Thomas Harman | Best’s News Service | April 13, 2015
A Texas Senate panel is considering legislation supporters hope will reduce the number of lawsuits filed against property/casualty insurers in the state.
Senate Bill 1628 is currently before the Senate Committee on Business and Commerce. If passed and signed into law, it would take effect Sept. 1, 2015.
Sponsor Sen. Larry Taylor said in recent years, hailstorms have resulted in tens of thousands of claims against property/casualty insurers statewide, resulting in mass litigation. He said third-party contractors, adjusters and attorneys canvass consumers after storms to seek business or representation to take legal action against insurers. “As a result, policyholders are misinformed, contractors are circumventing statutory and policy guidelines, adjusters inflate actual damages and attorneys are applying mass tort models to simple property damage claims,” Taylor’s statement said.
Steven Badger, of the Zelle Hofmann law firm in Dallas, recently testified in front of the committee in favor of the bill. He told Best’s News Service one of the bill’s major objectives is to reduce the abuses by attorneys filing lawsuits on behalf of policyholders after their claims have been paid and even after the property is repaired.
The bill contains provisions requiring a building owner who wants to file a supplemental claim to first give the insurer notice of the claim prior to filing a lawsuit. Also, the bill contains provisions setting a two-year notice deadline to provide initial notice of a loss.
Fred C. Bosse, the American Insurance Association’s vice president, southwest region, said while insurers have been able to dispose of nearly all claims within the time periods allowed, no more than 3% typically ended up in court. However, because the efforts of adjusters who inspect homes well after the claim has been settled and attorneys who file lawsuits against the companies, the percentage of cases in litigation after recent storms has risen to between 30% and 40%.
Bosse said while some claims are reopened and resettled, many others that are in dispute are not. Insurers, he said, often are unaware of any problem with settled claims until a lawsuit is filed.
SB 1628 also prohibits some public adjuster activity; requires notice of policyholder suit and proof of loss; creates a practical standard for bona fide disputes; defines actual damages and addresses liability for a person working on the adjustment of a claim on behalf of the insurer.
Texas was hit hard by severe hailstorms twice in 2014, with several thousand claims pouring in within 24 hours of an Oct. 2 storm that blew through northern Texas with winds of 90 miles per hour, and golf-ball-size hail in the Dallas-Fort Worth area (Best’s News Service, Oct. 3, 2014). A June hailstorm that pounded Abilene with baseball-size hail produced insured losses of $400 million (Best’s News Service, July 14, 2014).
The top five writers of homeowners’ multiperil insurance in Texas during 2013 were State Farm Group, with a 26.49% market share; Farmers Insurance Group, with 11.74%; Allstate Insurance Group, with 11.6%; USAA Group, with 8.62%; and Liberty Mutual Insurance Cos., with 7.81%, according to BestLink (www.ambest.com/bestlink).
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