Caller Times: State Senate argues insurance reform bill
State Senate argues insurance reform bill
April 12, 2015
Corpus Christi Caller Times, Matthew Waller
AUSTIN — Carol Fredenburg had never filed an insurance claim in her life. Nevertheless, she had carried insurance for more than 40 years, she told a panel of state lawmakers in March.
The Senate Business and Commerce Committee was considering legislation that could change Texas insurance law, and they listened as Fredenburg said when hail came and damaged the roof of her Austin home, she filed her first claim.
The adjusters looked at the roof and said there wasn’t damage on three sides, even though roofers said there was. She could not get the insurance company to help her.
In her struggle, she finally had an attorney file a lawsuit, and the insurance company settled before they went to trial.
“I’m not a fan of lawsuits,” Fredenburg said, but insurance companies “have all the hammers now. They can run over people. They tried to run me over.”
The proposed law, Senate Bill 1628, filed by state Sen. Larry Taylor, R-Friendswood, would shield insurance companies from excessive lawsuits in the name of cracking down on massive amounts of litigation in hailstorm situations.
“From our point of view, the bill is seeking a balance between the rights of the consumer … but also to do something about what we’re seeing as a big process of creating disputes and exacerbating disputes that leads to a lot of lawsuits and needless disputes in the claims handling process,” said Beaman Floyd, director of the Texas Coalition for Affordable Insurance Solutions.
Floyd said roofers and public adjusters seem to be trying to create work for themselves by convincing the public to reopen claims and file lawsuits. He said the industry has seen cases of getting a lawsuit before handling a claim.
However, more than a dozen witness testified against the bill, arguing that, as written, the bill could give a massive amount of power to insurance companies and disadvantage Texans trying to get claims handled to fix their homes.
Granting immunity
Taylor said the bill aims to curb those who solicit disaster victims for litigation, reaching out to people to start lawsuits instead of having people with legitimate problems reaching out to them.
“Over the last few years, various hail storms have resulted in tens of thousands of claims filed against property and casualty insurers statewide, resulting in mass litigation,” Taylor said.
Usually about 1 percent go to court, he said, but recently in the wake of the hail storms, that percentage has been about 30 percent.
The numbers come from insurance industry reports. After two storms in Hidalgo County in 2012, 22 percent of the claims became lawsuits, the Texas Coalition for Affordable Insurance has noted. None of the detractors of the bill disputed the claims.
He said that attorneys are signing up clients by simply asking, “Were you affected by hail?”
He pointed to one case in which a family initially wanted a roof repair as part of the claim, but then the family wanted more done in a lawsuit: removing all the tile flooring throughout the house, replacing baseboards and replacing brick veneer.
“All the different stakeholders will agree: We have a problem,” Taylor said.
The bill does have rules against soliciting claims for lawsuits, but Alex Winslow, executive director of the watchdog group Texas Watch, said his group isn’t concerned with those portions.
Democrats and witnesses attacked Taylor’s bill because of wording that seems to give too much power to insurance companies.
The bill would give immunity to the insurance company’s adjusters, who go out and look at the property on behalf of insurance companies. A revised version of the bill furnished to the Austin Bureau expanded immunity to employees, agents and representatives of the insurer.
State Sen. Kirk Watson, D-Austin, worried that the immunity could extend to insurance companies as well.
“That was not my intent,” Taylor said later in an interview. He said he would be working on language to protect adjusters from claims, but also to keep companies responsible.
Taylor did say that insurance companies should be the mainly responsible party.
The Christmas list
There are further issues in the 20-page bill, insurance attorney Mark Kincaid said in his testimony against the legislation.
He said policyholders could be prosecuted for miscalculating damages, even if they come from third parties.
Policyholders might also largely lose out on recovering certain costs in a legal damage.
Additionally, current law includes an 18 percent interest payment against insurance companies for underpaying claims, but the bill might let the companies avoid the penalty. The company could say it did not knowingly fail to act, for example.
Winslow said he worried about how “actual damages” in a lawsuit wouldn’t include policy benefits wrongfully withheld.
Taylor disagreed.
He said policyholders may still get damages and interest, along with attorney fees, if an insurer acts wrongly.
Steven Badger, a Dallas attorney who has worked for insurance companies, spoke in favor of the bill during the committee hearing. He said the lawsuit situation from hail damage has gotten out of hand.
“Today, hail is all I do,” Badger said.
He noted that home insurance policies could become more expensive or harder to get.
“Absent legislative intervention … policy forms are going to change and there will be less coverage for the Texas consumer,” Badger said.
Kincaid rejected Badger’s argument. He said the bill is not a “remedy for any of those problems.
The bill was left pending in committee, such that the bill or a new version of the bill could be voted out of committee at a later time.
Taylor’s bill has a companion version in the House, HB 3646 from Rep. John Smithee, R-Amarillo.
The bill hasn’t been scheduled for a committee hearing yet.
Matthew Waller covers state news as the Austin Bureau chief. Contact him at matthew.waller@caller.com and follow him on Twitter @waller_matthew.
