Texas Insurance Bill Seeks To Limit Hailstorm Lawsuits

A bill proposed in the Texas Senate seeks to limit how Texas insurance policy holders can file lawsuits against insurers. State Senator Larry Taylor, R-Friendswood, introduced Senate Bill 1628 last month. The bill would, according to Senator Taylor, “rein in hailstorm lawsuits” and other suits filed by Texas insurance policy holders against insurers who fail to pay claims in a timely manner. While Senator Taylor has framed the proposal as a “consumer protection bill”, Texas insurance industry observers see it as a means to protect insurers from lawsuits.

Proposed Changes to Texas Insurance Code

The bill proposes some significant changes to the current Texas insurance code. The bill would establish a limit of two years on claims due to storm damage. Texas insurance policy holders would also be required to list the extent of their damages before they could start legal actions against the insurers. The bill would also prevent plaintiffs from naming adjusters as defendants. Under the bill, adjusters who refer policy holders to attorneys would be charged with encouraging frivolous lawsuits, a crime known as barratry.

Taylor Cites “Lawsuit Abuse” For Texas Insurance Bill

Senator Taylor claims that his Texas insurance bill will curb what he and other pro-insurer groups see as “lawsuit abuse” after natural disasters. The Senate bill, as well as a companion Texas insurance bill in the Texas House of Representatives, cites a statistic that only two percent of insurance claims evolve into lawsuits. After a 2012 hailstorm in Hidalgo County, 22 percent of all claims went to court. Senator Taylor also claims that the spike in lawsuits has “some insurance companies…planning to stop writing homeowners’ insurance in Hidalgo County.”

Conflict of Interest in Texas Insurance Bill?

A site operated by an insurance adjuster cites Senator Taylor’s ownership of an insurance agency as an inherent conflict of interest. The site mentions that, when Texas insurance policy holders file claims, the income of insurance salesmen such as Sen. Taylor “takes a hit.” Sen. Taylor has also described the 18 percent interest penalty on damages as an “incentive for abuse,” despite calling the bill a “consumer protection” measure.

Texas Insurance Bill Forces Insurers to Pay Attorneys’ Fees

The biggest hurdle for Texas insurance policy holders with SB 1628 is that it excludes attorneys’ fees from what it calls “actual damages.” The bill defines “actual damages” as damages “independent of the harm resulting from the insurer’s denial of policy benefits.” The Texas insurance would not include attorneys’ fees, court costs, or any other expenses “incurred to recover those policy benefits” in its calculation of actual damage. This exclusion would prevent many homeowners from filing lawsuits when insurance companies deny or underpay legitimate claims, despite the fact that Texas homeowners already pay 60 percent more in insurance premiums than the national average.

Sources: SE Texas Record, Insurance Busters, LegiScan

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