The Texas Lawbook: Business leaders, lawyers and lobbyists line up against insurance bill

Business leaders, lawyers and lobbyists line up against insurance bill

May 22, 2015

The Texas Lawbook, Mark Curriden

Texas legislators are on the verge of passing a new law that critics say would encourage out-of-state insurance companies to sue Texas property owners for making legitimate coverage claims for damage caused by severe weather, including hail.

The legislation, identified as Senate Bill 1628, also would place expensive and time-consuming burdens on business and individual property owners who want to legally challenge their insurance carriers for denying their claims, according to legal experts representing scores of the largest companies in Texas.

Business leaders, lawyers and lobbyists, including those representing Trammell Crow Residential, La Quinta Inn, Sovereign Bank and dozens of other companies, flooded state legislators with letters, emails and phone calls this week in an effort to kill the proposed law, which is expected to come up for a final vote before the legislative session ends Tuesday.

David Mims, senior vice president of Dallas-based La Quinta Inns, wrote a letter to House Speaker Joe Straus saying that the legislation “will negatively impact every type of business that attempts to have legitimate business claims paid by insurance companies.”

“A lot of people are suddenly realizing that this is a crazy, wacky bill that benefits out-of-state insurance companies at the expense of Texas businesses and homeowners,” said Robert Ryan, the deputy general counsel of Houston-based Stallion Oil Field Services.

Supporters of the legislation, led by the group Texans for Lawsuit Reform, describe the measure as “pro-consumer” by helping keep insurance premiums less expensive. They say the law is needed to stop trial lawyers from filing so many lawsuits in South Texas over hail damage to their homes.

“There’s a lot of misinformation going around about this legislation — a lot of misinformation,” said Sherry Sylvester, a spokeswoman for Texans for Lawsuit Reform. “It does not take away your right to sue. It does not cap your damages.”

Business leaders dispute that the proposed law is pro-consumer and argue that it goes too far.

“This legislation would hurt our company and the thousands of employees who work for us,” said Kimberly Lubel, the CEO of San Antonio-based CST Brands, which operates more than 650 Corner Store convenience stores in Texas.

“I strongly oppose any legislation that gives the insurance industry more leverage than they already have over businesses or individuals,” said Lubel, who formerly was the general counsel at Valero Energy.

The proposed law, which passed in the state Senate and is awaiting a vote in the House, requires property owners to give insurance companies a 60-day advance notice if they plan to file a lawsuit challenging the rejection of a claim.

The legislation also requires business and individual property owners to provide the insurance companies with their entire claim and supporting evidence, including how much money they want and how much they would accept in a settlement.

“The sole purpose of this provision is so that the out-of-state insurance company can sue the Texas property owner in federal court first before you can sue them in state court in Texas,” said Jim Cooper, a partner in the Houston office of Gardere Wynne Sewell.

Cooper said SB 1628 encourages out-of-state insurance companies to sue Texas property owners in other states, forcing Texans to hire lawyers in those distant jurisdictions to fight for their legal rights.

“It is bizarre that our Texas Legislature would protect out-of-state insurance companies in disputes with Texas businesses and property owners,” Cooper said. “It places a ridiculous burden on policyholders to give the insurance companies your entire case.”

Finally, the legislation reduces the time limits that businesses and individuals have to sue an insurance company over a denied claim. Current law allows people to sue two years after the insurance carrier has denied the claim. The proposed statute would prohibit lawsuits two years after the property damage occurs.

“It is all about wearing people down so they won’t file a claim,” Cooper said.

Sylvester of Texans for Lawsuit Reform blames Houston plaintiff’s attorney Steve Mostyn for organizing the opposition to the legislation.

“The campaign of misinformation is being promulgated by a small group of storm-chasing trial lawyers led by Mostyn,” she said.

“Mostyn has turned his mass-tort model to hail claims, causing an explosion in weather-related lawsuits across the state — over 20,000 lawsuits in 81 Texas counties — a figure that is increasing daily,” Sylvester said. “As a result, property owners are seeing higher insurance deductibles, higher premiums, and reduced coverage.”

But the business executives and their lawyers interviewed by The Texas Lawbook said they have not had any contact with Mostyn. Many said they usually support the efforts by Texans for Lawsuit Reform but felt the group’s focus on hurting trial lawyers blinded it to the negative public policy ramifications in this situation.

“The bottom line is that SB 1628 imposes unfair, oppressive and onerous notice provisions on Texas businesses and insured with no reciprocal benefit in return,” Ryan said. “If this bill passes, it will not be an even playing field, even for a big corporation like mine, let alone a small business or homeowner.”

For a longer version of this article, please visit TexasLawbook .net.