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Hailstorm lawsuit reform passes Texas Senate, appears headed to Gov. Abbott's desk

Austin Business Journal, May 17, 2017

By: Kimberly Reeves

In a debate that pitted trial lawyers against insurance companies, insurers appear to have won out this session with passage of a bill that ties attorney fees to reasonable estimates. It still needs final approval from the Texas Senate and the signature of the governor before it becomes law.

The session’s signature tort reform bill to curtail excessive hailstorm litigation passed the Senate 21-8 Tuesday and will soon head to the governor’s desk.

Sponsor Sen. Kelly Hancock, R-North Richland Hills, said House Bill 1774 would protect a homeowner’s right to sue over an insurance company that acts unfairly or in bad faith in weather-related claims, often tied to replacing a home or business roof. But the bill also intended to hold attorneys who file such claims accountable.

Under HB 1774, attorney fees are tied to reasonable estimates, and those attorneys who ask for excessive settlements are at risk of losing those fees, even if they win their case in court.

The Senate will take a third-reading vote on the bill on Wednesday. The bill then goes to Gov. Greg Abbott for his signature. Earlier in the session, Abbott indicated his support for the bill, calling legal action after hailstorms "the newest form of lawsuit abuse."

The debate around the bill this session has pitted trial lawyers against insurance companies.

A few senators, including Democrat John Whitmire of Houston, are critical of the bill. Hancock might call the bill a consumer protection act — one intended to stop excessive litigation costs from being passed on to policyholders — but the bill also has the potential to hurt consumers by interfering with their opportunity to hire legal counsel, Whitmire said.

“Could you not get after those considerd to be bad actors without interfering with the practice of law and time-honored judicial processes that would allow people to hire an attorney at the front end?” Whitmire asked Hancock on the floor. “Are you just not worried about the unintended consequences?”

Hancock disagreed, saying he had left provisions that allowed for litigation if necessary. After the bill passed Tuesday on a party-line vote, with Democrats in the losing column, Texans for Lawsuit Reform issued a statement saying the bill will help put an end to lawsuits that were jeopardizing the availability of affordable property insurance in Texas.

“The Texas Senate today voted to strengthen protections for Texans against bad actors who exploit families and businesses after severe weather,” TLR Communications Director Lucy Nashed said. “By passing House Bill 1774 to third reading, the Senate is helping put a stop to abusive lawsuits that are jeopardizing the affordability and availability of property insurance across the state, and ensuring Texas policyholders will continue to have the strongest consumer protections in the nation against insurers who unfairly deny and delay claims.”

Texas Watch, an insurance industry watchdog group, was more grim about the outcome. Executive Director Ware Wendell has given the bill the hashtag of #BlueTarpsBill to suggest it could cause delays for homeowners needing repairs after a storm.

“Under this new law, many insurance companies will pay property owners as little as late as possible,” Wendell said. “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.”

The Property Casualty Insurers Association of America commended the Texas Senate for tentatively passing the bill on second reading. Vice President Joe Woods said weather-related lawsuit abuse by a few can become a problem for every consumer in the state.

“This bill maintains all of the consumer protections currently on the books, 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,” Woods said. “Texas has been in dire need of hail lawsuit abuse reform, and we applaud the Senate and House for taking steps to protect storm victims and consumers.”

Contributing writer Kimberly Reeves covers the Texas Legislature for the Business Journals.