Here we go again with tort “reform” in Texas. It seems to be the biggest issue in the state’s legislature lately. We looked at the issue in Missouri earlier this week as it pertains to lawsuits in general. Today, we look at the latest tort reform efforts in Texas, where tort reformers are going after plaintiffs’ attorneys in hail damage suits involving insurance companies.
This is a case where some “bad apples” ruin the barrel, so to speak. Texans for Lawsuit Reform (TLR), an advocacy group, and insurance companies are up in arms over hail damage lawsuits. The sad part is that, in some instances, their argument may have merit. For the most part though, it’s simply another way to help the insurance companies keep the profits they make from your premiums, all while you get stuck with inadequate compensation for repair bills.
First, a little primer on first party claims is in order. FPCs are claims that homeowners (the first party) file against their insurers when they incur property damage. Insurers are then on the hook to examine the policy to make sure the insured is actually covered for this type of damage and, if they are, to assess the extent of the damage to come up with what is supposed to be a fair and equitable settlement. The settlement is paid directly to the homeowner, who then uses it to pay for repairs. Seems pretty simple, right? Most of the time it is that simple and everything works out well.
Enter the “bad apples.” There are two types of bad faith business going on when it comes to FPCs. First, there are insurance companies who undervalue or overlook damages such as roof and siding damage. They can also focus on paying you for what are essentially cosmetic repairs, when you may actually need replacements for damaged roofs or siding.
As if that wasn’t bad enough, some disreputable insurers act in bad faith in the following manner:
- Delaying or denying your compensation without a good reason
- Failing to react promptly and reply to your claim
- Not performing a proper and thorough investigation of your damages
- Trying to get you to settle for less than your damages cost
- Neglecting to tell you that there is an appeals process for denied claims
- Not explaining why they denied or underpaid your claim
- Making it unnecessarily difficult for you to provide the documentation for your claim or asking for things that aren’t necessary
- Intimidating you through harassing investigative methods
When this type of bad faith business happens, homeowners absolutely need legal representation. The insurance companies have it and aren’t afraid to use it. Good lawyers and firms handle these cases all the time.
Enter the other “bad apples”: those lawyers the media has called “storm chasers,” a hat tip to the phrase “ambulance chasers.” Some of the bad faith practices of these “storm chasers” include, according to TLR’s website:
“…partner[ing] with unethical roofers or public adjusters to recruit homeowners and other property owners to file unnecessary lawsuits after a hailstorm—all for the lawyers’ financial gain.” These “bad apples” also “…exploit the Texas Insurance Code by using a mass-litigation model that revolves around recruiting thousands of homeowners and vastly inflating the alleged damages in every case to extort mass settlements. One particularly insidious aspect of their model is that they will sue individual insurance adjusters, agents or employees merely for tactical litigation purposes and not because those people actually did anything wrong. This burdens those individuals with personal and financial hardship.”
One insurance adjuster, Tim Maloney said, “The lawsuits that we receive — I’ve been served over 400 times since Hurricane Ike — they’re boilerplate. They’re all the same, the allegations are the same.” Mr. Maloney is one of many to testify before a Texas Senate committee, the focus of which is how storm damage claims are handled by insurers.
TLR continues, “This exploitation of our court system has real consequences for Texans. Every lawsuit abuse produces a ‘tort tax’ that is ultimately paid by consumers. In this case, all Texans who purchase property and casualty insurance will ultimately see their insurance costs increase through higher deductibles or premiums, or they may even see reduced or lost coverage.”
And so, a vicious cycle is born: some insurers act in bad faith, necessitating legal action; some lawyers then engage in less-than-ethical practices and the losers are the homeowners, good insurance companies and honest lawyers.
Now that the Texas legislature is seated again, “storm chasers” have become a top priority. In fact, Lt. Gov. Dan Patrick announced in November that the issue was one of his top priorities. There has already been plenty of testimony, as well as some interesting grilling of those who want reform.
Case in point, attorney for State Farm, Paul Solomon said that “This is a statewide problem.” This didn’t sit too well with Senator Kirk Watson (D-Austin). Referring to a settlement State Farm reached in 2015 in which it refunded millions of dollars to policyholders who’d been overcharged, Sen. Watson told Mr. Solomon that insurers should be careful with complaining about being victimized by Texas laws.
Part of this exchange between the two men is reproduced below:
Sen. Watson: “So before you declare the entire name of the game, let’s be clear that the way you make money is by collecting premiums and not paying. The perfect deal would be to collect premiums and never pay a claim, right?”
Mr. Solomon: “I disagree, because if we did that we wouldn’t be in business. People wouldn’t want to use us.”
Sen. Watson: “Well, pay as few and as little as you can is the name of the game at State Farm.”
Mr. Solomon: “I would disagree with that also, I think that’s a mischaracterization of what we do.”
Legitimate suits would not be filed – and won or settled – if insurers weren’t acting in bad faith. However, this does not excuse the unethical behavior of those lawyers dubbed “storm chasers.”
By no means am I a fan of tort reform of any kind. I’ve written numerous pieces on the subject and not once has tort reform delivered on its promises to the people. It greatly benefits insurers and corporations, though. However, I’m not a fan of unethical practices coming from the other side, either.
My idea of fair and equitable, surprisingly, can be summed up in a statement found on TLR’s website. It says, “Hail litigation is the worst lawsuit abuse in Texas today. TLR will work with the Texas Legislature to put an end to this lawyer-driven abuse while protecting the right of every Texas consumer to sue his or her insurance company if it does not settle a legitimate claim fairly and timely.”
I don’t think tort reform is the way to accomplish this goal, but the goal itself is worthy. Lawyers are meant to uphold the law, to fight for justice and to zealously represent the needs of their clients. The “bad apples” need to be brought under control. Sanctions can – and are – levied against lawyers who act unethically. One such lawyer was suspended from practice for a year.
Likewise, insurance companies are meant to protect and compensate their policyholders when disaster strikes. The “bad apples” need to be brought under control, too. That’s where honest lawyers come in and the legal system forces insurance companies acting in bad faith to pay up.
Hail damage is a very serious problem in Texas. The size of some of 2016’s hail stones was unbelievable. If one actually hit you on the head, never mind saying, “Ouch!” You’d probably be dead. We can’t control Mother Nature, though. Hail damage, to borrow from Mr. Solomon, is “a statewide problem,” and one that is not going away anytime soon.
What we truly need is a way to protect Texans’ rights to fair and timely insurance settlements that doesn’t tie the hands of honest attorneys and their clients or put an undue burden on honest insurers. Tort reform is only going to make achieving such justice more difficult.