The rain is still falling in Southeast Texas, and a bevy of special interests are warning homeowners that legislation passed this year restricts the ability of property insurance customers to pursue disputed claims.
“If you will remember, in the 2017 legislative session, a majority of your state lawmakers changed the laws which help property owners recover losses after a storm like Harvey and hampered your ability to hold your insurance company accountable if they slow pay, low pay, or no pay,” reads a post Sunday from Will Adams, a plaintiff’s lawyer in Katy.
“Well, the new law goes into effect SEPTEMBER 1!! This law will make it harder for you to get the insurance companies to pay what they are supposed to pay when they are supposed to pay it.”
He is referring to HB 1774, a measure that, among other things, drops the penalty assessed to insurers who lose in court for failure to pay adequately from 18 percent to around 10 percent.
The measure was passed with heavy lobbying from anti-tort lawmakers, insurance agencies, and backers of the state’s property insurance industry. And to the meager few consumer advocates, it’s a stab in the back to their constituents.
“It was the insurance people in favor of that bill, and it’s going to hurt many Texas property owners,” said Ware Wendell, executive director of Texas Watch, an Austin-based consumer watchdog group that focuses on the insurance industry.”
He said HB 1774 will force disputed claims that turn into lawsuits into federal courts while cutting the award that plaintiffs deserve after battling insurance companies that try to underpay or deny claims.
“The bill is very complicated, and people are in for a rude awakening,” said Wendell, who joined a dozen individuals — mostly trial lawyers — who spoke against the bill in committee. “This slashes the penalty on insurers, which makes it harder to get a lawyer as it reduces attorney fees. And you now have to send a notice letter to the insurance agency if you are going to file a lawsuit, there are more hoops to jump through for the consumer.”
Wendell said people should file their claim before Friday, when the new law takes effect, in order to have that claim be privy to the 18 percent penalty payout.
If it gets that far, the number of disputed claims that end up in court and are subject to the penalty is in the single digit percentage.
The legislation was prompted in part by the success of trial lawyers in the wake of Hurricane Ike, which struck the Gulf Coast of Texas in 2008.
Millions of dollars of claims filed with the Texas Windstorm Insurance Association (TWIA) — the state’s so-called “insurer of last resort” for 14 counties with direct exposure to hurricane winds — were settled with little resistance.
Some of the cases lingered as recently as 2015.
TWIA was taken over by the state and its director fired after a series of stories by Texas Watchdog — by reporters now with The Texas Monitor — revealed repeated malfeasance, including the firing of two employees for alleged fraud during the Ike claims process who were then awarded pickup trucks and given tens of thousands of dollars in severance pay.
In another instance, TWIA paid $39 million in defense fees before agreeing to a $189 million legal settlement for disputed claims.
Following the state takeover in 2011, TWIA paid over $100,000 a month for four months to lawyers to research decades-old open meetings legal decisions and to write legal briefs on withholding information.
The agency was supposed to be reformed through HB 3 in 2011, which streamlined the claims process and installed stringent checks on the agency. The new measure, HB 1774, is still part of the hangover from the TWIA/Ike episode, when ”a lot of lawyers got very, very rich,” said Mark Hanna, a spokesman for the Insurance Council of Texas, an association for Texas insurers.
HB 1774 addresses more of the basic elements that troubled tort reformers post-Ike. It limits the amount of attorney fees that can be awarded in certain cases and requires notice before a suit can be filed against an insurer.
It’s a practical measure, Hanna said, adding that the flurry of warnings from groups like Texas Watch is “hogwash.”
“This little burst of social media activity from trial lawyers and their representatives right before the legislation takes effect is unfortunate,” Hanna said. “This legislation has little to no effect on consumers but it does have an effect on trial lawyers. And for them to say you have to file flood and wind claims now, before Friday, is just so unfortunate. They are trying to scare people when they are most vulnerable.”
Another supporter of HB 1774 was Texas Coalition for Affordable Insurance Solutions, whose Executive Director, Beamon Floyd, noted that it’s “a strange circumstance” that Harvey strikes a few days before the bill takes effect.
“And what is not at stake is that idea that if people don’t file their claims before Friday, they won’t be able to,” Floyd said. “They will be able to and if they aren’t happy with their claim, they can file a lawsuit.”
Steve Miller can be reached at [email protected].