House Bill 1774/Senate Bill 10 is going to make filing a bad faith commercial insurance claim more difficult. The Bill, which has now been signed by Governor Greg Abbott, will affect first-party property insurance claims involving “forces of nature,” which includes earthquakes, wildfires, tornados, floods, hurricanes, lightning, hail, wind, snowstorms, and rain events. Texas is no stranger to extreme weather, so the new Bill will impact thousands of Texas policyholders across the state.
Texas lawmakers have placed out-of-state interests above Texas policyholders in several key ways:
The new Bill provides new legal protections to foreign insurance companies who violate the Texas Insurance Code and provides immunity to licensed Texas adjusters even when they commit wrongful claims conduct.
Foreign insurance companies can force cases into backlogged federal courts by simply assuming the liability of an adjuster
Texas policyholders must list all damages 61 days before filing suit, or they are precluded from recovering attorneys’ fees
Texas policyholders must win at least 80% of their pre-suit damand in trial, or their attorneys’ fees are reduced or eliminated
The penalty interest rate will decrease from 18% to 10%. In other words, the insurers receive nearly a 50% windfall
While all of these provisions are detrimental to policyholders, three in particular will make obtaining proper compensation a long and complicated process.
Assumption of Agent Liability
Texas policyholders should have the right to a jury trial for business insurance disputes. Protecting foreign insurers and their hired adjusters from Texas law means more claims for property damage will be handled in federal courts, which are backlogged in Texas with more judicial vacancies than anywhere else, and are often more favorable towards insurance carriers than policyholders. This practice is often referred to as “forum-shopping” and it allows insurance companies to cherry-pick courts they believe will be more favorable to them.
Requiring notice for filing a lawsuit is fair, but the new law contains several overreaching provisions that will be harmful to policyholders for a number of reasons. First, the notice must state a specific amount of damages before policyholders’ litigation experts have the chance to fully evaluate the loss. Second, the notice must also spoon-feed the carrier with the acts they committed which serve as the basis of the suit. If this wasn’t enough, after receiving pre-suit notice, the insurance carrier is permitted to conduct an additional inspection of the property, regardless of how many times it has already inspected the property.
Decreased Prompt Payment Penalties
Existing law allows policyholders to recover 18% interest per year if an insurance carrier violates the Texas Insurance Code. Under the new law, policyholders are only able to recover 10% interest. This change is a disincentive for insurers to promptly pay claims, and only serves to provide fewer penalties for insurance carriers operating in bad faith. Remember that insurance companies make most of their profit by investing the “float,” which is the money that insurance companies hold onto between the time the insurer collects premiums and pays claims. Reducing the interest rate for delayed claims serves no purpose other than to encourage insurance companies to “beat the spread” on the float. No Texas policyholder will benefit from a decreased interest rate.
If you still have questions regarding the new legislation, you can read what our founding partners, Jeffrey Raizner and Andrew Slania, have to say about legislation and the insurance industry in Texas in their recent white paper.
Policyholders Still Have Rights
While the Blue Tarp legislation will make recovering damages for commercial insurance claims more difficult, policyholders still have the right to pursue compensation. For policyholders, the new legislation means they must choose experienced insurance lawyers to pursue their claims. Lawyers unfamiliar with the intricacies and nuances of the new legislation could cause a policyholder’s claim to be completely thrown out.
At Raizner Slania, our bad faith insurance lawyers are leaders in the property insurance industry. Our lawyers regularly speak across the country and are published authors on the subject of insurance law. In addition, we continue to win substantial recoveries for clients against insurance carriers around the globe. If you believe your insurance company wrongfully denied your claim, it is more important than ever to turn to insurance lawyers with a demonstrated track record of success. Call Raizner Slania today to learn how we can help.