Texans’ property rights are at risk. The insurance industry and its allies at the self-styled Texans for Lawsuit Reform are pushing Senate Bill 10 and House Bill 1774 this session — legislation that would slash penalties for property insurers and force many cases into our overburdened federal courts where delay only benefits insurers. If they are successful, homes, businesses, churches and schools will be devalued as our state is blanketed in blue tarps.
Not since the proposed Trans-Texas Corridor has such a sweeping measure, impacting so many properties, been proposed for this state. Industry and TLR were rejected last session, and for good reason. Since then, they have invested heavily in a slick advertising and lobbying campaign as they attempt to fabricate yet another “crisis” in order to advance sweetheart legislation.
The Legislature requires the best information — and the whole truth — when evaluating policy. So here it is. During the period the industry is complaining about, Texas homeowners insurers have pocketed over $4.5 billion in net underwriting profits. This actually understates total profits because it doesn’t include investment income, a significant part of the insurance business model. When you consider profitability figures from the National Association of Insurance Commissioners, Texas homeowners insurers showed a higher return on net worth than the national average from 2012-2014.
The Texas Department of Insurance didn’t say one word about TLR’s so-called “crisis” in its Biennial Report. Instead, TDI described how the “Texas insurance market has been growing rapidly in recent years and now represents the ninth-largest insurance market in the world,” and released figures showing how our homeowners insurance market has only become more competitive over time.
Thirteen of the 31 largest storms to hit Texas have occurred since 2012, and there were, consequently, more claims and an uptick in litigation during this period. The litigation rate rose to 1.5 to 2 percent of all claims, falling back to .7 percent in 2015. This did not happen in a vacuum. Official data from TDI shows insurers denied more claims in that period, paying 10 percent fewer hail claims and refusing to reopen claims in significant numbers until lawsuits were filed. For insurers to cry “crisis” now is like arsonists complaining about the number of fires in the city.
Too often, Texans are subjected to “deny, delay and underpay” tactics as insurers test and break the will of property owners. Only strong laws pry policy benefits back from the insurance industry, serving as the last line of defense for Texas property owners.
These laws were changed to benefit insurers in the 1990s, creating special pre-suit notice, case abatement, offer of settlement and groundless lawsuit provisions. However, the Blue Tarp Bills proposed in this legislative session would require additional, costly notice with severe consequences for claimants who don’t thread the needle. Penalties for insurers that pay slowly would be slashed, and most cases would be forced into federal courts, where it takes twice as long to receive justice. The bills are overbroad, threaten access to justice, do nothing to distinguish good claims from bad and assure that claims payments will be low and slow, if they are paid at all.
Texans don’t want this. A recent poll from Hill Research Consultants, a nationally-respected Republican polling firm, showed 83 percent of Democrats, 87 percent of Republicans, and 89 percent of those who identify with the Tea Party want to increase or maintain policyholders’ legal rights. These numbers confirm the last election cycle. Moreover, a brigade of Texas businesses — large and small — have joined homeowners and churches in a coalition opposing these bills.
Insurers have dozens of tough laws at the ready if they believe a case is unmerited. Insurance fraud is punishable by up to 99 years in jail. Any baseless suit can be dismissed as soon as it’s filed, and the defendant can recover their costs and fees when doing so. Case solicitation is punished severely under our criminal and civil laws. Laws passed last session to deal with any unscrupulous public adjusters are working. We merely need to enforce the laws, not weaken them to benefit for-profit insurers.
Texas families and businesses are counting on their legislators to protect their private property rights. If they don’t, they’ll only be seeing red as they stare at the blue tarps covering their worldly possessions.