By Steven J. Badger | December 1, 2014
Alejandro Stolarski is a United States citizen who emigrated from Mexico. Stolarski resides in Dallas County. Like hundreds of other Dallas County residents each week, Stolarski received a notice in the mail for jury duty. But unlike most Dallas County residents, he was excited about being called to jury duty. Even better, Stolarksi was thrilled when he was selected to actually serve on a jury and, in his words, be an integral part of his adopted country’s legal system.
Unfortunately, Stolarski was selected to serve as a juror in a Texas hail damage lawsuit.
The trial was representative of thousands of hail damage lawsuits presently pending in courts across Texas. The homeowner alleged that her roof was damaged in an April 2011 hail storm. Three months later, on June 23, 2011, she submitted a claim to State Farm.
One week later, on June 29, 2011, State Farm inspected the reported damage. Shortly thereafter, State Farm issued payment for the cost to repair minor damage to the roof and other building components. The homeowner accepted the payment. It appeared to State Farm that the claim had been amicably resolved.
Eighteen months later, with no notice to State Farm of any disagreement with its claim measure, the homeowner filed a lawsuit against State Farm. The lawsuit alleged that State Farm failed to comply with its obligations under the policy, that it engaged in deceptive acts, and that it failed to conduct a reasonable investigation of the claim.
After eighteen months of litigation, including written discovery, depositions, hearings and other extensive pre-trial proceedings, the matter was called to trial in the last week of October.
Stolarski and eleven other Dallas County citizens were impaneled as the jury to hear the matter.
After a three day trial, the case was submitted to the jurors. Very soon thereafter, the jurors returned a verdict in favor of State Farm, finding that the insurer complied with its payment obligations under the policy, that it did not engage in any deceptive acts, and that it conducted a reasonable investigation of the claim.
The trial was over. State Farm prevailed.
The following week, Stolarski took the bold step of sending a letter to the lawyer who represented the homeowner in the trial. He also sent copies of his letter to the Dallas judge who presided over the trial and to the Office of the Chief Disciplinary Counsel of the State Bar of Texas.
The letter in its entirety stated as follows:
Dear Mr. [Plaintiff’s Attorney]:
As an immigrant to the US from Mexico, I was thrilled to be picked as a Juror for the referenced case, and be an integral part of my adopted country’s legal system.
However, as the case progressed and the facts came out, it became obvious to me that the jury would decide in a few minutes, which it did. It also became obvious to me that the process had nothing to do with justice; it was simply a vehicle for you and your Law Firm to generate legal fees. The Jury did not come up with a unanimous result because one juror did not really understand the process and was fixated on the fact that the inspector did not write down that Mrs. Garcia denied entrance. Since 11 of us quickly agreed and that we wanted to go home, no effort was made to clarify the Judge’s instructions to her. The general feeling of the jury was that we had wasted 3.5 days on a case that had no reason to make it to a Court.
At the end of the proceedings, Judge Smith came into the Jury room and told us that in 30 years as a Judge he had never presided over a frivolous laws suit and that he would no longer be able to say this.
I find it unbelievable that you, a descendant of immigrants from Mexico a country that does not run under the rule of law; instead of being appreciative, you try to game the legal system for your personal gain. Did you ever stop to consider the cost to policyholders that will face higher rates? To Dallas County paying additional expenses? To 12 people wasting 3.5 days? Or for that matter to society as a whole by you’re deteriorating the legal system?
In my opinion, Mrs. Garcia knew she did not have a case, but had nothing to lose. As we say in Mexico “maybe its glue and it sticks”. An ethical attorney would not have taken the case or built up her unrealistic expectations.
As a juror in a Texas hail damage lawsuit, Stolarski witnessed firsthand . . . What The Hail Is Going On In Texas?
The Texas insurance industry is under attack. Every day, dozens of lawsuits are filed against property insurance companies across Texas alleging underpayment of hail damage claims. Literally thousands of these lawsuits are presently pending in courts across the state – predominantly in Hidalgo, Dallas, Fort Worth, and Potter counties, all locations where significant hail events have occurred over the past few years.
Typically, these lawsuits originate with a contractor knocking on the building owner’s door with promises of a “free roof”. Whether there actually exists hail damage to the roof is often irrelevant. The contractor knows that so long as the roof is old, it likely exhibits characteristics that can be alleged to have resulted from hail impact. In some cases, the building owner has already submitted and resolved its claim with its insurance company. This is often irrelevant as well, as the contractor will suggest that the insurer should have paid more and that a supplemental claim can be filed. The building owner is asked to sign a “contingency contract” giving the contractor the right to assist with the insurance claims process and then perform any repair work with the insurance proceeds. Hundreds of contractors advertise their services – with door-to-door flyers, on the radio, with large roadside billboards, and across the internet – as experts in the insurance claims process.
When the contractor is unable to demonstrate to the insurer the existence of hail impact damage, or if the insurer rightly refuses to negotiate the claim with the contractor, the contractor turns the claim over to a public adjuster. A second contract is signed by the building owner, this one giving the public adjuster 10 percent of the insurance proceeds.
The public adjuster then appears on behalf of the building owner. Some public adjusters actually attempt to establish the existence of hail damage by retaining consultants and preparing damage estimates. These public adjusters actually work to demonstrate to the insurance company that there exists damage resulting from hail impact in a particular hail event and attempt to reasonably resolve the claim. Other public adjusters, however, simply act as conduits for lawyers. These public adjusters have no intention of adjusting the claim, but instead immediately refer their building owner clients to a lawyer. In fact, some public adjusters ask the homeowner to sign a lawyer contract simultaneously with execution of the public adjuster contract. That contract provides the lawyer with a 30-40 percent contingency fee payable out of any insurance proceeds obtained.
And a lawsuit is filed. Sometimes the lawsuit is filed after notice to the insurance company of the claim (or supplemental claim) and a legitimate effort to resolve the claim. Sometimes, the lawsuit is the first notice to the insurer of any dispute concerning a claim that it believed had long ago been amicably resolved.
Eventually, most of these lawsuits are resolved. Often, resolution has nothing to do with the merits of the claim, but occurs only because it is more cost effective for the insurance company to resolve the matter for nuisance value than to retain counsel and proceed to trial. Texas law also imposes mandatory penalties of 18 percent interest and attorneys’ fees whenever it is determined that an insurer underpaid a claim. These penalties, particularly the attorneys’ fees, can amount to multiples of the actual unpaid claim award. As a result, policyholder lawyers recognize that insurers often have a motivation to simply settle the lawsuits – regardless of their merit.
But some lawsuits do go to trial. And, unfortunately, Stolarski’s letter speaks eloquently to the typical matter that ends up at trial.
All of this comes at a tremendous cost to the Texas building owner, both homeowners and commercial building owners. Texans pay amongst the highest insurance premiums in the country, with hail damage being the most expensive peril each year.
These premiums directly correlate to the significant increase in the number of hail damage claims and resulting litigation costs. Historically, less than 2 percent of all Texas first-party property insurance claims resulted in litigation. That number spiked to 6 percent for Hurricane Ike claims. Today, Texas insurers are reporting a 35 percent litigation rate for hail damage claims in Hidalgo County.
35 percent! How Can That Be?
Have Texas insurance companies all of a sudden stopped paying hail damage claims? Of course not. The real cause of the Texas hail claims crisis is obvious – as it was to Stolarski and his fellow jurors. Texas has an emerging industry of contractors, public adjusters and policyholder attorneys specializing solely in the solicitation and pursuit of hail damage claims.
Stolarski realized that many individuals involved in these hail damage claims “game the legal system” for their “personal gain”. He realized that the lawsuit he was involved with had “nothing to do with justice,” but was just a vehicle for a law firm to “generate legal fees.” He realized the homeowner brought the lawsuit only because someone had “built up her unrealistic expectations” and that she had “nothing to lose.” And, finally, Stolarski recognized that with this emerging industry comes a “cost to policyholders” through “higher rates.”
Fortunately, not all contractors, public adjusters and policyholder attorneys follow this model. Fortunately, there remain qualified and reputable contractors, public adjusters, and policyholder attorneys who carefully select their claims to be pursued and sincerely act in the best interests of the building owner. But, unfortunately, use of the model is growing and, since it ain’t gonna stop hailing anytime soon in Texas, the model will remain an issue until corrective action is taken to preclude its use. Until that happens, the average Texas citizen and homeowner, like Stolarski, will suffer.
Stolarski’s insurance premiums will continue to rise, his deductibles will continue to increase, and the scope of his available hail damage coverage will continue to be restricted or entirely eliminated
And this realization worried Stolarski. So he did what he could and sent his letter.
As the Texas legislature returns to session in mid-January, it must take steps to remedy the Texas hail claims crisis – not for the sake of the insurance companies, but for the benefit of Texas citizens and homeowners such as Stolarski. The incentive for this emerging industry of contractors, public adjusters and policyholder attorneys to pursue Texas hail claims – using his words — for their own “personal gain” must be addressed and eliminated. Otherwise, honest Texas citizens and homeowners will be the ones who suffer through higher premiums, increased deductibles, and less available insurance coverage.
It is time for the Texas legislature to step in and help Stolarski do something about What The Hail Is Going On In Texas?
Steven Badger is a partner in the Dallas office of Zelle, Hofmann, Voelbel & Mason, LLP. Additional information concerning Badger’s work in the hail claims area is available at www.zelle.com/whatthehail. An original copy of Alejandro Stolarski’s letter is available to the public at http://courts.dallascounty.org. See Mary Rodriguez vs. State Farm Lloyds; Cause No. DC-13-00992; 192nd District Court; See Docket Entry dated November 6, 2014.