Austin American-Statesman: Insurance bill once backed by industry now seen as flawed

Insurance bill once backed by industry now seen as flawed

May 20, 2015

Austin American-Statesman, Tim Eaton

Support is eroding quickly in the Legislature for a bill that was originally drafted to curb insurance-related lawsuits after hail storms and other weather disasters.

Many insurance companies and tort reformers saw an early version ofSenate Bill 1628 by state Sen. Larry Taylor, R-Friendswood, as a proposal they could get behind. But the bill has gone through so many changes since its introduction that even some of its most ardent supporters have flipped their positions, leaving only a few outliers along with Texans for Lawsuit Reform as the remaining advocates.

Fred Bosse, a Texas official of the American Insurance Association, said the bill no longer addresses the insurance industry’s problems with the swelling rate of litigation over claims following weather events. The leaders of the insurance industry group, who originally came out in favor of Taylor’s version of the bill, now have no interest in seeing the current version reach the Texas House floor for a vote.

“It seems that we have been regressing,” Bosse said.

Insurers across the country normally see claims-related litigation on about 1 percent to 3 percent of all claims, but in Texas, some insurance companies are reporting as much as 35 percent of claims in litigation, Bosse said.

Particularly troubling for some insurers is a provision on appraisals added by the bill’s sponsor in the House, state Rep. John Smithee, R-Amarillo — who said he made “significant changes” to prevent abuses, create a fair bill and allow affected consumers to rebuild their lives as quickly as possible following a covered loss.

The appraisal process in the insurance realm is basically a way to resolve damage disputes, using an “umpire” to determine the value of insured property when there’s a disagreement between the insurer and the customer.

Smithee’s change would allow insurers in an appraisal process to pay an extra 12 percent on a claim in exchange for quick resolution and to reduce the likelihood of litigation.

Beaman Floyd, the director of Texas Coalition for Affordable Insurance Solutions, thinks the added 12 percent could lead to more appraisals and overpayments because some customers might be inclined to push for appraisals with the hope of getting more cash, he said.

But Floyd, who runs an organization of homeowner and automobile insurers, said he’s hopeful changes can be made before the looming end of the session.

The proposed appraisal process is equally troublesome to the insurance companies’ sworn enemies: trial lawyers.

The trial lawyers see the provision as a way for insurers to insulate themselves from penalties they could face for slow payment and other possible violations of the claims handling, as long as they pay the amount designated by the umpire.

Opponents of SB 1628 have seen a growing number of people and groups on their side, including one faithful proponent of tort reform. Ruben Martin of Martin Resource Management and founder of East Texans Against Lawsuit Abuse, wrote a May 18 letter to Speaker Joe Straus saying the bill “could make it difficult for businesses who suffer an insured loss to obtain prompt and full payment” and could maker Texas “a less desirable state in which to do business.”

Martin recommended that lawmakers take the year and half before the next session to create a better bill to deal with, as he puts it, “storm chasing attorneys.”

Smithee said he hopes to resolve any issues before Tuesday’s deadline for the House to give preliminary approval Senate bills.