[TX] [TX] Can a franchisor force a franchisee to buy their liability insurance?
Can a franchisor force a franchisee to purchase business liability insurance through them?
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Requiring you to buy insurance through them can be an illegal “tying arrangement” and usually isn’t enforceable (Sherman Act §1 (15 U.S.C. §1)). It turns on whether these are two separate products. Courts sometimes treat core system elements as one product, but insurance is usually separate. A franchisor might argue a customized program is essential to protect brand goodwill. You can ask their broker/franchisor: “Isn’t this tying? If not, why?”
They can require specific coverages/limits and an approved, financially sound carrier—but generally can’t mandate a single provider unless there’s a rare, strong justification. So: yes, they can make you carry insurance (and certain amounts), but typically cannot force their carrier absent a very specific reason. Let me know if you have more questions.
This likely gives you a valid dispute (different from issues for a prospective franchisee). You need a local franchise-law attorney.
Potential claims to discuss:
— Texas Deceptive Trade Practices Act (failure to disclose, unconscionable conduct)
— Breach of contract / implied covenant of good faith & fair dealing
— Antitrust/tying concerns (FTC Act §5 (15 U.S.C. §45))
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Can a franchisor force a franchisee to purchase business liability insurance through them?
Lexi, Chatbot
I understand your concern. Is the requirement to buy insurance through the franchisor stated in your franchise agreement?
I don’t know.
Lexi, Chatbot
Have you discussed this with the franchisor or gotten legal advice on your rights as a franchisee?
No.
Lexi, Chatbot
Is there anything else the lawyer should know before I connect you?
No.
AttyZ
Hi, thanks for using AskaLawyer. I’m reviewing your question now. Sorry you’re dealing with this. What state is the franchise in?
Texas. I’ve been part of the franchise for 2 years.
AttyZ
Requiring you to buy insurance through them can be an illegal “tying arrangement” and usually isn’t enforceable (Sherman Act §1 (15 U.S.C. §1)). It turns on whether these are two separate products. Courts sometimes treat core system elements as one product, but insurance is usually separate. A franchisor might argue a customized program is essential to protect brand goodwill. You can ask their broker/franchisor: “Isn’t this tying? If not, why?”
They can require specific coverages/limits and an approved, financially sound carrier—but generally can’t mandate a single provider unless there’s a rare, strong justification. So: yes, they can make you carry insurance (and certain amounts), but typically cannot force their carrier absent a very specific reason. Let me know if you have more questions.
This likely gives you a valid dispute (different from issues for a prospective franchisee). You need a local franchise-law attorney.
Potential claims to discuss:
— Texas Deceptive Trade Practices Act (failure to disclose, unconscionable conduct)
— Breach of contract / implied covenant of good faith & fair dealing
— Antitrust/tying concerns (FTC Act §5 (15 U.S.C. §45))
Yes, they set specific requirements/limits. I had coverage with my preferred agent/carrier, then one day the franchisor made a group policy and started charging it on the monthly royalty statement. I had to cancel my policies and pay them—now premiums are twice as expensive.
AttyZ
Your attorney might start with a formal demand letter alleging breach and giving the franchisor a chance to cure (e.g., reverse the forced policy).
AttyZ
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