 of art. 21.21 of the Texas Insurance Code. We hold that a third party claimant has no such direct cause of action under art. 21.21 and therefore, we reverse in part and affirm in part the judgment of the court of appeals.
Kathleen Watson was injured in a car accident on March 31, 1989. The driver of the other car was M.D. Townley, an insured under an automobile liability policy issued by Allstate Insurance Company. Watson filed suit on June 28, 1989 against Townley alleging that Townley was negligent and that his negligence was a proximate cause of the accident and her injuries. In the same action, Watson also sued Allstate under art. 21.21, section 16, for alleged unfair claim settlement practices in failing to attempt in good faith to effectuate prompt settlement of her claims where liability had become reasonably clear and in denying or unreasonably delaying payment of her claim. Watson alleged that Allstate’s conduct violated 28 Tex.Admin.Code § 21.3 (Board Order 18663) and section 17.46 of the Texas Deceptive Trade Practices — Consumer Protection Act (DTPA), thereby giving rise to her cause of action under art. 21.21, section 16.1 In addition to her claim under art. 21.21, Watson alleged violations of the DTPA, breach of contract, breach of the duty of good faith and fair dealing, and sought a declaratory judgment that Watson was an intended third party beneficiary of the Allstate liability policy.
[147]*147On Allstate’s motion, the trial court severed the claims against Allstate, struck Watson’s pleadings as to Allstate for failure to state a claim, and granted Allstate’s motion for summary judgment. The court of appeals affirmed the judgment of the trial court, 828 S.W.2d 423, except as to Watson’s claim under art. 21.21 of the Texas Insurance Code. 828 S.W.2d at 425. The court of appeals reversed and remanded Watson’s art. 21.21 claim, holding that Watson, as a third party beneficiary of an automobile liability policy, could bring an action under art. 21.21 without first proceeding directly against the named insured of the policy.2 Id. For the reasons stated below, we reverse the judgment of the court of appeals concerning Watson’s art. 21.21 claim.
I.
In this case, we are asked to expand our holding in Vail v. Texas Farm Bureau Mutual Ins. Co., 754 S.W.2d 129 (Tex.1988) and conclude that section 16 of art. 21.21 confers upon third party claimants a direct cause of action against an insurer for unfair claim settlement practices. In essence, we are asked to extend to a party adverse to the insured, the same duties and obligations insurers owe to their insureds under Vail. For the reasons stated below, we decline to do so.
To have a private cause of action for alleged unfair claim settlement practices under art. 21.21, section 16, such practices must be declared unfair or deceptive acts or practices in the business of insurance in section 4 of art. 21.21, the rules and regulations of the State Board of Insurance adopted under art. 21.21, or be defined unlawful deceptive trade practices in section 17.46 of the DTPA. Tex.Ins.Code Ann. art. 21.21, § 16. The full text of art. 21.21, section 16 reads:
(a) Any person who has sustained actual damages as a result of another’s engaging in an act or practice declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board under this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance or in any practice defined by section 17.46 of the Business & Commerce Code, as amended, as an unlawful deceptive trade practice may maintain an action against the person or persons engaging in such acts or practices.
Id. We address each basis for art. 21.21 liability separately.
A. Section 4 of art. 21.21
The express purpose of art. 21.21 is to regulate trade practices in the business of insurance by- defining or providing for determination of “all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices ” and prohibiting such practices. Tex.Ins.Code Ann. art. 21.21, § 1 (emphasis added). Section 4 of art. 21.21 defines those practices that constitute unfair methods of competition or unfair or deceptive acts or practices. Id. at § 4. We note that unlike section 17.46 of the DTPA, discussed below, section 4 of art. 21.21 does not use the phrase “includes, but is not limited to” when defining prohibited acts. As written, art. 21.21, section 4, is an exclusive list of statutory unfair or deceptive acts or practices in the business of insurance.3 Within this list, section 4 does not define unfair claim settlement practices as an unfair or deceptive act or practice. Unfair claim settlement practices are not actionable under art. 21.21, section 16, by virtue of art. 21.21, section 4.
B. Rules and regulations adopted under art. 21.21
Board Order 18663 was adopted by the State Board of Insurance pursuant to art. [148]*14821.21. Through that order, Watson claims she is entitled to sue Allstate for unfair claim settlement practices. Board Order 18663 does not declare unfair claim settlement practices to be an unfair or deceptive act or practice. Rather, like art. 21.21 of the Insurance Code, this regulation prohibits insurers from engaging in unfair or deceptive acts or practices as defined elsewhere. The relevant portion of Board Order 18663 provides:
State Bd. of Ins., 28 Tex.Admin.Code § 21.3 (West October 1, 1992) (emphasis added). Because Board Order 18663 does not declare unfair claim settlement practices to be an unfair or deceptive act or practice, such practices are not actionable under art. 21.21 by reference to Board Order 18663 alone. Tex. Ins.Code Ann. art. 21.21, § 16.
(a) Misrepresentation of insurance policies, unfair competition, and unfair practices by insurers, agents and other connected persons are prohibited by Article 21.20 and Article 21.21 or by other provisions of the Insurance Code. No person shall engage in this state in any trade practice that is a misrepresentation of an insurance policy, that is an unfair method of competition, or that is an unfair or deceptive act or practice as defined by the provisions of the Insurance Code or as defined by these sections and other rules and regulations of the State Board of Insurance authorized by the Code.
(b) Irrespective of the fact that the improper trade practice is not defined in any other section of these rules and regulations, no person shall engage in this state in any trade practice which is determined pursuant by law to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.
Free access — add to your briefcase to read the full text and ask questions with AI
ON MOTION FOR REHEARING
ENOCH, Justice.
Respondent’s motion for rehearing is overruled. We withdraw our opinion of November 24, 1993 and substitute the following opinion in its place.
The issue in this case is whether the legislature has conferred upon a third party claimant a direct cause of action against an insurer for unfair claim settlement practices under section 16 of art. 21.21 of the Texas Insurance Code. We hold that a third party claimant has no such direct cause of action under art. 21.21 and therefore, we reverse in part and affirm in part the judgment of the court of appeals.
Kathleen Watson was injured in a car accident on March 31, 1989. The driver of the other car was M.D. Townley, an insured under an automobile liability policy issued by Allstate Insurance Company. Watson filed suit on June 28, 1989 against Townley alleging that Townley was negligent and that his negligence was a proximate cause of the accident and her injuries. In the same action, Watson also sued Allstate under art. 21.21, section 16, for alleged unfair claim settlement practices in failing to attempt in good faith to effectuate prompt settlement of her claims where liability had become reasonably clear and in denying or unreasonably delaying payment of her claim. Watson alleged that Allstate’s conduct violated 28 Tex.Admin.Code § 21.3 (Board Order 18663) and section 17.46 of the Texas Deceptive Trade Practices — Consumer Protection Act (DTPA), thereby giving rise to her cause of action under art. 21.21, section 16.1 In addition to her claim under art. 21.21, Watson alleged violations of the DTPA, breach of contract, breach of the duty of good faith and fair dealing, and sought a declaratory judgment that Watson was an intended third party beneficiary of the Allstate liability policy.
[147]*147On Allstate’s motion, the trial court severed the claims against Allstate, struck Watson’s pleadings as to Allstate for failure to state a claim, and granted Allstate’s motion for summary judgment. The court of appeals affirmed the judgment of the trial court, 828 S.W.2d 423, except as to Watson’s claim under art. 21.21 of the Texas Insurance Code. 828 S.W.2d at 425. The court of appeals reversed and remanded Watson’s art. 21.21 claim, holding that Watson, as a third party beneficiary of an automobile liability policy, could bring an action under art. 21.21 without first proceeding directly against the named insured of the policy.2 Id. For the reasons stated below, we reverse the judgment of the court of appeals concerning Watson’s art. 21.21 claim.
I.
In this case, we are asked to expand our holding in Vail v. Texas Farm Bureau Mutual Ins. Co., 754 S.W.2d 129 (Tex.1988) and conclude that section 16 of art. 21.21 confers upon third party claimants a direct cause of action against an insurer for unfair claim settlement practices. In essence, we are asked to extend to a party adverse to the insured, the same duties and obligations insurers owe to their insureds under Vail. For the reasons stated below, we decline to do so.
To have a private cause of action for alleged unfair claim settlement practices under art. 21.21, section 16, such practices must be declared unfair or deceptive acts or practices in the business of insurance in section 4 of art. 21.21, the rules and regulations of the State Board of Insurance adopted under art. 21.21, or be defined unlawful deceptive trade practices in section 17.46 of the DTPA. Tex.Ins.Code Ann. art. 21.21, § 16. The full text of art. 21.21, section 16 reads:
(a) Any person who has sustained actual damages as a result of another’s engaging in an act or practice declared in Section 4 of this Article or in rules or regulations lawfully adopted by the Board under this Article to be unfair methods of competition or unfair or deceptive acts or practices in the business of insurance or in any practice defined by section 17.46 of the Business & Commerce Code, as amended, as an unlawful deceptive trade practice may maintain an action against the person or persons engaging in such acts or practices.
Id. We address each basis for art. 21.21 liability separately.
A. Section 4 of art. 21.21
The express purpose of art. 21.21 is to regulate trade practices in the business of insurance by- defining or providing for determination of “all such practices in this state which constitute unfair methods of competition or unfair or deceptive acts or practices ” and prohibiting such practices. Tex.Ins.Code Ann. art. 21.21, § 1 (emphasis added). Section 4 of art. 21.21 defines those practices that constitute unfair methods of competition or unfair or deceptive acts or practices. Id. at § 4. We note that unlike section 17.46 of the DTPA, discussed below, section 4 of art. 21.21 does not use the phrase “includes, but is not limited to” when defining prohibited acts. As written, art. 21.21, section 4, is an exclusive list of statutory unfair or deceptive acts or practices in the business of insurance.3 Within this list, section 4 does not define unfair claim settlement practices as an unfair or deceptive act or practice. Unfair claim settlement practices are not actionable under art. 21.21, section 16, by virtue of art. 21.21, section 4.
B. Rules and regulations adopted under art. 21.21
Board Order 18663 was adopted by the State Board of Insurance pursuant to art. [148]*14821.21. Through that order, Watson claims she is entitled to sue Allstate for unfair claim settlement practices. Board Order 18663 does not declare unfair claim settlement practices to be an unfair or deceptive act or practice. Rather, like art. 21.21 of the Insurance Code, this regulation prohibits insurers from engaging in unfair or deceptive acts or practices as defined elsewhere. The relevant portion of Board Order 18663 provides:
State Bd. of Ins., 28 Tex.Admin.Code § 21.3 (West October 1, 1992) (emphasis added). Because Board Order 18663 does not declare unfair claim settlement practices to be an unfair or deceptive act or practice, such practices are not actionable under art. 21.21 by reference to Board Order 18663 alone. Tex. Ins.Code Ann. art. 21.21, § 16.
(a) Misrepresentation of insurance policies, unfair competition, and unfair practices by insurers, agents and other connected persons are prohibited by Article 21.20 and Article 21.21 or by other provisions of the Insurance Code. No person shall engage in this state in any trade practice that is a misrepresentation of an insurance policy, that is an unfair method of competition, or that is an unfair or deceptive act or practice as defined by the provisions of the Insurance Code or as defined by these sections and other rules and regulations of the State Board of Insurance authorized by the Code.
(b) Irrespective of the fact that the improper trade practice is not defined in any other section of these rules and regulations, no person shall engage in this state in any trade practice which is determined pursuant by law to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.
Watson argues, however, that through Board Order 18663, Board Order 41454 is implicated.4 This Court held in Vail that an insured could not rely on Board Order 41454 because the definition of unfair or deceptive acts or practices required that such acts be committed with “such frequency as to indicate a general business practice.” Vail, 754 S.W.2d at 135. Thus, Vail precludes Watson’s claims under Board Order 41454.5 While Board Order 41454 was amended effective August 19, 1992 to delete any frequency requirement, because of its effective date, this amendment does not apply to this case. In any event, Board Order 41454 was adopted pursuant to art. 21.21-2, not art. 21.21 and, thus, cannot form the basis of a claim under art. 21.21, section 16. Tex.Ins. Code Ann. art. 21.21, § 16.
Watson also argues that art. 21.21-2, which defines and prohibits unfair claim settlement practices, is made available as a private cause of action through Board Order 18663.6 To the contrary, art. 21.21-2 does not create a private cause of action for violations of that statute. See CNA Ins. Co. v. Scheffey, 828 [149]*149S.W.2d 785, 791 (Tex.App.—Texarkana 1992, writ denied); Cantu v. Western Fire & Casualty Ins. Co., 716 S.W.2d 737, 741 (Tex.App.—Corpus Christi 1986), writ ref'd n.r.e. per curiam, 723 S.W.2d 668 (Tex.1987). Significantly, the legislature in 1985 specifically rejected a proposed amendment to art. 21.21, section 16, that would have created a private cause of action for unfair claim settlement practices as defined in art. 21.21-2. H.J. of Tex., 69th Leg., R.S. 417 (1985). And more recently, in 1991, the legislature deleted a provision from H.B. 2 that would have provided a private cause of action in art. 21.21-2 to any “claimant” for unfair claim settlement practices. H.B. 2, § 9.12, 72d Leg., R.S. (1991) (original version of bill filed February 2, 1991). In construing art. 21.21 and Board Order 18663 promulgated thereunder, we cannot ignore the legislature’s refusal to create a statutory private cause of action for unfair claim settlement practices for third party claimants such as Watson. See Transportation Ins. Co. v. Maksyn, 580 S.W.2d 334, 338 (Tex.1979) and Smith v. Baldwin, 611 S.W.2d 611, 617 (Tex.1980) (deletion of provision in a pending bill discloses legislative intent to reject the proposal). We will not construe art. 21.21, section 16 to permit, indirectly, a third party claimant to sue an insurer for unfair claim settlement practices through Board Order 18663 where she may not do so directly and where the legislature has specifically refused to create such a cause of action for unfair claim settlement practices under art. 21.21, section 16 and art. 21.21-2.
C. Section 17.46 of the DTPA
Art. 21.21, section 16 provides a private cause of action for any practice defined by section 17.46 of the DTPA as an unlawful deceptive trade practice. Tex.Ins.Code Ann. art. 21.21, § 16. “Unfair claim settlement practices” is not among the enumerated items defined by section 17.46 as an unlawful deceptive trade practice. While section 17.46 may not be a complete list of unlawful deceptive trade practices for purposes of asserting claims under the DTPA,7 art. 21.21 expressly makes actionable those acts or practices that, in fact, are defined in section 17.46 as unlawful deceptive trade practices. Unfair claim settlement practices are not listed and, therefore, they are not actionable under art. 21.21, section 16 of the Insurance Code.
II.
To be sure, art. 21.21, section 16 is worded as providing a cause of action to “any person.” However, for Watson to assert her cause of action against Allstate for unfair claim settlement practices, she must do so through the reasoning of Vail. Vail, an opinion delivered in 1988, followed closely after our decision in Arnold v. National County Mutual Ins. Co., 725 S.W.2d 165 (Tex.1987). Vail thus presented the question of construction of art. 21.21, section 16 in the context of an insured-insurer relationship and in light of the preexisting common law duty of good faith and fair dealing recognized in Arnold. In reaching our decision today, we are particularly mindful of the duties imposed on insurers as to their insureds. See Vail, 754 S.W.2d at 136; Arnold, 725 S.W.2d at 167. Vail is predicated upon this Court’s expressed belief that a special relationship exists between an insured and the insurer. See Arnold, 725 S.W.2d at 167. Vail remains the law as to claims for alleged unfair claim settlement practices brought by insureds against their insurers.
Watson, however, is not an insured. Rather, she asserts her claims against Allstate as a third party to the contract between Allstate and its insured. The obligations imposed by art. 21.21 of the Insurance Code and Vail are engrafted onto the contract between the insurer and insured and are extra-contractual in nature. A third party claimant has no contract with the insurer or the insured, has not paid any premiums, has no legal relationship to the insurer or special relationship of trust with the insurer, and in short, has no basis upon which to expect or demand the benefit of the extra-contractual obligations imposed on insurers under art. 21.21 with regard to their insureds. Nothing in Vail suggests that the extra-contractual obligations, rights, and remedies of art. 21.21, section 16 extend to third party claimants.
[150]*150More to the point, in construing art. 21.21, section 16 as Watson would have us construe it to give her standing in this case, we would undermine the duties insurers owe to their insureds under Vail and Arnold. In construing art. 21.21 in Vail, we were not faced with potentially conflicting duties. There is nothing inconsistent between the common law duty of good faith and fair dealing owed by an insurer to its insured and a duty imposed under Vail and art. 21.21, section 16 on an insurer as to its insured prohibiting unfair claim settlement practices. Were we to extend to third party claimants the same duties insurers owe to their insureds, insurers would be faced with owing coextensive and conflicting duties. An insurer owes to its insured a duty to defend the insured against the claims asserted by a third party. Recognizing concomitant and coextensive duties under art. 21.21 to third party claimants, parties adverse to the insured, necessarily compromises the duties the insurer owes to its insured. In fact, the logical result of permitting a separate and direct cause of action in favor of third party claimants allows third parties to sue for unfair claim settlement practices even though the insured has no claim for an unfair claim settlement practice. As troublesome, it is conceivable that in attempting to settle claims pursuant to the demands of a third party claimant, insurers may be liable to the insured for settling too quickly. See Texas Farmers Insurance Co. v. Soriano, 844 S.W.2d 808 (Tex.App.—San Antonio 1993, writ granted) (affirming a judgment for actual and punitive damages against an insurer and in favor of the insured for breach of the common law duty of good faith and fair dealing where the insurer attempted to settle multiple claims for its underinsured by offering the full policy limits against the insured’s wishes). In refusing to provide a direct cause of action for third party claimants, the legislature may well have been aware of this potential for conflicting duties. We will not construe art. 21.21 or Vail, absent explicit directive from the legislature, so as to compromise the insurer’s loyalties and obligations owed to the insured.8
We hold that Watson, as a third party claimant, lacks standing under section 16 of art. 21.21 to sue Allstate directly for unfair claim settlement practices.
III.
In coming to our conclusion, we also note that the court of appeals incorrectly determined that Watson had standing to sue under art. 21.21 as a third party beneficiary of the automobile liability policy. 828 S.W.2d at 428. In Dairyland County Mutual Ins. Co. v. Childress, 650 S.W.2d 770 (Tex.1983), this Court held that for purposes of recovering attorney’s fees under an insurance contract, a third party who has obtained a judgment against an insured is an intended third party beneficiary of the insurance contract and is entitled to enforce the contract. Dairyland does not give third party claimants standing to sue to enforce the extra-contractual obligations under art. 21.21, section 16. Therefore, Dairyland is not applicable to this case.
The court of appeals erred in reversing the trial court’s judgment as to Watson’s art. 21.21 claim. We reverse in part the judgment of the court of appeals as to Watson’s art. 21.21 claim and affirm the remainder of the judgment of the court of appeals.
PHILLIPS, C.J., and GONZALEZ, HIGHTOWER, HECHT and CORNYN, JJ., join in this opinion.