Failure of Texas Hail Claim Litigation Bill a Disappointment to Insurers

In the last days of the Texas legislative session an insurance industry-backed measure that proponents said would help rein in litigation related to property insurance claims died in the House of Representatives.

Passed by the Senate on April 30, Senate Bill 1628 by Sen. Larry Taylor of Friendswood – an insurance agent and agency owner – would have, among other things, limited the time frame in which property damage claims and lawsuits over those claims could be filed.

It also would have granted immunity from liability to insurance company adjusters, insurance agents and others working on behalf of an insurance company in a claim dispute. All liability instead would be held by the insurer under the bill’s provisions.

The Texas Legislature adjourned on June 1. Action on the bill ceased on May 22; it was never heard by the full House.

SB 1628, called the First Party Claims Litigation bill, was written largely in response to a substantial increase in hail claims litigation in the state in recent years. Insurers report they have seen from 25 percent to 40 percent increases in post-storm claim litigation over the past several years.

Insurance industry representatives also say costly property claim litigation in general has been on the rise in Texas since Hurricane Ike hit in 2008.

In a Senate debate on April 30 Sen. Taylor said the spike in litigation has been generated not by policyholders but by “some lawyers, some public adjusters and some roofers.”

In 2011 as a state representative, Taylor successfully sponsored legislation aimed at curbing future lawsuits against the Texas Windstorm Insurance Association, which was overwhelmed by litigation resulting from its handling of claims in the aftermath of Hurricane Ike in 2008.

“Many of our members are very disappointed to see that there won’t be changes in the law to help curb the runaway hailstorm litigation trend that’s spreading across Texas,” said Mark Hanna, a spokesman for the Insurance Council of Texas, an insurance trade association that advocates for property/casualty insurers writing business in the state.

“These lawsuits have now spread to 68 Texas counties, potentially disrupting the availability of coverage in some areas and increasing the cost of coverage in those same areas. Companies will now continue to face the prospect of mass lawsuits after each storm throughout the state and in the long run, that is not good news for insurance companies or consumers,” Hanna said.

Fred C. Bosse, Southwest region vice president for the American Insurance Association (AIA), said the defeat of SB 1628 “was a major disappointment. The legislature’s failure to pass SB 1628 threatens the viability of Texas’ homeowners’ insurance marketplace. Homeowners will continue to be subjected to predatory adjusters and trial lawyers who will continue the practice of suing for damages and collecting huge attorneys’ fees after a claim has been settled.”

There was wide opposition to the measure, however. In public hearings, and in petitions and letters to lawmakers, consumer advocates and business interests spoke loudly against SB 1628, which they dubbed the “Insurance Immunity Bill.” Opponents said the measure was overreaching, and would exclude policy benefits and deny the insured the benefit of the insurance contract.

Sen. John Whitmire of Houston said he was concerned the legislation would “cut off the individual’s access to a fair and just repair to their home or business after a storm.”

Taylor replied that he had made a “diligent and sincere effort to make sure this bill is good for consumers and preserves their right to go to court, preserves their right to penalties, yet is not abused by some to the detriment of all by way of the price of insurance going up, losing coverages, those types of things.”

The AIA’s Bosse said his group “will continue advocating for relief from this type of lawsuit abuse.”