The road to hail reform.

February 17th, 2017 By Catherine Hanna

In the last few years in Texas, we have seen a significant increase in the percentage of hail storm claims turning into lawsuits and there is no end in sight. Texas saw more record hail storms in 2016. “Texas Hailstorms Set Record Losses in 2016.” Insurance Council of Texas. December 13, 2016. In his recent state of the state address, Governor Greg Abbott called the many lawsuits arising from these storms, “the newest form of lawsuit abuse,” and added his voice to the call for legislation “that limits abusive hailstorm litigation.” Jones, Stephanie, “Texas Governor Calls for Legislation to Rein in Hailstorm Litigation.” Insurance Journal. February 2, 2017. Along with the glut of lawsuits, we have also seen increasing accusations of attorney misconduct. See Yates. David. “Judge tosses Voss Law hail suit, considers sanctioning firm for keeping clients ‘in the dark’ for own ‘benefit.'” SE Texas Record. January 25, 2017; Yates, David. “Barratry charge surfaces in Hidalgo County.” SE Texas Record. February 10, 2017. 

Legislation has now been filed in the Texas Legislature to address hail storm litigation: HB 1774 by Rep. Greg Bonnen (R-Friendswood) and SB 10 by Sen. Kelly Hancock (R-North Richland Hills). The Insurance Council of Texas has prepared a good summary of the legislation, highlighting the following key points:
  • Limit applicability of claims under both DTPA in Business and Commerce Code and Ins. Code
  • Limit insurer liability under chapter 542 to damages for delays in payment and not simply any violation of the prompt payment provisions. Changes penalty interest amount from 18% to judgment interest rate +3%
  • Requires written pre-suit notice (61st day before suit).  Abatement plea available if pre-suit notice is not given.
  • Allows insurers to make a written request for inspection of the property after pre-suit notice is given
  • Allows an insurer to accept liability for the agent’s acts or omissions related to the claim

The proposed legislation also provides a formula intended to limit attorneys fees and prohibits attorney fee recovery on a showing, by a preponderance of the evidence, that the claimant’s attorney committed barratry.

The provision that could have the most significant impact on Texas insurance carriers is the one allowing an insurer to accept liability for the adjuster’s acts or omissions related to the claim. By doing this, carriers could defeat the practice of Plaintiffs’ lawyers of including Texas citizen insurance adjusters in lawsuits for the purpose of defeating federal court diversity jurisdiction.

The filing of the bills is not the end of the story. Two years ago, a bill crafted to end hailstorm lawsuit abuse died in the Texas House. We’ll be following the progress of these bills. Stay tuned.