Texas House Committee on Insurance Holds Public Hearing

Austin, Texas – The Texas House of Representatives Committee on Insurance recently held a public hearing to look at data gathered by the Texas Department of Insurance (TDI) on weather-related property claims and the frequency of litigation of those claims. Much of the hearing focused on a special data call that was issued earlier this year by TDI, which gathered statistical information from areas in Texas that had been affected by damaging weather events.

The hearing was well attended and representatives from Lubbock, Hidalgo, Dallas, Harris, and Travis counties were in attendance. The committee heard invited testimony only, and those giving testimony were divided into three different panels.

The first panel was TDI and included Deputy Commissioner of Regulatory Policy Division Cassie Brown and Senior Actuary Brian Ryder. Ryder stated that the data collected shows that there has been an increase in claims statewide that involved a public adjuster or an attorney over the past four years. Before 2010-2011, there were about 1 in 300 claims that involved a public adjuster or an attorney. Beginning around 2012, that number increased to about 1 in 30 claims. The panel also mentioned that this information was representative of their preliminary findings only, and could be updated once more data is collected.

Ryder said that claims involving a public adjuster or an attorney involved higher payments to claimants and higher settlement losses for insurers. However, the dataset did not include a net amount that the claimant was ultimately paid out when an adjuster or attorney was involved. In addition, a majority of claims with a public adjuster or an attorney involved were in South Texas, but there was also a noticeable increase in claims of this type in the Panhandle and Southwest Texas.

Further, Ryder’s testimony indicated that claims involving a public adjuster or an attorney were more likely to be reopened and took longer to close—around 625 days when there was a public adjuster or attorney involved, as opposed to around 95 days when there was not.

However, after evaluating regional and statewide market data, Ryder said that TDI found that there were no systematic patterns that it could draw on litigation in windstorm or hail claims based on the information requested in the data call.

The second panel was the Office of Public Insurance Counsel (OPIC) and included Deputy Public Counsel Joseph Matetich. OPIC is a consumer advocate agency whose funding is mandated through the Texas Insurance Code. Based on the data collected by TDI, Matetich said that no state-wide litigation crisis existed in Texas, and that claim frequency in the state was below the 16-year average. He also found that there was little to no correlation between increased premium rates and litigation rates over the last five years.

Rep. Kenneth Sheets, representing District 107 in Dallas County, questioned whether insurers were not spreading the risk throughout the state by increasing rates across the board because of the money paid out in lawsuits. Rep. Sheets will not be returning this session, but he was interested in making sure there was a balance between protecting consumers and protecting the insurance marketplace.

The third panel consisted of stakeholders who held very divided opinions. It included Lee Parsley with Texans for Lawsuit Reform, Bryan Blevins with the Texas Trial Lawyers Association, Ware Wendell with Texas Watch, and Beaman Floyd with the Texas Coalition for Affordable Insurance Solutions.

Texans for Lawsuit Reform is a pro-consumer organization, and Parsley said that the increase in litigation was a case of lawsuit abuse. He stated that while the number of claims are up, they are not consistent with the number of lawsuits that have been filed. In addition, most of the lawsuits were settled, and only a small percentage actually moved forward to litigation.

Blevins, with the Texas Trial Lawyers Association, argued that the TDI data did not show that there was any kind of lawsuit abuse in place. He also noted that in the period of time that lawsuits went up, hail claims went down. Rep. Morgan Meyer, representing District 108 in Dallas County, could not reconcile this information, and suggested that if hail claims were decreasing, the incidence of litigation should have been decreasing as well.

Blevins also contended that, according to the data, there was an 8-month lag between when claims were filed and when attorneys became involved, meaning attorneys could not have been driving the increased litigation rates. However, the committee members suggested that attorneys may have been purposefully waiting to file lawsuits to drive up the amount of money that they could receive in accruing interest rates and attorney’s fees.

Texas Watch is a consumer advocate agency, and Wendell wondered about whether the lawsuits brought were facing early dismissal. He said he is concerned that without the threat of litigation, claims won’t be paid to their full value. He mentioned that there are many tools and protections available for insurance companies when they are facing a lawsuit that is not meritorious, which the claimant does not necessarily have at its disposal.

Finally, Floyd, with the Texas Coalition for Affordable Insurance Solutions, noted that the number of confirmed policy complaints was low, and did not correlate with the number of lawsuits filed. He said that consumers need to be protected from potential bad actors in the insurance company marketplace, and they need to be protected from situations where they are forced to pay high regressive rates to fund a small number of people who may be abusing the system.

This issue had proponents on both sides and it is likely that the groups involved will be active in this debate. The Committee on Insurance is divided on the issue, with members who are both pro-industry and pro-consumer. The committee will not meet again before legislative session begins on January 10, 2017.