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Texas lawmakers file bill that takes aim at hailstorm insurance 'abuse'

Austin Business Journal, February 13, 2017

By: Kimberly Reeves 

Texas lawmakers have taken another swing at hailstorm lawsuit reform with a bill that is more streamlined and direct than the one filed last session that ultimately failed, says an industry trade group.

The bill, Senate Bill 10, has been filed, but not posted, on the state’s website. Sponsor Sen. Kelly Hancock, R-North Richland Hills, noted the bill was a priority in Gov. Greg Abbott’s State of the State address and compared the need for tort reform to the black mold epidemic of 2003.

“Hail litigation has spiraled out of control in Texas, mainly because a small group of bad actors who abuse the system,” said Hancock, who was joined at a Monday press conference to unveil the bill by Lt. Gov. Dan Patrick and Sen. Larry Taylor, R-Friendswood. “Senate Bill 10 will address this problem, improve transparency and protect Texas consumers from sky-high premiums without infringing on their right to make an insurance claim or sue their insurance company when it's not holding up its end of a deal.”

The insurance industry’s view is that attorneys are circumventing the Texas Department of Insurance’s traditional complaint process. Texans for Lawsuit Reform call these “storm chasers.” Roofers and adjusters bring the cases to attorneys, and those cases go to court, often increasing the time and cost of individual claims, said Mark Hanna of the Insurance Council of Texas.

“A $5,000 claim turns into a $50,000 claim. A $70,000 claim turns into a $1.5 million claim," Hanna said. "That’s going to have a very detrimental effect on homeowner rates.”

The bill is one of Patrick's priorities this session. On Monday afternoon, he issued a video statement posted on Facebook citing his support for the bill.

Hidalgo County, which borders Mexico in South Texas, is considered ground zero of the claim-turned-litigation epidemic. Last year, 1,500 claims and 1,600 hailstorm-related lawsuits were filed in that county, Hanna said. Yet, despite the escalation of these claims, only one complaint was filed with the Texas Department of Insurance, which has saved homeowners millions of dollars resolving disputed claims.

Ware Wendell of consumer protection group Texas Watch said the Texas Department of Insurance has reported only a small fraction of claims result in litigation — and yet no direct tie can be made between claims filed and increases in homeowner premiums, Wendell said. He calls Senate Bill 10, and its companion, House Bill 1774, “The Blue Tarp Bills,” which refers to the blue tarps used on buildings when a repair takes an extended period of time to complete.

“Texans purchase insurance to protect us in our time of need. When insurers cheat their customers by denying, delaying, and underpaying valid claims, our entire state suffers,” Wendell said. “Families, businesses, churches, and schools need full payment from their carriers to rebuild after disaster. Lessening penalties and pushing cases into already-clogged federal courts only makes it more likely insurers will leave property owners in the lurch in order to further pad their profits.”

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