Texas Senate Committee on Business and Commerce
Tuesday, March 31 2015 at 8:00am
Capitol Extension Room E1.016
SB 1628 by Taylor, Larry. Relating to insurance claims and certain prohibited acts and practices in or in relation to the business of insurance; amending provisions that are or may be subject to a criminal penalty.
Bill info: http://www.capitol.state.tx.us/BillLookup/history.aspx?LegSess=84R&Bill=SB1628
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Texas’ unique geographical location increases its propensity to catastrophic weather-related events and natural disasters, such as hurricanes, tornadoes, wildfires and hail storms.
Over the last few years, various hail storms have resulted in tens of thousands of claims filed against property and casualty insurers statewide, resulting in mass litigation. In many cases, third-party contractors, adjusters, and attorneys canvass consumers in post-event areas to solicit business and/or representation to take legal action on behalf of the policyholder against the insurer. 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.
Carriers with historical actuarial experience of 1% or 2% of their claims resulting in lawsuits are now seeing lawsuit volume in the 30% range. Damage estimates of a few thousand dollars are resulting in lawsuit demands of $100,000 or more. Lawyers are bundling large numbers of claims and extorting huge sums in settlements from carriers.
This litigation explosion is having the predictable results of less competition among carriers and will produce higher deductibles, higher premiums, and loss of coverage in some areas.
SB 1628 is a fair and moderate reform of existing statutes to address the problems revealed by the exponential increase in litigation against carriers following hail events in recent years:
- Suits against insurance company adjusters
- Many independent adjusters are being sued to prevent carriers from removing cases out of a trial lawyer’s preferred forum and into federal court. S.B. 1628 addresses the problem by providing that a person who participates in adjusting the claim for the insurance company is no longer subject to suit for unfair settlement practices. Instead, the insurance company is the sole defendant in the action and responsible for the adjuster’s actions.
- Requiring notice of a claim
- A policyholder must give the insurance company pre-suit notice of a claim, stating the amount sought for the claim itself, the amount sought for payment of the claimant’s attorney fees, and the total amount the policyholder will accept in settlement of the claim.
- Failure to give the notice can result in abatement or, in some cases, dismissal.
- Liability for unfair settlement practices
- Under 541, a policyholder can recover only “actual damages” resulting from an unfair settlement practice. “Actual damages” does not mean the amount of the claim itself, but something more.
- A policyholder can recover under Ch. 542 only if the insurance company acted “knowingly,” which eliminates the strict liability for being “a day late or a dollar short” that currently exists in that statute.
- Strict claims-filing period
- Claims must be filed with the insurance company within two years of the event or the claim is barred.
- Increased regulation of public adjusters
- Eliminates public adjuster trainees.
- A PA cannot enter into a contract or collect a fee unless he/she had intent to actually perform services.
- A PA cannot enter into a contract with a policyholder for the primary purpose of referring the policyholder to an attorney.
- A PA cannot act on behalf of an attorney by having the policyholder sign an attorney representation contract.
- A PA may not pay a fee to anyone for a referral and a PA may not accept a referral fee of any kind, including one from an attorney.
- Insurance fraud
- Clarifies that the insurance fraud statute covers adjusters, estimators, and that contractors are subject to the statute.
- A person covered by the statute may not:
- agree to waive, absorb, rebate, subsidize, or credit an insurance deductible;
- provide an estimate for repair that is increased, inflated, or manipulated to exceed the deductible;
- knowingly provide false information to an insurance company about the scope or cost of repair.
- Violating the statute remains a Class A misdemeanor.
- Adds public adjusters to the criminal barratry statute.
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