By: James Drew
AUSTIN - Declaring the start of the latest round in Texas "tort reform," Lt. Gov. Dan Patrick and a key legislator said a bill filed Monday will crack down on a small group of attorneys they say are abusing the system by filing unnecessary lawsuits after hailstorms.
Patrick acknowledged that legislative changes in recent decades have targeted the civil justice system. But he added that tort reform is needed again to address the most recent problem - a sharp increase in lawsuits over damage caused by hail and other storms.
"It means that insurance companies are raising the premiums on homeowners and business owners. Deductibles are higher," Patrick said at a news conference. "That is costing our citizens of Texas real money out of their pocket that is going to lawyers."
State Sen. Kelly Hancock, R-North Richland Hills, said the bill he filed would prevent increases in premiums and deductibles for business andhomeowners' insurance, and help insurers that have stopped selling policies that cover hailstorm damage. Hancock is the chairman of the Business and Commerce Committee, which will act on his bill.
"It improves transparency, and it protects Texas consumers from sky-high premiums without infringing on their right to make insurance claims or sue their insurance company when the insurance company is not fulfilling their obligation," Hancock said.
But a nonprofit consumer group, Texas Watch, attacked the legislation, saying it would lessen penalties for insurers and "prolong the rebuilding process for Texas communities" after storms. The bill applies to all property damage claims - including hail, fire, theft, vandalism and burst pipes.
The legislation would reduce plaintiffs' attorney fees when their clients get less than they have demanded in lawsuits. It would bar the payments of such fees if insurance companies can prove the attorneys used intermediaries, known as "runners," to recruit clients.
Also, the bill would make it harder for plaintiffs' attorneys to name adjusters and agents as defendants to prevent lawsuits from being transferred to federal courts. Such "venue shopping" would be curtailed by allowing insurance companies to assume the adjusters' and agents' liability.
A recent report by the state Department of Insurance said there has been an increase in the rate of hail and windstorm claims in which policyholders sue insurers. Through 2011, the lawsuit rate was about one in 1,000 claims, or 0.1 percent. That has jumped since 2012 to one in 50 to 60 claims, or about 1.5 to 2 percent.
The new bill would maintain the state code's strict liability provision so that property owners can get penalty interest from insurance companies when they fail to pay a legitimate claim "timely and fully." But it would lower the penalty interest rate insurance companies have to pay.
It also would require plaintiffs' attorneys, before filing a lawsuit, to file a notice to an insurance company and include a "realistic demand" for the amount needed to repair or replace damaged property and the amount of attorney fees incurred.
If they fail to do so at least 60 days before a lawsuit is filed, attorneys would not be able to collect fees.
Richard Trabulsi, president of Texans for Lawsuit Reform, which for years has pushed for tort reform, said the bill provides a "common-sense solution that will stop this abusive litigation and protect the right of every Texas homeowner to sue their insurance company if it fails to pay timely, or acts unfairly or in bad faith."
Ware Wendell, the executive director of Texas Watch, referred to Hancock's bill, and the companion House version carried by state Rep. Greg Bonnen, R-Friendswood, as "blue tarp bills."
"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. If insurance lobbyists have their way, Texas will be blanketed in blue tarps," he said.
Will Adams, a lobbyist for the Texas Trial Lawyers Association, said the group supports efforts to strengthen existing laws. The group has not taken a position yet on the bills filed Monday.
"In cases where insurance companies can show fraud or abuse by a claimant, current law provides dozens of ways to dismiss those claims, allow insurers to recoup their costs, and sanction attorneys and public insurance adjusters," Adams said.