Insurance industry pushing bill to erode consumer protections

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As the 84th Texas Legislature enters the final days of the session, attention is focused on hot button issues like the open carry of firearms.

What you don’t hear much about is a measure in the House being quietly pushed by the insurance industry that eviscerates key protections for property insurance policyholders, protections that have long been a matter of law the industry wants to jettison. SB 1628 has already passed the Senate without much public notice and is currently in the House Calendars Committee with proponents hoping to bring it to the floor for a quick vote before consumer groups have a chance to raise an alarm.

As written, SB 1628 would make it harder for homeowners and companies to recover certain damages from their insurance company. It would impose broad changes on how policyholders can sue insurance companies that don’t deal with them fairly or don’t adequately pay out on claims made under property and casualty insurance policies, such as losses incurred in a storm, fire or accident.

The bill would establish a two-year time limit on seeking claims. And before being allowed to sue for deceptive acts or unfair claims handling, policyholders would have to provide advance written notice, sign a statement attesting that damages occurred and show proof of damages. It would also offer certain new immunity protections to insurance agents and adjusters who are named in lawsuits. And the bill would lower the penalty that insurance companies face for late payments.

Those industry efforts are being threatened as a coalition led by Texas Watch, a policyholder advocacy group, is forming at this late hour to oppose the measure. They are warning that the bill:

• Incentivizes low and slow pay tactics by insurance companies by reducing penalties for insurance companies that fail to pay claims promptly

• Effectively immunizes insurance adjusters, agents, and employees for misconduct and misrepresentations

• Creates new “gotcha” provisions that criminalize innocent mistakes by homeowners and businesses while immunizing industry misconduct

• Severely restricts the time homeowners and businesses have to file a claim

“Senate Bill 1628 protects ‘deny, delay, underpay’ insurance industry tactics, making it easier for insurance companies to cheat their customers. The effect of this legislation – if passed by the House – would be to undermine crucial policyholder protections designed to ensure fair, timely payments to Texas families and businesses with valid insurance claims,” said Alex Winslow, executive director of Texas Watch. “This bill is fundamentally flawed. It is facing growing opposition within the business community and a groundswell of grassroots opposition from Texans across the state.”

So how did this “fundamentally flawed” bill originate? Look no further than its author, Sen. Larry Taylor, a Republican from Friendswood serving his first term in the Senate after 10 years in the House. He is the owner of an insurance company in his hometown and has enjoyed generous support from the insurance industry throughout his political career. He is not alone in that regard; as a regulated industry, insurance companies have made sure their interests are represented in Austin for decades. There is nothing wrong with that, of course, but for any industry seeking to influence public policy, the interests of that particular industry must be balanced by the public interest.

Taylor claims the purpose of the bill is to keep insurance affordable for low-income homeowners in the wake of huge losses caused by lawsuits against the industry. Of course, these losses are actually payments made to policyholders – and the industry enjoys record profits despite the inconvenience of paying legitimate claims. But Taylor offers a familiar catchphrase for his efforts to carve new protections for his own very profitable industry: lawsuit abuse.

In the wake of devastating hailstorms in the Rio Grande Valley in 2012, Taylor insisted, “Lawsuit abuse is the only explanation for the recent surge in lawsuits following hailstorms. There’s been no increase in the frequency of hailstorms and no changes in insurance law.” While his bill aims to strip away protections from consumers, Taylor insists, “Texas policyholders will continue to have extraordinary remedies not available to policyholders in most other states.”

If all of this sounds depressingly familiar, it is. When massive resources were employed to push tort reform through the Texas Legislature and elect a Supreme Court to ignore precedent and jury verdicts to prop it up, it still wasn’t enough for wealthy homebuilder Bob Perry, who expended buckets of cash to make it happen.

Not content to block the path to the courthouse door for the maimed and injured, he pushed through a bill creating the Texas Residential Construction Commission to prevent the purchaser of a defective new home built by Perry’s company or one of his cronies from seeking redress in the courts unless they jumped through endless legal hoops. Carole Keeton-Rylander, then state comptroller, had her office audit the TRCC and pronounced it the “builder protection agency” – as indeed it was. It finally died of its own weight in 2009 when the Sunset Commission declined to renew it, but its bitter legacy devastated many buyers of these horrific homes.

Bob Perry died in 2013, but his spirit lives on in the 84th Legislature with this hailstorm Trojan horse being used in an attempt to fatten insurance company coffers.

As for Sen. Taylor, his District 11 includes most of Galveston County, but the siren call of his insurance business apparently outweighs the interests of some of his constituents. Coastal property owners – both residential and commercial – face a one-two punch if this bill becomes law.

“Coastal property owners can’t take another hit,” said Winslow. “First came TWIA. Now come all insurance companies grabbing with both hands.”

In 2011, lawmakers erected a series of barriers that severely curtail important legal protections when coastal communities are devastated by windstorms, eviscerating the legal rights of coastal property owners insured through the Texas Windstorm Insurance Association.

Now, lawmakers are expanding TWIA-style restrictions to all Texas property insurance policies. Winslow says this move will make it easier for insurance companies to cheat their customers. The bill impacts claims by both residential and commercial policyholders and is not limited to just wind or hail claims. In fact, the bill undermines decades of policyholder protections for claims involving theft, fire, vandalism, water damage and any other peril covered by a property damage policy.

“All Texans – and coastal homeowners and businesses in particular – need and deserve real protections that force insurance companies to pay valid claims in full and on time,” said Winslow. “SB 1628 is a knockout blow to coastal property owners. It gives to insurance companies by taking from hard working families and businesses.”

The fate of the bill may rest with Rep. Todd Hunter. The Corpus Christi Republican chairs the schedule-setting House Calendars committee where the bill currently rests. If Hunter recognizes it as a giveaway to insurance companies at the expense of homeowners and businesses, it may die there – if the chairman can withstand what is certain to be maximum industry pressure. Hunter was an advocate for his constituents in the wake of Hurricane Ike. Coupled with restrictions placed on TWIA policyholders enacted in 2011, this bill removes the last line of defense for homeowners and businesses with valid property damage claims.

The bill is facing growing opposition within the business community. Dozens of businesses and churches, as well as school, trade and citizen groups, have added their voices in opposition. This week AARP – formerly the American Association of Retired Persons – entered the fray.

“It’s wrong to punish honest people who’ve already been victimized by weather-related catastrophes ... again,” said Bob Jackson, AARP Texas state director. “This is not how you deal with any excesses in the system or bad apples in the bunch. The insurance industry, already enjoying record profits in Texas, has its fingerprints all over this bill and would now want you to believe that it is designed to protect policyholders. That’s disingenuous, and we all know better.”

Serving more than 2.2 million members in Texas, AARP is a nonprofit, nonpartisan membership organization that helps people 50-plus have independence, choice and control in ways that are beneficial and affordable. If their members follow Jackson’s lead and oppose the bill, it is in real trouble.

“Insurance companies have taken Texas’ allergy season to new heights,” Jackson said. “They are good at collecting premiums but quite allergic to paying claims.”

The attention now focused on this bill by Winslow, Jackson and a growing cadre of people disinclined to believe insurance industry propaganda has forced this issue out from under the radar, but the clock is running.


James Shannon writes about politics and government for The Examiner. He can be reached at james [at] theexaminer [dot] com