Legislation backed by the insurance industry and some Texas business groups that curtails the ability of policyholders to sue insurance companies over property claims following extreme weather events passed the state Senate in mid-May and headed for the governor’s desk.
On May 17, the Texas Senate approved House Bill 1774 by Rep. Greg Bonnen (R-League City), which limits liability for insurance companies sued by policyholders following storm damage. The measure was passed by the House earlier in May. In its original form, the legislation only addressed claims lawsuits following hailstorms. It was later amended to include other severe nature-related events including earthquake, wildfire, flood, tornado, lightning, hurricane, wind, snowstorm and rainstorm.
Texas experiences some of the most extreme weather events annually in the United States, and generally tops the list of states with the highest number of hail damage claims each year. Last year set a record for losses from wind and hail damage. Hailstorms in March and April 2016 alone caused more than $4 billion in damage to homes and businesses in the Dallas/Fort Worth and San Antonio regions, according to the Insurance Council of Texas.
HB 1774 curbs lawsuit abuse by requiring notice before a suit can be filed in order to permit the insurer to address any outstanding claim issues, according to the American Insurance Association (AIA), a national insurance company trade organization. Attorney’s fees may not be awarded if the court finds the insurer was entitled to but not provided with pre-suit notice.
The bill cuts penalties for insurers sued for offering too little money on storm claims, including wind and hail damage, while making it harder for those suing to collect attorneys’ fees, the Associated Press reported.
Under the bill, an insurer may elect to assume any liability an insurance agent, adjuster or company employee may have in regard to a relevant property claim if the policyholder is given notice of that assumption. Evidence of an agent’s actions may be presented at trial and the agent must be made available for deposition if required by the court.
The property insurance industry in Texas has been pushing for this protection as a reaction to an increase in post-severe weather event litigation — particularly following hailstorms — in the past several years. Supporters of the legislation say the increase in lawsuits has led to insurers decreasing and even declining to insure homes against hailstorms in the areas with the most lawsuits.
The Texas Coalition for Affordable Insurance Solutions (TCAIS), which represents major homeowner insurance companies doing business in Texas, praised the passage of HB 1774.
In a statement released by that organization, TCAIS Executive Director Beaman Floyd said that abusive claims lawsuits “are imperiling the availability and affordability of homeowners insurance in state where consumers suffer more loss from natural hazards on an ongoing basis than anywhere else in the country. Senate passage of HB 1774 establishes good sense protection from lawsuit abuse in the Texas marketplace while preserving rights and recourse for homeowners.”
Similarly, the AIA applauded the bill’s passage. In a statement, Fred C. Bosse, AIA’s Southwest region vice president, said it “is an important step toward ending rampant hailstorm-related lawsuit abuse. Weather-related lawsuit abuse was not only creating an insurance claims crisis in parts of Texas; it was also subjecting homeowners to predatory adjusters and trial lawyers. HB 1774 prohibits this practice and provides a 60-day window for insurers to address any outstanding claims issues.”
Opponents, including trial lawyers and consumer advocacy organizations, say the legislation limits the ability of property owners to hold insurers accountable for underpaid claims or poorly handled claims investigations.
Testifying at a senate hearing in March on SB 10, the companion bill to HB 1774, Bryan Blevins, representing the Texas Trial Lawyers Association, said in many cases insurance company practices have led to the increase in weather-related claims litigation.
“We recognize the concern about increased lawsuits, we also believe that there are insurer conduct issues that may be responsible in part for the problem,” Blevins said.
He cited Texas Department of Insurance data showing that insurance companies are taking less time or not doing their due diligence in investigating claims before they close them. Therefore, insurers are having to re-open one out of every three claims they close.
According to the consumer advocacy group, Texas Watch, the legislation will force many claims cases into federal court, “where it takes twice as long to receive justice, and adds cost and uncertainty for property owners who attempt to legally challenge insurers’ decisions.”
In an announcement released by Texas Watch, Executive Director Ware Wendell said that under HB 1774, “many insurance companies will pay property owners as little as late as possible. Texans can expect only more delays and denials from the for-profit insurance industry. The harmful effect of this legislation for homeowners, businesses, churches, and schools will be felt all across our state.”
However, according to Joe Woods, vice president, state government relations for the Property Casualty Insurers Association of America (PCI), the bill “maintains all of the consumer protections currently on the books.”
In a statement released by PCI, Woods said HB 1774 “makes the existing 60-day notice of suit enforceable, stops personal lawsuits from being filed against insurance company employees and agents, and continues to make insurance companies pay a tough penalty for failing to make prompt payments.”
This is not the first time Texas lawmakers have considered legislation intended to limit litigation against property insurers. A bill introduced in the 2015 legislative session that the insurance industry said would help curb the filing of lawsuits related to property insurance claims failed in the waning days of the session.
At press time Gov. Greg Abbott had yet to sign HB 1774, but it’s likely he will either sign it or allow it to become law without his signature.
In his state of the state address at the end of January, Abbott called litigation against insurers following hailstorms “the newest form of lawsuit abuse.” He also said he wanted to see legislation on his desk “that limits abusive hailstorm litigation.”
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