Senate Bill Makes It Harder to Sue Insurers

A controversial bill that would make it harder for homeowners and companies to recover certain damages from their insurance companies — cheered by the insurance industry and criticized by liberal groups and some businesses — cleared the Texas Senate on Thursday.

Senate Bill 1628 by state Sen. Larry Taylor, R-Friendswood, would make broad changes to the way homeowners and businesses can sue insurance companies that don't deal with them fairly, or don't adequately pay out on claims made under property and casualty insurance policies, such as losses after a storm, fire or accident.

The bill would establish a two-year time limit on seeking claims. And before being allowed to sue for deceptive acts or unfair claims handling, policyholders would have to provide advance written notice, sign a statement attesting that damages occurred and show proof of damages. It would also offer certain new immunity protections to insurance agents and adjusters who are named in lawsuits. And the bill would lower the penalty that insurance companies face for late payments.

Democrats and trial lawyer-backed groups have adamantly opposed the measure, arguing that it takes away property owner rights that have been enshrined in Texas insurance law for decades. 

“It expressly immunizes wrongdoers,” said state Sen. Kirk Watson, D-Austin. “That means a Texan who was wronged by their insurance adjuster or an insurance agent would be in a position of not being able to hold them accountable.”

Insurance company interests and groups favoring lawsuit restrictions say the bill is needed to rein in abuses by trial lawyers seeking to cash in after catastrophic events, such as when storms hit the coast or hail pounds West Texas.

Bill author Taylor said his legislation would stop storm-chasing trial lawyers while keeping premiums low for property owners.

“Some unscrupulous contractors, public adjusters and case runners troll entire neighborhoods to solicit lawsuit clients,” he said. “This unethical behavior makes millions of dollars off the backs of unaware consumers who see their deductibles and premiums rise after a weather catastrophe hits.”

Taylor said he’s heard of claims that should have been as simple as a new roof ballooning to more than $125,000. Bad actors go “venue shopping” for courts or judges inclined to side with the plaintiffs, he said.

“There were people who should not be being sued, sued just to get the lawsuit into certain venues,” Taylor said during floor debate on Wednesday.     

Critics have said Taylor has no business carrying the bill because he owns an insurance agency. Taylor said he's working on behalf of consumers by trying to lower insurance costs and would actually get more money in his private business if premiums rise because he is paid a percentage of them.

“If I allow the lawyers to run wild like they’re doing what are premiums going to do? They are going to go up," he said. "I’m actually working against my interest if you want to look at this like I'm doing this for a selfish purpose."

Thursday's tussle in the upper chamber was foreshadowed by a public battle between the liberal groups and trial lawyers opposing the bill and the lawsuit reform groups and insurance companies that wholeheartedly embrace it.

“If passed it would put homeowners, businesses, schools, churches and the rest of the state's insurance customers at extreme risk. It would neuter the penalties that insurers must pay when they are caught delaying or denying legitimate claims,” Alex Winslow, the executive director of Texas Watch, a liberal consumer rights group, wrote in a column for TribTalk, a sister publication of The Texas Tribune.

Winslow said it wasn’t fair to penalize all policyholders for abuses associated with storm lawsuits. 

Texas for Lawsuit Reform, a conservative group that seeks to restrict lawsuits, launched its own salvo earlier this week.

“Sen. Larry Taylor’s hailstorm lawsuit bill will stop the latest wave of lawsuit abuse in Texas — storm-chasing trial lawyers who go from hailstorm to hailstorm manufacturing lawsuits for attorney fees,” said TLR spokeswoman Sherry Sylvester in a statement. “Though complaints to Texas Department of Insurance are at an all time low, an explosion of lawsuits across Texas — 300 lawsuits were filed in 25 Texas counties last week alone – have resulted in demands of ten to twenty times as much as the original homeowner’s claim.” 

When asked if the bill can be simply labeled a battle between trial lawyers and tort reformers, Watson, a lawyer, called that an oversimplification.

“Here’s the idea: You had businesses testify that they will be hurt by this,” he said. “This is, pure and simple, an insurance company bill against everybody else.”

Taylor softened some of the provisions that sparked complaints after it emerged from a Senate committee. But the bill stirred concern among some businesses that went beyond the typical liberal-against-conservative dynamic common in past battles over lawsuit restrictions.

Ernest Martin, a partner in the Dallas law firm Haynes and Boone LLP, said he was representing a variety of business clients who were worried about the bill, including homebuilders Trammel Crow Residential, La Quinta Inns & Suites and Sovereign Bank.

“Business policyholders in Texas spend millions of dollars on insurance premiums to protect their property, business, and various business interests,” Martin said in written testimony provided to senators. “Many businesses would be financially crippled or significantly deterred without the insurance protection they purchased.”

David Stein, owner of the Roger Beasley Automotive Group of Central Texas, also criticized the bill during a recent committee hearing. 

“Why are we looking at a bill that is pretty much strictly in favor of the insurance companies?” he said. “Where in this bill does it protect families? Where in this bill does it protect the small businesses, the medium or large businesses? Nowhere.”

Disclosure: Haynes and Boone LLP was a corporate sponsor of The Texas Tribune in 2013. A complete list of Tribune donors and sponsors can be viewed here.