Two broad bills at the state Capitol impair the rights of Texas property owners in insurance disputes.
HB 1774 and SB 10 have passed through committee. If they are signed into law, they will only strengthen the hand of insurers in legal fights, threatening access to justice for policyholders who have been unfairly denied, delayed or underpaid on their property claims.
State Sen. Kelly Hancock, R-North Richland Hills, is one of the authors of SB 10.
Policyholders occupy a uniquely weak position as consumers.
Our lending practices require the purchase of property insurance. Insurers offer policies on a take-it-or-leave-it basis and take our money up-front in exchange for a promise.
We only use the product when we have suffered a loss and are desperate for help.
For decades, our laws have recognized the disproportionate strength insurers have over policyholders, creating incentives to ensure carriers do right by their customers in their time of need.
For example, our Insurance Code sets forth clear and reasonable deadlines for the investigation and payment of claims. If insurers break them, they are subject to an 18 percent penalty.
Insurance companies speak the language of money, and penalties must be significant enough to get and hold their attention.
If carriers believe they stand to gain more financially by withholding money instead of making claims payments, reaping income on investments all the while, then policyholders suffer.
Strong laws help policyholders receive their policy benefits.
The new legislation significantly weakens the law instead, reducing the current 18 percent penalty to a floating rate currently set at just 10 percent.
By cutting the penalty nearly in half, insurers will face much less incentive to pay claims on time.
The bills also force many insurance disputes into our overburdened federal courts, where it takes twice as long to receive justice.
They give insurers the special statutory privilege of assuming their agent or adjuster’s liability, artificially creating federal jurisdiction where none should exist. This amounts to forum shopping for insurers.
Texas currently has the most federal judicial vacancies in the nation, and judicial emergencies have been declared in all of our state’s federal judicial districts due to heavy caseloads.
The delays created by these bills would only help insurers and hurt policyholders who have suffered a loss and are in need of funds to repair and rebuild their properties.
Finally, the bills threaten access to justice by forcing policyholders and their attorneys to play a guessing game about the amount a jury will ultimately award.
If they claim the wrong amount in damages at the outset, before they have been able to discover the full extent of the carrier’s wrongdoing and its effect, their attorney’s fees will be reduced or cut off completely, depending on how far they are from the mark.
This will disadvantage property owners in claims disputes, and it will require policyholders to do the insurance company’s job for them by hiring their own costly experts early on to thoroughly investigate the damage.
The exceptional risk, delay and cost created by this legislation will result in attorneys being unwilling to take insurance cases for policyholders.
Without legal representation, policyholders will stand little chance when taking on insurance companies and their armies of professional adjusters and attorneys.
The bills tip the scales in favor of insurers.
Currently, carriers enjoy special laws requiring policyholders to send detailed pre-suit notice, allowing them to suspend the case when this is not done, and enabling them to recover their costs if they are confronted with a frivolous suit.
The Department of Insurance has its own Fraud Unit, and prosecutors can push for up to 99 years in prison if insurance fraud is proven.
Insurers have dozens of laws on the books today to protect them. And the Texas Supreme Court recently issued bright-line rules to govern insurance disputes.
Texas doesn’t need these bills, which help the worst insurers the most and hurt property owners with valid claims.
HB 1774 and SB 10 represent the wrong policy for our state.
Ware V. Wendell is the executive director of Texas Watch, a non-partisan citizen advocacy group that has worked to protect policyholders since 1998.