Senate panel OKs hail insurance bill critics say will restrict consumer rights

AUSTIN – A Texas Senate committee on Thursday approved a controversial bill that critics say will benefit insurance companies by restricting business and consumer access to the courts to resolve disputes over hail and other storm claims.

By a 7-1 vote without any discussion, the Senate Business & Commerce Committee advanced SB 10, which backers say will protect homeowners and business policyholders from the detrimental effects of unnecessary lawsuits. Sen. Judith Zaffirini, D-Laredo voted no. Sen. John Whitmire, D-Houston, was not present when the vote was taken.

The vote came two weeks after a House committee approved the companion bill, HB 1774, which has not reached the House floor.

Supporters of the bill have said the measure targets "abusive" lawsuits while protecting consumers' right to sue their insurance company if it acts unfairly or in bad faith. The bill would set new requirements on notices of a lawyer's intent to sue and could restrict attorneys' fees.

In addition to hail, the bill applies to earthquakes or tremors, wildfire, flood, tornado, lightning, hurricane, wind, snowstorms and rain.

The bill would lower the penalty interest rate that insurance companies have to pay when they fail to pay a legitimate claim "timely and fully" from the current 18 percent to a rate 5 percentage points above Texas' judgment rate, which currently stands at 5 percent.

Existing state law requires a plaintiff's attorney to file a notice with an insurance company more than 60 days before filing a lawsuit. SB 20 would require the pre-suit notice to include "acts or omissions" causing the claim, the amount alleged to be owed, and the amount of "reasonable and necessary" attorney fees incurred. If the pre-suit deadline is missed, the plaintiff's attorney would not be able to collect fees on the lawsuit.

Two years ago, a bill backed by the insurance industry that targeted hailstorm lawsuits gained Senate approval, but died in the House Calendars Committee, which votes on the bills that reach the floor. Business opposition was key in that bill's demise.

The lead sponsor of SB 10, state Sen. Kelly Hancock, R-North Richland Hills, said in an interview that he's not worried about the legislation's prospects in the final six weeks of the session. He said it's unclear when the bill will reach the Senate floor for a vote.

"I'm not in a hurry," said Hancock, who is chairman of the Senate Business & Commerce Committee.

Ware Wendell, executive director of Texas Watch, a nonprofit consumer advocacy group with ties to the Texas Trial Lawyers Association, referred to SB 10 as one of the "blue tarp bills" because he said they would prolong storm damage repair.

"This legislation threatens every property owner in this state. It is a giveaway to insurance companies at the expense of Texas families, businesses, churches, and schools. Lawmakers should represent their constituents, not the insurance industry," Wendell said in a statement.

Texans for Lawsuit Reform, the nonprofit group heavily funded by businesses which champions "tort reform," applauded the committee's approval of SB 10.

Lucy Nashed, a TLR spokeswoman, said in a statement that the bill "provides a common-sense solution to the worst lawsuit abuse in Texas today, shutting down the abusive lawsuit mills that are jeopardizing affordable property insurance coverage for all Texans while maintaining the strongest consumer protections in the nation for property owners."