In Hermann Hosp. v. National Standard Ins. Co., 776 S.W.2d 249 (Tex. App.--Houston 1st Dist. 1989, no writ), the Court held that a hospital has standing to sue for damages it suffers by relying on an insurance company's misrepresentation as to coverage and benefits.
The Court stated:
"The supreme court has held that misrepresentations as to coverage and benefits are precisely the sort of conduct that give rise to a cause of action under" article 21.21, section 16(a) of the Texas Insurance Code, now section 541.151. 776 S.W.2d at 252.
The Court explained:
"We find that as a practical matter, the relationship between insurance companies and providers of health care is a direct one, with the health care provider acting in reliance on the representations of coverage made by the carriers. Hospitals and other health care providers must, and do, rely upon the insurance carriers representations of coverage in making their decision regarding admission of potential patients. If insurance coverage and benefits can be verified, the hospital will usually accept an assignment of benefits to insure it is paid for any services rendered. If insurance coverage and benefits cannot be verified, or if no coverage exists, the medical provider can then make alternative financial arrangements. To insulate the insurance carriers from liability leaves the medical care provider without recourse against the party causing its damage, if it acts on the representations of coverage. Had the insurance carrier not falsely or negligently provided information, appellant could have sought alternative means to ensure that it received payment for services before rendering them." (Hermann Hosp., 776 S.W.2d at 252.)