WHAT THE HAIL IS GOING ON? WAR ON HAIL DECLARED IN TEXAS AS INSURERS FIGHT STORM CLAIMS AND PENALTIES FOR REFUSING TO PAY LEGITIMATE DAMAGE CLAIMS
Two of the state’s most-powerful lobbies, the insurance
industry and trial lawyers, are gearing up for a fight over a push to ease
penalties against companies that deny homeowners their hail-damage claims.
“The litigation is just off the scale,” said Mark
Hanna, a spokesman for the Insurance Council of Texas, an Austin trade group
that represents firms including Allstate Corp. and Nationwide Mutual Insurance
Co. “We’ve had insurance companies say we can’t take this anymore.”
In Texas, home to some of the nation’s most severe
weather, no scourge is more costly to homeowners than the baseball-sized
pellets that fall from the sky, toppling fences, shattering windows and ripping
through roofs. Hail storms caused $10.4 billion in damage to homes from 1999 to
2011, more than hurricanes, thunderstorms and tornadoes combined, according to
the Texas Department of Insurance.
Allstate spokeswoman Kristen Freis and Nationwide
spokeswoman Elizabeth Stelzer declined to comment.
Extreme weather has made Texas the third-most-expensive
market for insurance premiums, behind Florida and Louisiana, according to the
National Association of Insurance Commissioners in Kansas City, Missouri. It’s
also left insurers and policyholders battling in court over what type of damage
gets paid and when.
Lawsuit Blitz
The legal aftermath of the hailstorms three years ago,
which left behind $330 million in residential damage, gave the insurance
industry pause.
In Hidalgo County, which sits along the Mexican border
inland from the Gulf Coast, 6,700 lawsuits have been filed since the 2012
storms, according to data from the county clerk’s office. Hidalgo, which
includes the city of McAllen, has a population of 816,000, more than a third of
whom live in poverty.
“There are enough hailstorm cases that they could
constitute their own court,” said Laura Hinojosa, the county clerk.
The insurance industry says the flood of lawsuits is
directly tied to lawyers who flocked to Hidalgo County to cajole storm-weary
policyholders to sue, increasing the odds that they could collect damage awards
and fees.
“This whole process is not about ensuring that people
get their hail-damaged roofs paid for,” said Steven Badger, a Dallas-based
attorney with Zelle Hofmann Voelbel & Mason LLP who represents commercial
property insurers. “It’s about people making money and pocketing money at the
expense of the insurance industry.”
Stonewalling
Homeowners
Consumer advocates and the trial lawyers, many of whom
contribute to Democrats, say policyholders are asserting their rights.
“If those claims don’t have underlying merit, then the
courts will shake that out,” said Bryan Blevins, president of the Texas Trial
Lawyers Association.
“Hidalgo had what I call a Biblical hail storm,” said
J. Steve Mostyn, a Houston trial attorney and Democratic Party donor who filed
13 percent of the county’s cases. “You had hail drifts that would stack up
along houses six feet tall.”
Mostyn said he had never filed any hail lawsuits before
the storm. He did so only after hearing stories of people stonewalled by their
insurance companies.
“The conduct I have seen toward the people in the Rio
Grande Valley has been rather horrific,” he said.
Austin Statehouse
In the Austin statehouse, the insurance industry wants
to make it harder for trial lawyers to profit from catastrophic weather. In
January, R Street Institute, a Washington-based nonprofit, wrote a report
titled “Come Hail or High Water: Texas’ Litigation Explosion.” The group, whose
five-person board includes State Farm Insurance vice president Steve McManus,
advocates changing the law to prevent “legal gamesmanship” after catastrophic
weather events like hail. Gary Stephenson, a State Farm spokesman, declined to
comment.
Lawmakers are acting on the advice. Republican state
Senator Larry Taylor plans to introduce legislation that would ease an 18
percent annual penalty on insurance companies that don’t pay claims within 60
days.
Pocketing Fees
Attorneys pocket those fines, critics say.
“They’re incentivized to drag these claims out,” said Taylor,
who owns the Truman Taylor Insurance Agency in Friendswood, a Houston suburb.
“I don’t know of any savings account that offers eighteen percent. There’s too
much of an incentive for abuse.”
Taylor said he plans to frame the legislation as a
“consumer-bill-of-rights type bill” because the costs of litigation could cause
insurers to increase their premiums.
Texas homeowners already pay an average of $1,661 a
year for the most commonly sold policy, 60 percent more than the national
average, according to the National Association of Insurance Commissioners.
Residents of Florida, the most- expensive state, pay an average of $2,084.
Consumer protection advocates balk at the notion that
consumers will be helped.
“It looks like what they want to do is roll back
meaningful protections designed to ensure that policyholders are paid,” said N.
Alex Winslow, executive director of Texas Watch, a consumer advocacy group in
Austin. “Policyholders are especially vulnerable after a widespread loss like a
hail storm when a lot of people are filing claims. This is when we need
insurance. We paid our premiums. Now it’s their turn to pay claims.”
’Junk Lawsuits’
The legislation will be the latest turn in a
decades-long Republican push to curb Texans’ ability to profit from lawsuits.
In his 1994 run for governor, George W. Bush campaigned
on stopping “junk lawsuits.” Once in office, the future president signed laws
that capped punitive damage awards and raised the bar to prove negligence.
His successor, Rick Perry, a Republican, went on to
enact laws making it harder to sue for medical malpractice and asbestos-related
illnesses, among other things. Texans for Lawsuit Reform, based in Houston,
called Perry “the most effective tort reformer in our nation’s history.”
The insurance industry won protections, too. After
Hurricane Ike struck the Texas coast, leaving thousands homeless, insurers were
on the hook for $12 billion of losses, making it the single costliest Texas
storm since 1950, according to the Insurance Council of Texas. Courts were
deluged by disputed claims.
In 2011, Texas lawmakers passed legislation that made
it more difficult for coastal dwellers to sue after hurricanes.
“Now we’re hearing about hail,” said Blevins, of the
trial attorneys group. “I guess we’ll be hearing about tornado claims in a
couple of years.”
Our Opinion
In a nutshell, folks, it is always about the mighty dollar. The defense lawyers and the plaintiff lawyers are making some pretty nice living with these lawsuits.
The insurers have shopped around for "experts" who would say whatever the insurers want them to say so that they deny the claim or reduce the amount of the payment to the homeowner. The latter is the most frequent case. There are all kinds of sleazebags in this business. The mighty dollar rules over ethics or decency or the law.
The property owners are the ones who suffer in the end.