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August 28, 2017 Property and Casualty News
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Harvey Creates Big Test For New Texas Property Insurance Law

Austin American-Statesman (TX)

Aug. 28--A controversial new Texas law designed to protect insurance companies from abusive lawsuits in the wake of "forces of nature" -- such as hurricanes -- is about to get an immediate test.

The law is set to take effect Friday, while much of the Texas coast remains a drenched disaster area after Hurricane Harvey made landfall near Corpus Christi last week as a Category 4 storm, battered the region and then stalled over it.

The law lowers the penalties insurers can face for denying or dragging their feet on payment of claims later found by a court to be legitimate, and it reduces the chances of the insurance companies being ordered to pay plaintiffs' attorney fees, among other changes.

Critics of the new law are echoing warnings they issued in May, when it was approved by the Legislature and signed by Gov. Greg Abbott. They say the law tips the scales toward insurance companies in disputes with home and business owners, and they're urging policy holders -- if they can do so safely -- to at least conduct cursory surveys of their Hurricane Harvey-damaged property before Friday and notify their insurance companies in writing that they're filing claims.

"We are encouraging people to file written claims before Sept. 1 to at least try to preserve some of their legal rights," said Ware Wendell of Texas Watch, a consumer advocacy group. The new law is "going to make it much harder for you to get what you are owed from your insurance company" in the event of a dispute.

But proponents of the law say policyholders have nothing to worry about because it doesn't change the process of filing a claim, and it also preserves the rights of property owners to sue in legitimate cases in which insurance companies act improperly.

Industry groups and other advocates of the law contend it is needed to rein in predatory attorneys who have been fueling a growing trend of baseless property-damage suits against insurance companies in Texas, particularly after severe storms. Texans for Lawsuit Reform, an advocacy group that backs the law, has cited statistics indicating property damage lawsuits climbed from about 500 in 2006 to nearly 10,000 in 2015.

The law "has no impact on the insurance claims process (because) it only affects lawsuits," state Sen. Kelly Hancock, R-North Richland Hills, said in a statement Monday in reaction to the recommendation that policyholders try to file claims before Friday.

"The narrative that the claims process changes on (Friday) is false," said Hancock, a backer of the legislation. "There is no need to rush to file a claim. Put your safety first. Do not return to seriously damaged property unless you are informed that it is safe."

But the advice to file claims before Friday is intended to potentially preserve the rights of property owners to sue under existing law in the event of a dispute, not because the claim filing process changes.

For instance, an insurance company found to have delayed payment is charged an 18 percent interest rate under existing law, compared with a fluctuating rate to be set at about 10 percent initially beginning Friday under the new law.

Even some lawmakers were urging victims of Hurricane Harvey to try to file claims before the new law takes effect.

"Texans: be sure to file for #Harvey relief before Sept 1. #TXlege passed a bill making it harder to dispute weather-related property claims," U.S. Rep. Joaquín Castro, D-San Antonio, tweeted Monday.

The new law "provides an avenue for the insurance companies to have abuses and not be held accountable," said Amy Witherite, president of the Texas Association of Consumer Lawyers. "There is less remedy for either the homeowner or the business owner."

Lucy Nashed, a spokeswoman for Texans for Lawsuit Reform, disputed that contention, saying the law strikes an appropriate balance between preserving the rights of property owners to sue while discouraging "storm chasers from going out there and trying to generate (abusive) lawsuits in the first place."

State Sen. John Whitmire, an opponent of the law, made a prediction in May regarding how it could unfold, saying at the time that lawmakers eventually will have to reverse it. Whitmire wasn't available for comment Monday.

"I think we will hear from our constituents across the state when we have storms and natural disasters," Whitmire, D-Houston, said during the debate over the law in May. "I think people are going to be in for a real surprise."

Spokesmen for Abbott couldn't be reached for comment Monday.

___

(c)2017 Austin American-Statesman, Texas

Visit Austin American-Statesman, Texas at www.statesman.com

Distributed by Tribune Content Agency, LLC.

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