The Second Storm: Policy Report by Texas Watch

THE SECOND STORM
Official Data Indicates Abusive Tactics

by Property Insurers
A Policy Report by Texas Watch | March 2017
Texas Watch is a non-partisan, non-profit citizen advocacy organization
dedicated to ensuring that insurance companies and other corporations are
accountable to their customers.
Since 1998, Texas Watch has fought for Texas families and consumers by
advocating for laws that:
Ensure accountability through our courts and guarantee our
constitutional right to Trial by Jury;
Improve safety for workers, patients, and communities; and
Reform the insurance marketplace to ensure meaningful coverage at a
fair price.
Our organization thrives on community engagement, providing a platform for
tens of thousands of Texans to preserve and strengthen their constitutional
rights and protections.
LEARN MORE AT WWW.TEXASATCH.ORG/PROTECTPOLICYHOLDERS

SPIN AND SELECTIVE
STORYTELLING BY THE INSURANCE
INDUSTRY AND LOBBYISTS
The insurance industry and lobbyists at the self-styled Texans for Lawsuit Reform (TLR) are
selling a selective story of a hail litigation crisis they date to 2012. A close study of the offi-
cial data and a review of current law shows that this is inflated and overly-simplistic rhetoric
from an industry that profits off of captive consumers and stands to gain financially if they can
successfully lobby for special privileges under the law. If successful, insurance carriers will be
able to inflict a second storm of deny, delay, underpay tactics on property owners struggling
to rebuild.This policy report corrects the record, providing sources for the interested reader to
study further.
SB 10 and HB 1774, more aptly referred to as the Blue Tarp Bills given their effect, hurt all
real property owners, regardless of the type of loss they suffer, whether the result of fire, fro-
zen pipes, or tornadoes. The bills arent limited to hail at all. They gut penalties for insurers
who slow pay their customers, increase costs for policyholders, and wrongly push Texas cases
into our overburdened federal
courts where additional delay
only benefits the insurer.1 Prop-
erty owners will be strung along FACTS ARE STUBBORN
and ground down if the legisla-
tion passes into law. As such, THINGS. -JOHN ADAMS
the Blue Tarp Bills amount to
a broad assault on the private
property rights of all Texans.
Dating back to the reforms of 1995, our laws are currently balanced between insurers and poli-
cyholders.2 As such, any tipping of the scales, even slightly in favor of insurers, would have cat-
astrophic and cascading effects for policyholders. The aim of the law today is to ensure illegit-
imate claims are punished and valid claims are paid on time and in full. These legal protections
are essential given the overwhelming power the insurance industry holds over their customers.
By virtue of our lending practices and laws, many policyholders are compelled to purchase in-
surance, and they have little bargaining power. Insurers write the policies, charge and collect the
premiums, and invest our money for their profits until we suffer a covered loss and have to make
a claim. In our time of need, we expect their help to get back on our feet, and strong laws are the
only thing that compel for-profit insurers to honor their promise.
1 See annotated legislation at Attachment A. SB 10 & HB 1774 are currently identical in wording.
2 HB 668, 74th Regular Session, 1995, http://www.capitol.state.tx.us/BillLookup/history.
aspx?LegSess=74R&Bill=HB668.
INTRODUCTION 1
Insurers are quick today to paint a picture of ambush-by-lawsuit, claiming they are forced to
settle inflated suits en masse despite no wrongdoing on their part. In doing so, they obscure
the scores of strong penalties that currently exist in both our civil and criminal laws, constitut-
ing an arsenal of remedies for any insurance carrier confronted with an unsupported lawsuit.3
If a dispute arises, insurers are provided with extraordinary means to resolve it before litiga-
tion, or early in the litigation. Specifically, insurance carriers have unique pre-suit notice, case
abatement, settlement offer, and early mediation provisions currently available to them under
the law today.4 When an insurer suspects fraud or case-running, serious punishments follow. In
addition to the Special Investigations Units within insurers that ferret out any fraud,5 the Texas
Department of Insurance (TDI) has its own Fraud Unit,6 and barratry is punished severely under
both the criminal and civil law.7 Carriers merely need to strictly enforce the tough laws at their
disposal today, and we support their ability to do so if any policyholder should attempt to abuse
our courts. No new laws are needed.
If carriers are not reporting these suits as fraudulent or immediately seeking to dismiss them
under current law, which allows
for recovery of their costs, this
refusal on the part of the carri-
JUSTICE DELAYED IS ers speaks volumes. It shows
JUSTICE DENIED.
that they are being served with
viable suits worthy of adjudica-
tion through our courts. After
all, given how insurance is sold
and claims are processed, car-
riers are in complete control of their liability. If they pay 100 cents on the dollar on time, under
the policy they wrote, they face no liability whatsoever. But when they seek to squeeze dollars
out of property owners by muscling them, and are caught doing so, they have to face the conse-
quences of their choices.
Accountability for all wrongdoers is a fundamental concept under the law. If the insurance in-
dustry is able to pass one-sided legislation this session, they will be able to escape their wrong-
doing by folding severely-reduced slow-pay penalties in as a business cost, imposing addi-
tional costs on property owners wishing to challenge their decisions, driving a wedge between
the property owner and their attorney, and beating the claimant into submission through legal
delay tactics. Justice delayed is justice denied. And a property owner without an attorney has
been completely disarmed when facing an insurance industry that has its own private army of
claims adjusters and attorneys.
Contrary to TLRs doomsday rhetoric, the insurance market in Texas is thriving. Property in-
3 See Existing Penalties & Procedures in Texas Law: Insurance, Texas Watch, at Attachment B.
4 See Tex. Ins. Code 541.154-541.161.
5 See, e.g., Expert FAQ: How Do Insurance Investigators Fight Fraud, A. Holbrook, NerdWallet, 8/27/14,
https://www.nerdwallet.com/blog/insurance/expert-faq-insurance-investigators-fight-fraud/.
6 See https://www.tdi.texas.gov/fraud/.
7 Tex. Penal Code 38.12 & Tex. Govt Code 82.065-82.0651.
INTRODUCTION 2
surers have what they want when it comes to rates a file and use system8 and the ability
to have their national policy forms routinely approved.9 The result is Texans have been paying
more for less coverage for well over a decade. Now insurers, after being rejected by the Legis-
lature last session, sense one last opportunity to manufacture a crisis in order to gut the few
remaining policyholder protections in the law.
If the insurance industry is successful, their profits will swell beyond the billions theyve pock-
eted in the time theyve been crying crisis. Furthermore, if they ram through an unpopular bill,
the real world effect is that Texas businesses, homes, churches, and schools will be blanketed in
blue tarps.
A review of the data does demonstrate an uptick in claims and lawsuits in the last five years.
TLR and the industry wish to end the thought process there (simplistically arguing more law-
suits = bad lawsuits, reverting to hot rhetoric about storm-chasing trial lawyers, and ignoring
the fall in the litigation rate in 2015). A fuller analysis shows that a combination of major storms
hitting populated areas, a proliferation of low-coverage policies pushed into the market by
industry, and insurers deny, delay, and underpay tactics have forced more property owners into
legal disputes with their carriers in order to finally receive the full benefit of the policy for which
THE REAL WORLD EFFECT IS THAT

TEXAS BUSINESSES, HOMES, CHURCHES,
AND SCHOOLS WILL BE BLANKETED IN
BLUE TARPS.
they dutifully paid premiums. This second storm is a man-made catastrophe, created by the
insurance industry, wreaking havoc on too many Texas homeowners, business owners, church-
es and schools that simply wish to rebuild.
Unfortunately, TLR and the insurance industry arent coming close to telling the whole story as
they attempt to force SB 10 and HB 1774 through the Texas Legislature. Lawmakers, the pub-
lic, and the press deserve the best information as they evaluate the claims being made by the
insurance industry and their lobbyists.
8 Tex. Ins. Code 2251.101.

9 Tex. Ins. Code 2301.006.
INTRODUCTION 3
TDI HAS NOT VALIDATED THE
INDUSTRYS STORY OF A
SO-CALLED HAIL CRISIS
The Texas Department of Insurance releases a Biennial Report to the Legislature before each
session, highlighting pressing insurance issues and making recommendations. TLRs so-called
hail crisis does not appear in TDIs Biennial Report at all not even one passing mention.10 If
this was truly a pressing public policy matter, the state regulator would certainly speak to it.
In stark contrast to TLRs scare tactics, TDI states in their Biennial Report: The Texas insurance
market has been growing rapidly in recent years and now represents the ninth largest insurance
market in the world. This growth can be primarily attributed to the performance of the Texas
economy and the resulting population growth and job creation. In addition, Texas is perceived
as a preferred location by insurance industry participants, as evidenced by new market entrants,
insurance carrier mergers, and insurers relocating to Texas.11
SEVERE WEATHER INCREASINGLY

HITS POPULATED AREAS IN TEXAS
Much has been made of the Hidalgo
litigation by TLR, but few have appre-
ciated the force and devastation of the
storm that hit the Rio Grande Valley.
On March 29, 2102, a slow-moving and
particularly vicious storm wreaked hav-
oc on these Texans. For thirty minutes,
straight-line winds of 65 mph drove
large hail stones into homes and busi-
nesses.12 The McAllen airport recorded,
over just one hour, gusts of up to 74
mph and nearly 4 inches of rain.13 One
official described the damage from this
storm as worse than when Hurricane Dolly hit in 2008.14 As McAllen was trying to rebuild, soft-
10 Biennial Report to the 85th Legislature, Texas Department of Insurance, December 2016, http://www.tdi.
texas.gov/reports/documents/2016biennialreport.pdf.
11 Id. at p. 3.
12 Weather Informer: March 29, 2012 Rio Grande Valley Hail Storm, B. Mejia, last accessed 3/6/17, https://
brianmejia.wordpress.com/2012/03/31/march-29-2012-rio-grande-valley-hail-storm/.
13 Id.
14 Id.
A CLOSE READING OF THE FACTS 4

ball-sized hail hit the area again in April.15
The National Weather Service defined the storm as Historic Hail! and described how the area
was blitzed by hours of hail, wind, [and] flooding on March 29, 2012.16
Texas has the most severe weather of any state in the country and is the only state subject to
nine different types of natural disasters.17 Of particular interest, populated areas of our state
have suffered a series of large and violent storms over the past five years. According to the
insurance industrys own data, Texas incurred large insured losses from the following weather
events18:
RANK COST STORM DATE LOCATION

4 $1.4 BILLION HAILSTORM 4/12/16 SAN ANTONIO
5 $1.2 BILLION TORNADOES 12/26/15 GARLAND/ROWLETT
7 $890 MILLION HAILSTORM 6/13/12 DFW
9 $850 MILLION TORNADOES/HAIL 4/3/14 DENTON
11 $775 MILLION TORNADO/HAIL 4/3/12 DFW
13 $700 MILLION HAILSTORM 3/23/16 PLANO
14 $600 MILLION HAILSTORM 3/16/16 FT. WORTH
15 $600 MILLION HAILSTORM 3/29/12 MCALLEN
16 $500 MILLION HAILSTORM 5/8/13 AMARILLO
21 $400 MILLION HAILSTORM 6/12/14 ABILENE
24 $300 MILLION HAILSTORM 4/11/16 WILEY
26 $260 MILLION HAIL/WIND 3/29/12 MCALLEN
PALO PINTO/HOOD/
29 $200 MILLION TORNADOES/HAIL 5/15/13 JOHNSON COUNTIES
Thirteen of the 31 largest storms have occurred in Texas during this period.19 Since 2012, Texas
population has grown by a staggering 1.8 million people.20 Properties develop to accommodate
these new Texans. Farms and ranches become suburbs and exurbs. Hailstorms that used to fall
on fields now fall on roof tops. One out of every 12 Americans lives in our great state with Texas
15 Brief But Dangerous Hailstorm Passes Through Valley, I. Ortiz, The Monitor, 4/20/12, http://www.
themonitor.com/brief-but-dangerous-hailstorm-passes-through-valley/article_74abc87d-f2b1-5346-b77d-13d566b7963a.html.
16 Preliminary Report on McAllen/Edinburg/Mission Hailstorm March 29 2012, National Weather Service,
last accessed 3/6/17, https://www.weather.gov/bro/2012event_midvalleyhailprelim.
17 Texas Most Severe Weather State in the Country, R. Rodriguez, KRISTV.com, 10/6/16, http://www.kristv.
com/story/33330526/texas-most-severe-weather-state-in-the-country.
18 Costliest Texas Storms: Insured Losses Actual Dollars, Insurance Council of Texas, last accessed
3/6/17, https://www.insurancecouncil.org/4DCGI/cms/review.html?Action=CMS_Document&DocID=145&MenuKey=none.
19 Id.
20 United States and Texas Populations 1850-2016 (Official U.S. Census Estimate Texas), Texas State
Library and Archives Commission, last accessed 3/6/17, https://www.tsl.texas.gov/ref/abouttx/census.html.

ranking 2nd in the United States in terms of population.21
Populated areas in Texas have been hit hard by storms, especially San Antonio, DFW, and McAl-
len. The combined population of just these three Metropolitan Statistical Areas covers 10.32
million Texans, according to U.S. Census estimates.22 This roughly equals the number of people
living in the entire state of Georgia.23
San Antonio was hit by three big hail storms in April 2016. As the San Antonio Express-News re-
ported, San Antonio accounted for a lot of the damage that the state sustained in the first half
of 2016. Losses from three April hail storms in the Alamo City exceeded $2 billion including
$1.4 billion from the April 12 storm alone.24
When big storms hit populated areas, you have large losses. Because many property owners
are impacted, you naturally see a rise in insurance claims. And when those claims arent adjust-
ed properly, disputes arise due to deny, delay, and underpay insurance tactics.
As one would expect, the TDI report does demonstrate there was an uptick of claims following
huge storms hitting populated areas of our state and, as detailed below, the rate of claims-relat-
ed litigation is now falling.
THE TDI DATA CALL REPORT

TDI conducted an extensive data call during the interim, collecting information from about 140
separate residential property insurance companies and issuing a final report to the Legislature
on February 1, 2017, concerning The Cost of Weather-Related Property Claims and Related Lit-
igation.25 Taken as a whole, this data call report shows: (a) the Texas property insurance mar-
ket is thriving; (b) there was an uptick in litigation following large storms and the litigation rate
fell sharply in 2015; (c) carriers have paid fewer hail claims in the last 4 years; (d) policyholders
who had to pursue litigation were more likely to have been initially denied by their carrier; and
(e) carriers largely refuse to reopen claims until policyholders must resort to litigation.
Highlights of TDIs findings and related information follows:
21 U.S. States Ranked by Population, World Atlas, last accessed 3/6/17, http://www.worldatlas.com/articles/
us-states-by-population.html.
22 Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2015 United States Metropolitan
and Micropolitan Statistical Area; and for Puerto Rico; 2015 Population Estimates, U.S. Census Bureau, last
accessed 3/6/17, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=CF. The population
figures are as follows: Dallas-Fort Worth-Arlington MSA (7,102,796), San Antonio-New Braunfels MSA (2,384,075),
and McAllen-Edinburgh-Mission MSA (842,304).
23 Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2016, 2016 Population Estimates,
U.S. Census Bureau, last accessed 3/6/17, https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.
xhtml?src=CF.
24 Texas Losses from Hail and Wind Damage Cost $5.5 Billion, Most Since 2008, P. Danner, San Antonio
Express-News, 9/29/16, http://www.mysanantonio.com/business/local/article/Losses-from-hail-and-wind-damage-most-in-
Texas-9443080.php.
25 Final Presentation to the Texas Legislature: Interim Charges: The Cost of Weather-Related Property
Claims and Related Litigation, TDI, 2/1/17, http://www.tdi.texas.gov/reports/report5.html#specialreports.

1. PROFITS
TDI found, Insurers have been able to consistently make an underwriting profit for homeown-
ers insurance in Texas in 2012-2015 and over the last 4 years, insurers have experienced an
average underwriting profit of 13.6 percent of premium.26 According to legislative reports from
TDI, homeowners insurers took home over $4.5 billion in underwriting profits during this time.27
It is important to note that these eye-popping figures actually understate the case as they dont
account for investment income, which is a large part of the insurance business model. Official
figures from the National Association of Insurance Commissioners show Texas homeowners
carriers outperformed the nation in terms of return on net worth during the time TLR has been
crying crisis.28 This means Texas homeowners carriers have been making more money after
investment income and taxes
have been accounted for than
their counterparts around the
country -- hardly a crisis.29
TDI does project in the data call
report that insurers will expe-
rience an underwriting loss in
2016.30 It is important to note
that DFW and San Antonio were
hit with massive storms and the
claims following those account
for these losses.31 TDI places
this in context when it states:
[I]nsurers are expected to make
a below average underwriting
profit (or sustain an underwriting
loss) in years with significant
hurricanes or greater than aver-
age severe thunderstorm events.32 The DFW and San Antonio storms certainly qualify as se-
vere.
Our laws are carefully balanced to protect against ill-gotten gains obtained through insurance
abuse. A central part of the insurance business model is the float, which is basically the time
26 Id. at p. 7 & 54.

27 Quarterly Legislative Reports on Market Conditions: Homeowners Multiple Peril (All Companies), Net
Underwriting Profit or Loss, TDI, last accessed 3/6/17, http://www.tdi.texas.gov/reports/report4.html.
28 Profitability by Line by State (Texas-Homeowners Multiple Peril), National Association of Insurance
Commissioners, 2015-2013 reports (covering 2014-2012 profits), http://www.naic.org/prod_serv_alpha_listing.
htm#profitability.
29 Id. at Introduction.
Claims and Related Litigation, TDI, 2/1/17, at p. 54, http://www.tdi.texas.gov/reports/report5.html#specialreports.
31 Id. at p. 55.
32 Id. at p. 54.

between the collection of premium and the pay out on the claim. In this time, insurers pool our
money and reap investment income, adding to their underwriting profits (i.e., profits gained from
the difference between premiums charged and losses paid).
Warren Buffett calls this the collect-now, pay-later model.33 In his most recent letter to share-
holders last month, Mr. Buffett illuminated the financial pressures some insurers feel right now
due to low interest rates34:
If our premiums exceed the total of our expenses and eventual losses, our insurance operation
registers an underwriting profit that adds to the investment income the float produces. When
such a profit is earned, we enjoy the use of free money and, better yet, getpaidfor holding it.
Unfortunately, the wish of all insurers to achieve this happy result creates intense competition,
so vigorous indeed that it sometimes causes the P/C industry as a whole to operate at a sig-
nificant underwritingloss. This loss, in effect, is what the industry pays to hold its float.Com-
petitive dynamics almost guarantee that the insurance industry, despite the float income all its
companies enjoy, will continue its dismal record of earning subnormal returns on tangible net
worth as compared to other American businesses.
This outcome is made more certain by the dramatically lower interest rates that now
exist throughout the world. The investment portfolios of almost all P/C companies
thoughnotthose of Berkshire are heavily concentrated in bonds. As thesehigh-yieldinglega-
cy investments mature and are replaced by bonds yielding a pittance, earnings from float will
steadily fall. For that reason, and others as well, its a good bet that industry results over the
next ten years will fall short of those recorded in the past decade, particularly in the case of
companies that specialize in reinsurance.
The prompt pay laws found in Chapter 542 of the Texas Insurance Code recognize these finan-
cial dynamics and guard against the slow payment of claims as a way for insurers to further
maximize the float and juice profits at the expense of policyholders in need. The fundamental
threat for policyholders is that insurance companies take our money up front and may refuse
to give it back at the time when we are most desperate. The longer insurers can hold onto our
money, the more money they can make on it. Our prompt pay laws put clear deadlines in place
for carriers to investigate, accept, or reject claims.35 Extensions of time are built into the law for
insurers, meaning this carefully-balanced law is no gotcha statute.36 If insurers fail to meet the
deadlines under the law, they are subject to an 18% penalty interest rate.37 This penalty interest
rate has to be big enough for insurers to respect it and not simply fold it in as a cost of doing
business. SB 10 and HB 1774 gut the penalty interest rate instead.38
33 Warren Buffett Explains the Genius of the Float, J. Goldstein, NPR, 3/1/10, http://www.npr.org/sections/
money/2010/03/warren_buffett_explains_the_ge.html.
34 Lessons from the Oracle: Warren Buffetts Shareholder Letter, Annotated, L. Kawa, Bloomberg, 2/25/17,
https://www.bloomberg.com/news/features/2017-02-25/lessons-from-the-oracle-warren-buffett-s-shareholder-letter-
annotated.
35 See Tex. Ins. Code 542.055 - 542.058.
36 See Tex. Ins. Code 542.056(d) & 542.059.
37 Tex. Ins. Code 542.060(a).
38 See SECTION 5 of the proposed legislation at http://www.legis.state.tx.us/BillLookup/history.aspx?LegSess=85R&Bill=SB10.

2. ROBUST AND COMPETITIVE INSURANCE
MARKET
TDI found that the statewide homeowners insurance market has become less concentrat-
ed with more competition over the last 16 years with this trend continuing in the last four
years.39 Despite the PR campaign being mounted by the insurance industry and TLR, the data
shows Texas is a hospitable and competitive place for home-
owners insurers to do business and make a profit.
OUR INSURANCE
MARKET IS LESS
CONCENTRATED AND
MORE COMPETITIVE.
3. PREMIUMS & DEDUCTIBLES
TDI states that it did not find a clear pattern of average premiums increasing greater than the
statewide average in areas experiencing increased amounts of attorney/[public adjuster] in-
volvement.40 TLR has focused much of its attention on South Texas, but TDI found South Tex-
as was one of the areas of the state where average homeowners
premiums per policy increased the least.41 3.6%
1.8% 2.6%
TDIs data shows that the average homeowners premium per policy
has risen steadily since 2000, demonstrating this is a long-term
trend.42 Increased scrutiny of rates and regulatory oversight could
address this trend, but TLR and the insurance industry,
feigning concern for messaging purposes, are pushing in- 3.3% 3% 4.3%
stead to remove policyholders legal rights.
TLR is trying to a paint a dark picture of insurers raising de- 5.3%
ductibles because of litigation. They again ignore long-term 2.4%
trends in the market as insurers have moved from set dollar deduct- 2.9% 1.5%
ibles to percentage deductibles for years now. For example, State Farm
switched their deductibles in 2011, before TLRs claimed crisis.43 TDI
Annual growth in the average
39 Final Presentation to the Texas Legislature: Interim Charges: The Cost of premium per policy
Weather-Related Property Claims and Related Litigation, TDI, 2/1/17, at p. 71, http://www. (2012-2015)
tdi.texas.gov/reports/report5.html#specialreports.
40 Id. at p. 75.
41 Id. at p. 74.
42 Id. at p. 73-75.
43 State Farm Changing Deductible Method, Boosting Rates, P. Patel, Houston Chronicle, 9/13/11, http://
www.mysanantonio.com/business/article/State-Farm-changing-deductible-method-boosting-2167428.php.

found there is no clear pattern of deductibles increasing in reaction to litigation on claims from
weather-related perils.44 They did observe a pattern consistent with insurers increasing de-
ductibles in areas where insurers are concerned with managing hurricane risk exposure.45 This,
of course, does not fit TLRs manufactured hail narrative whatsoever.
4. CLAIMS DENIED & THE REFUSAL TO

REOPEN FILES
A close look at the TDI data reveals troubling patterns of behavior by the property insurance
industry in Texas. According to the agency, the percentage of claims closed without payment at
first close (i.e., the percentage of claims initially denied) rose from 2012-2015.46 Claims involv-
ing attorneys or public adjusters had a higher percentage of claims that were initially denied
when compared to others (28% vs. 13%).47 This makes sense. Texans whose claims were de-
nied by their insurer were forced into disputes and litigation in order to receive what they were
owed under the insurance policy.
The TDI demonstrates that insurers paid fewer claims from 2012 to 2015. At a time when Tex-
as suffered 13 of its 31 costliest storms, the frequency of hail claims paid shockingly dropped
from a historical average of 3.9 to 3.5 paid claims (per 100 policies).48 That amounts to a stag-
gering 10% decrease in claims paid. Big storms hit populated areas of our state and insurers
paid fewer hail claims.
After denying more claims and paying fewer claims, were Texas property insurers receptive to
the cries of their customers? The data shows that they were not. Insurers refused to reopen ful-
ly 2/3 of all claims.49 This indicates callousness on the part of the insurance industry. If a poli-
cyholder complains about the initial decision to deny or only partially pay a claim, why would a
carrier refuse to look at the file again? If they cared about their customers, shouldnt they double
check to ensure they didnt make a mistake in adjusting the claim? These numbers indicate that
insurers are stiff-arming property owners instead when they question the amount
3.9 3.5 they were paid (assuming they
16 YR AVERAGE
4 YR AVERAGE were paid at all).
The TDI data shows that in-
surance companies only take
2008 2009 2010 2011 2012 2013 2014 2015 policyholders seriously when
they hire experts and advo-
STATEWIDE HAIL CLAIM FREQUENCY
cates. When a public adjuster
(PER 100 POLICIES)
Claims and Related Litigation, TDI, 2/1/17, at p. 7 & 64, http://www.tdi.texas.gov/reports/report5.html#specialreports.
45 Id. at p. 67.
46 Id. at p. 24.
47 Id. at p. 25.
48 Id. at p. 59.
49 Id. at p. 33.
or attorney is involved, the number
AVERAGE REOPEN RATE
of reopened claims rises to 51%.50
And when a claim ultimately results
in a lawsuit, the reopen rate finally
climbs to 77%.51
77% LAWSUIT
This data shows that it takes a law-
suit to be heard. Insurers refuse to
listen to property owners until they 51% ATTORNEY/PA INVOLVED
demonstrate that they are willing to
fight for their rights. The insurance
industrys arrogance, indifference, 33% NO ATTY/PA
or its strong-arm business model
is forcing Texas property owners
into lawsuits. It is the height of irony that the insurance industry and their lobbyists now at-
tempt to use the lawsuits that result from their claims denials and refusal to reopen files against
policyholders. This is like an arsonist complaining to the fire department about the number of
fires raging in the city.
5. LESS COVERAGE
Since 2002, insurers have had the ability to offer their national policy forms in Texas.52 Before
that time, the majority of Texas homeowners had the HO-B policy form, which provided compre-
hensive coverage. Since switching to their national forms, Texans have seen important cover-
age, such as damage to foundations and backup from sewers and drains, reduced.53
An important coverage change that many Tex-
ans are unaware of concerns whether dam-
ages are paid on a replacement cost or an
actual cash value basis. Replacement
cost coverage is more comprehensive
in that it pays you todays cost for
the damaged item while actual
cash value policies subtract
depreciation.54
The HO-B policy provided
replacement cost coverage for the dwelling while more bare bones HO-A policies only provide
actual cash value coverage. A review of homeowners policy forms being sold in the Texas
50 Id.
51 Id.
52 Texas Homeowners Insurance Policy Comparison: Report to the 82nd Texas Legislature
as required by Senate Bill 1 (81st Legislature, 2009), TDI, January 2011, at p. 3, http://www.lrl.state.tx.us/scanned/
archive/2011/17532.pdf.
53 Id. at p. 4.
54 For an explanation of these coverages, see Actual Cash Value vs. Replacement Cost Coverage in
Homeowners Insurance, TDI, last accessed 3/6/17, http://www.helpinsure.com/home/documents/acvvsreplace.pdf.
market today shows that more property owners are seeing their coverage downgraded to actual
cash value. For example, State Farm Lloyds, the states largest insurer with nearly 22% of the
homeowners market,55 only pays for actual cash value for damage to roof surfaces caused by
hail or windstorm under its Basic Policy.56 The same holds true for Allstate Texas Lloyds under
their HO-A policy with the 470T endorsement.57 The AVP 145 endorsement to the House and
Home Policy offered by All-
state Vehicle and Property In-
surance Policy requires a roof
payment schedule for dam-
age to roof surfaces caused
by windstorm or hail.58 Fore-
most Lloyds, a member of the
Farmers Insurance group of
companies,59 offers the stan-
dard HO-A, which only offers
actual cash value on damage
to the dwelling.60 The HO-A
form offered by Texas Farm
Bureau Mutual Insurance
Company and the HO-751C
and HO-753C endorsements
offered by the company only pay actual cash value for damage to roof surfaces caused by hail
or windstorm.61 The list goes on.
The result of this reduced coverage particularly on roofs is that more property owners find
themselves in disputes with their carriers about the proper cost of the damage observed. These
disputes arise over the proper cost of depreciation. It is important to keep sight of the fact that
carriers have created these disputes through their low-coverage policies.
TDIs data confirms that Texas homeowners have not seen the same broad coverage levels
in our state since the switch to national forms in 2002.62 We continue to pay more for reduced
coverage.
55 Top 40 List of Insurers Homeowners, Texas Department of Insurance, last accessed 3/7/17, http://
www.tdi.texas.gov/company/top40.html.
56 See the Homeowners Insurance Comparison tool created by the Office of Public Insurance Counsel of
Texas and select State Farm Lloyds and State Farm Basic in the drop down menus at http://www.opic.texas.gov/
residential-property/compare-policy-coverages/homeowners.
57 Id. and make corresponding menu choices.
58 Id.
59 See http://www.foremost.com/ at foot, last accessed 3/7/17.
60 See the Homeowners Insurance Comparison tool created by the Office of Public Insurance Counsel
of Texas and make corresponding menu choices at http://www.opic.texas.gov/residential-property/compare-policy-
coverages/homeowners.
61 Id.

6. LITIGATION
After being hit with large storms and being told no by their insurers though claims denials
or underpayments, Texas homeowners were left to bring their cases before our courts as their
final line of defense. The Founders envisioned and guaranteed this right when they stated in the
Seventh Amendment to the Constitution, In Suits at common law, where the value in controver-
sy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by
a jury, shall be otherwise re-examined in any Court of the United States, than according to the
rules of the common law.63
TDI data shows the lawsuit rate for windstorm and hail claims after 2011 was about 1.5 to 2
percent, falling to .7% in 2015.64
Texas property owners did not rush to lawyers. TDI confirms this, stating, On average, insurers
are notified of attorney involvement about eight months after the claim is reported to the in-
surer.65 This indicates that policyholders try to work out their disputes with insurers, for many
months after the storm, and it is only after their patience is exhausted that they turn to profes-
sional advocates for help.
When property owners hire attorneys, their claims are resolved for three to four times more than
those who are unrepresented.66 If the fair value of claims resolution is several multiples of what
most receive, this raises the specter of systemic underpayment to many Texans who take on
the insurance industry and their private army of adjusters and lawyers alone.
Claims involving lawsuits take longer to resolve than those without.67 This is unsurprising given
the due process afforded to the accused in our legal system. Property owners, devastated after
a storm, and their attorneys, often working on the basis of a contingent fee agreement requiring
them to pay litigation expenses, desire a quick resolution to the suit. However, insurance defen-
dants possess many defenses
Only 1.5% to 2% of under their law. Additional delay
all claims result in created by invoking these de-
litigation. fenses makes the plaintiff more
desperate for recovery and also
allows the insurer to continue
to hold onto the money longer,
*In 2015, the litigation profiting further from invest-
rate was just 0.7% of
ments. While insurers may
all claims.
never wish to find themselves
confronted with an aggrieved
claimant and a knowledgeable
63 See The Bill of Rights: A Transcription Americas Founding Documents, The National Archives, last
accessed 3/6/17, https://www.archives.gov/founding-docs/bill-of-rights-transcript#toc-amendment-vii.
65 Id. at p. 31.
66 Id. at p. 28.
67 Id. at p. 30.
attorney in court, once they are in a lawsuit, the insurer often derives strategic advantage by
dragging out the proceedings. To put it bluntly, doing so allows the insurer to bleed the policy-
holder and weaken their resolve.
It is highly ironic that insurance lobbyists express disdain about the delays associated with
litigation given the fact that the legislation they support forces many property lawsuits into
our overburdened federal courts.68 Currently, suits over $75,000 involving diverse parties go
to federal court.69 If a Texas property owner sues an Illinois-based insurance company and an
in-state insurance adjuster for cheating them, the parties are not diverse under the law and the
case properly stays in state court.70 If an adjuster is improperly joined in a lawsuit and there
are not facts evident to support their inclusion, there is a well-developed body of law to remove
them from the suit due to fraudulent joinder.71
SB 10 and HB 1774 artificially create diversity of citizenship between the parties by allowing the
insurer to elect legal responsibility for their agents and adjusters. In doing so, foreign insurance
companies faced with suits over $75,000 will be allowed to forum shop by forcing these insur-
ance disputes into federal court. This (1) deprives property owners from directly seeking ac-
countability from a party
who may have caused
ON AVERAGE IT TAKES 22.7 them great harm; (2)
drives agents and adjust-
MONTHS TO RECEIVE A JURY ers deeper into the arms
TRIAL IN TEXAS FEDERAL of the companies who

employ them, immunizing
COURTS. them from accountability
and further incentivizing
them to low-ball and deny
claims; and (3) creates unnecessary delay in the litigation that only works in the favor of the
insurance company.
On average it takes 22.7 months to receive a jury trial in Texas federal courts.72 Contrast this
with state court statistics demonstrating that 61% of Texas District Court civil cases, and 73% of
Texas Statutory County Court civil cases are resolved within 12 months.73 These comparisons
are not exact, but they are the best available and confirm recent reporting.
68 See SECTION 6 of SB 10 & HB 1774 at proposed Sec. 542A.006 of the legislation at http://www.legis.state.
tx.us/BillLookup/history.aspx?LegSess=85R&Bill=SB10.
69 28 U.S.C. 1332, https://www.law.cornell.edu/uscode/text/28/1332.
70 The parties are not diverse because a Texan appears on either side of the suit (e.g., TX v. IL & TX).
71 See, e.g., Smallwood v. Illinois Cen. R.R. Co., 385 F. 3d 568, 573 (5th Cir. 2004).
72 Median Time from Filing to Trial for Civil Cases in Which Trials Were CompletedDuring the 12-Month
Period Ending September 30, 2014, Table T-3, U.S. District Courts, last accessed 3/6/17, http://www.uscourts.gov/
statistics/table/t-3/judicial-business/2014/09/30 (citing the following number of months to receive a jury trial in Texas
(5th Cir.): Northern District (24.2), Eastern District (21.7), Southern District (26.4), Western District (18.5)).
73 Annual Statistical Report for the Texas Judiciary, Office of Court Administration, Fiscal Year 2016, at PDF
p. 65 of 153 (Court-Level-19) & PDF p. 71 of 153 (Court-Level-25), http://www.txcourts.gov/media/1436989/annual-
statistical-report-for-the-texas-judiciary-fy-2016.pdf.

Our federal courts do important work concerning matters of federal law. They hear criminal cas-
es, as well as civil cases, with criminal cases taking precedence given the 6th Amendment right
to a speedy criminal trial.
The cover story of the February edition of Texas Lawyer is entitled the 2016 Slow Poke Re-
port.74 In it, this noted legal publication details how Texas federal judges are struggling be-
cause of empty benches, further stating, Texas currently has the most federal judicial va-
cancies in the nation with 11 district court vacancies and two open positions on the U.S. Court
of Appeals for the Fifth Circuit.75 They go on to document how because of heavy caseloads
across the state, judicial emergencies have been declared by the U.S. Judicial Conference in all
four of Texas federal judicial districts.76
U.S. District Judge Sam Lindsay states, Im averaging 70 hours a week at work. And Im not the
only one. Were down judges by 25 percent in Dallas. So every judge is working hard.77 The ar-
ticle describes: In the Western District of Texas, judges quickly grow accustomed to a caseload
heavy with drug and immigration cases due to the jurisdictions close proximity to the Texas/
Mexico border.78 And in Brownsville, border-fence condemnation cases occupy the docket, dat-
ing back to 2008 when the U.S. Department of Homeland Security filed eminent domain pro-
ceedings against hundreds of Texas landowners as part of a government project to build new
sections of fence along the U.S.-Mexico border.79
Our federal courts, already under-staffed and stretched, would be overwhelmed by state insur-
ance cases being diverted onto their dockets by legislative fiat. If SB 10 or HB 1774 were to
pass, our federal courts would be clogged and Texas property owners would only experience
more delay. It is unsurprising, then, that the insurance industry is pushing so hard for these
provisions.
A MANUFACTURED CRISIS
We pay our hard-earned dollars for insurance each year so we are protected in the event of loss.
After large storms, insurers have a duty to pay claims on time and in full. If they do so, they face
no liability. Their fate is completely within their control. But when they nickel and dime their loyal
customers, string them along, or wrongfully deny their claims, they face accountability as they
should.
Our insurance laws are carefully-balanced, providing clear rules of the road for insurers and
policyholders alike. Because of these laws, the vast majority of claims are resolved short of
litigation. TDI data shows there was an uptick in the number of lawsuits following major storm
events averaging 1.5 to 2 percent of windstorm and hail claims but the litigation rate is
74 The 2016 Slow Poke Report, J. Council, Texas Lawyer, February 2017, http://www.texaslawyer.com/
(subscription required).
75 Id. at p. 13.
76 Id.
77 Id. at p. 14.
78 Id. at p. 17.
79 Id. at p. 16.
CONCLUSION 15
falling to below 1% as of 2015. The data also shows that insurers have paid fewer claims during
this period and refused to reopen files in significant numbers short of a lawsuit. This indicates
that when insurance companies abuse their policyholders, they will be held accountable in our
courts of law, the final arbiter of disputes. This is the way that the judiciary, a co-equal branch of
government with layers of checks and balances, properly functions.
All wrongdoers should be held accountable under the law. We have strong laws on the books
to ensure neither side gains an undue advantage over the other. Insurers confronted with an
unsupported lawsuit have multiple remedies available to them today. No new laws are needed;
our laws simply need to be enforced. Unfortunately, the broad provisions of SB 10 and HB 1774
do nothing to help property owners see that their claims are paid more quickly. They gut the
prompt pay penalties in the law, increase costs, and push Texas insurance disputes into feder-
al courts, creating delay that only works to the advantage of the insurer. If they pass into law,
Texas will be blanketed in blue tarps as homeowners, business owners, churches, and schools
experience the second storm of insurance industry abuse when they seek to rebuild.
LEARN MORE AT WWW.TEXASATCH.ORG/PROTECTPOLICYHOLDERS
CONCLUSION 16
ATTACHMENT A
ANNOTATED LEGISLATION
By: ____________________ __.B. No. _____
Substitute the following for __.B. No. _____:
By: Hancock_____________ C.S._S_.B. No. __10___ Commented [A1]: We believe this is the
committee substitute that was laid out before
the B&C Committee on 3/9/17.
A BILL TO BE ENTITLED
AN ACT
relating to insurance claims and certain prohibited acts and
practices in the business of insurance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 541.156(a), Insurance Code, is amended to
read as follows:
(a) A person who receives notice provided under Section
541.154 or 542A.003 may make a settlement offer during a period
beginning on the date notice under Section 541.154 or 542A.003 is
received and ending on the 60th day after that date.
SECTION 2. Section 542.060, Insurance Code, is amended by
amending Subsection (a) and adding Subsection (c) to read as
follows:
(a) Except as provided by subsection (c), if [If] an insurer
that is liable for a claim under an insurance policy is not in
compliance with this subchapter, the insurer is liable to pay the
holder of the policy or the beneficiary making the claim under the
policy, in addition to the amount of the claim, interest on the
Page - 1 -
amount of the claim at the rate of 18 percent a year as damages, Commented [A2]: Those with non-weather claims
will still have the 18% penalty interest rate
if their carrier slow pays them. If 18% is the
together with reasonable attorney's fees. right penalty to protect these policyholders,
why should those with weather-related claims
receive fewer protections from insurer abuse?
(c) In an action governed by Chapter 542A, if an insurer
that is liable for a claim under an insurance policy is not in
compliance with this subchapter, the insurer is liable to pay the
holder of the policy, in addition to the amount of the claim,
interest on the amount of the claim as damages at the rate
determined on the date of judgment by adding five percent to the
interest rate determined under Section 304.003, Finance Code, Commented [A3]: This amounts to just 10%, a
reduction of 8 points off of the current rate
of 18% percent. Penalties must be sufficient
together with prejudgment interest on the amount of the claim and to compel insurance companies to do the right
thing. Policyholders are slow paid under our
current laws. Imagine what will happen if they
reasonable and necessary attorney's fees. Interest awarded under are weakened.
Commented [A4]: By mentioning prejudgment
this subsection as damages accrues beginning on the date the claim interest here but not above in subsection (a),
the courts may interpret the Legislature
intends to deprive non-weather claimants who
was required to be paid. have been slow paid from recovering
prejudgment interest.
Commented [A5]: Only late payment is penalized
SECTION 3. Subtitle C, Title 5, Insurance Code, is amended under the bill. Chapter 542 currently sets out
deadlines for accepting, investigating, or
rejecting claims. With this new language,
by adding Chapter 542A to read as follows: those deadlines are not applicable to weather-
related real property claims. We should
incentivize carriers to quickly investigate
CHAPTER 542A. CERTAIN CONSUMER ACTIONS RELATED TO CLAIMS FOR claims in order to determine the correct
amount of payment.
PROPERTY DAMAGE
Sec. 542A.001. DEFINITIONS. In this chapter:
(1) "Agent" means an employee, agent, representative,
or adjuster who performs any act on behalf of an insurer.
(2) "Claim" means a first-party claim that:
(A) is made by an insured under an insurance
policy providing coverage for real property or improvements to Commented [A6]: Real property is impacted by
this new chapter.
Page -2 -
real property;
(B) must be paid by the insurer directly to the
insured; and
(C) arises from damage to or loss of covered
property caused, in whole or in part, by the violence of nature, Commented [A7]: This strange definition does
not appear regularly in law. It seems to
approximate Acts of God but creates
including an earthquake or earth tremor, wildfire, flood, tornado, confusion. The definition encompasses much
more than hail. This is not just a hail bill!
lightning, hurricane, hail, wind, snow, or rain.
(3) "Claimant" means a person making a claim.
(4) "Insurer" means a corporation, association,
partnership, or individual, other than the Texas Windstorm
Insurance Association, engaged as a principal in the business of
insurance and authorized or eligible to write property insurance
in this state, including:
(A) an insurance company;
(B) a reciprocal or interinsurance exchange;
(C) a mutual insurance company;
(D) a capital stock insurance company;
(E) a county mutual insurance company;
(F) a farm mutual insurance company;
(G) a Lloyd's plan;
(H) an eligible surplus lines insurer; or
(I) the FAIR Plan Association.
(5) "Person" means a corporation, association,
Page -3 -
partnership, other legal entity, or individual.
Sec. 542A.002. APPLICABILITY OF CHAPTER. (a) Except as Commented [A8]: The bill has exceptionally
broad application.
provided by subsection (b), this chapter applies to an action on
a claim against an insurer or agent, including:
(1) an action alleging a breach of contract;
(2) an action alleging negligence, misrepresentation,
fraud, or breach of a common law duty; or
(3) an action brought under:
(A) Subchapter D, Chapter 541;
(B) Subchapter B, Chapter 542; or
(C) Subchapter E, Chapter 17, Business & Commerce
Code.
(b) This chapter does not apply to an action against the
Texas Windstorm Insurance Association or to an action relating to
or arising from a policy ceded to an insurer by the Texas Windstorm
Insurance Association under Subchapter O, Chapter 2210. An action
against Texas Windstorm Insurance Association or that relates to
or arises from a policy ceded to an insurer by the Texas Windstorm
Insurance Association under Subchapter O, Chapter 2210, is
governed by Chapter 2210.
Sec. 542A.003. NOTICE REQUIRED. (a) In addition to any
other notice required by law or the applicable insurance policy, Commented [A9]: Presuit notice is already
required by Ch. 541 of the Insurance Code and
the DTPA. This new 542A notice is redundant
as a prerequisite to filing an action seeking damages under this and carries severe consequences.
Page -4 -
chapter against any person, a claimant shall give written notice
to the person not later than the 61st day before the date the
claimant files an action to which this chapter applies. During the
60-day period, a written request to inspect, photograph, or
evaluate, in a reasonable manner and at a reasonable time, the Commented [A10]: This term is vague and will
invite litigation from the insurance industry.
property that is the subject of the claim may be presented to the
claimant by any person receiving a notice under this section.
(b) The notice required under this section must be in writing
and must provide:
(1) a statement of the acts or omissions giving rise to
the claim;
(2) the specific amount alleged to be owed on the claim
by the insurer; and
(3) the amount of reasonable and necessary attorney's
fees incurred by the claimant, calculated by multiplying the number
of hours actually worked by the claimant's attorney, as of the Commented [A11]: This invades freedom of
contract. The building owner and their
attorney have likely contracted for a fee
date the notice is given and as reflected in contemporaneously agreement that pays the attorney a contingent
percentage. If they have not entered an hourly
contract, the law should not impose these
kept time records, by an hourly rate that is customary for the terms. This is government overreaching and
threatening citizens 7th Amendment Right to
Trial by Jury. A lawsuit without a lawyer to
same or similar legal services. prosecute it doesnt do much to protect the
person harmed.
(c) If an attorney or other representative gives the notice Commented [A12]: If the attorney is
exceptionally good, they will be further
underpaid, driving the best attorneys from
required under this section on behalf of a claimant, the attorney this area of practices, leaving property
owners at a disadvantage when forced to take
on the insurance industry and their army of
or representative shall: lawyers.
(1) provide a copy of the notice to the claimant; and
Page -5 -
(2) include in the notice a statement that a copy of
the notice was provided to the claimant.
(d) A presuit notice under Subsection (a) is not required if
giving notice is impracticable because:
(1) the claimant has a reasonable basis for believing
there is insufficient time to give the presuit notice before
limitations will expire; or
(2) the action is asserted as a counterclaim.
(e) Any action commenced by a person to whom notice is given
under this section during the 60-day period provided by Subsection
(a) is subject to abatement, dismissal, or other appropriate court
order that will ensure that the claimant is not prejudiced by
having complied with this section.
(f) A claimant who gives notice in accordance with this
chapter is not relieved of the obligation to give notice under any
other applicable law. Notice given under this chapter may be
combined with notice given under any other law.
(g) Notice given under this chapter is admissible in
evidence in a civil action or alternative dispute resolution
proceeding relating to the claim for which the notice is given.
Sec. 542A.004. ABATEMENT. (a) In addition to taking any Commented [A13]: Abatement is already provided
for under the DTPA and Ch. 541 of the
Insurance Code.
other acts allowed by contract or law, a person against whom an
action governed by this chapter is pending may file a plea in
Page -6 -
abatement not later than the 30th day after the date the person
files an original answer in the court in which the action is
pending if the person:
(1) did not receive a presuit notice complying with
Section 542A.003; or
(2) was not provided a reasonable opportunity to
inspect, photograph, or evaluate the property.
(b) The court shall abate the action if the court finds that
the person filing the plea in abatement:
(1) did not, for any reason, receive a presuit notice
complying with Section 542A.003; or
(2) requested under Section 542A.003 but was not
provided a reasonable opportunity to inspect, photograph, or
evaluate the property that is the subject of the claim.
(c) An action is automatically abated without a court order
beginning on the 11th day after the date a plea in abatement is
filed if the plea:
(1) is verified and alleges that the person against
whom the action is pending did not receive a presuit notice
complying with Section 542A.003 or requested but was not provided
a reasonable opportunity to inspect, photograph, or evaluate the
property; and
(2) is not controverted by an affidavit filed by the
Page -7 -
claimant before the 11th day after the date the plea in abatement
is filed.
(d) If the plea in abatement is filed because of an alleged
lack of notice complying with Section 542A.003, a copy of the
document the claimant sent to give notice of the claimant's action
must be attached to any affidavit filed under Subsection (c)(2),
and the affidavit must state the date on which the notice was
given.
(e) An abatement under this section continues until the 60th
day after the date a notice complying with Section 542A.003 is
given or the inspection, photographing, or evaluating of the
subject property is completed.
(f) In an action to which this chapter applies,
participation in an alternative dispute resolution proceeding may
not be compelled by a court until after the abatement period
provided by Subsection (e) has expired.
Sec. 542A.005. ACTION AGAINST AGENT; INSURER ELECTION OF
LEGAL RESPONSIBILITY. (a) In an action to which this chapter
applies, an insurer that is a party to the action may, by providing
a written notice to the claimant, accept whatever liability the Commented [A14]: Through special legislative
fiat, the insurance industry is allowed to
forum shop and force suits into our
agent might have to the claimant for the agent's acts or omissions overburdened federal courts, where it takes
twice as long to receive justice. This
provision artificially creates diversity
related to the claim. jurisdiction in federal court, where their
truly is none, involving cases over $75,000
against out-of-state insurance companies.
(b) If an insurer makes the election available to it under
Page -8 -
Subsection (a) before the claimant files an action to which this
chapter applies, no cause of action exists against the agent
related to the claimant's claim.
(c) If a claimant files an action to which this chapter
applies against an agent and the insurer thereafter makes the
election available to it under Subsection (a), the action against
the agent shall be dismissed with prejudice.
(d) The election made by an insurer under subsection (a)
must be unconditional. A conditional election by the insurer shall
be ineffective to obtain dismissal of an action against an agent
if the stated conditions would result in the insurer avoiding
liability for any claim-related damages caused to the claimant by
the agent's acts or omissions.
(e) An insurer may not revoke, and a court may not nullify,
an insurer's election made under Subsection (a).
(f) If an insurer makes the election available to it under
Subsection (a) and the agent is not a party to the action, evidence
of the agent's acts or omissions may be offered at trial and, if
sufficient evidence supports the submission, a jury may be asked
to determine the agent's responsibility for claim-related damage
caused to the claimant.
(g) In an action tried by a jury, an insurer's election made

Commented [A15]: The jury is kept in the dark
under Subsection (a) may not be made known to the jury. about this special election by the insurance
company.
Page -9 -
Sec. 542A.006. AWARD OF ATTORNEY'S FEES. (a) Except as
otherwise provided by this section, the amount of attorney's fees
that may be awarded to a claimant in an action to which this
chapter applies is the lesser of: Commented [A16]: The bill sees to it that the
property owner receives the least recovery of
attorneys fees possible. This reduces their
(1) the amount of reasonable and necessary attorney's overall recovery and threatens their ability
to have enough money to rebuild.
fees that was supported at trial by sufficient evidence and
determined by the trier of fact to have been incurred by the
claimant in bringing the action;
(2) the amount of attorney's fees that may be awarded
to the claimant under other applicable law; or Commented [A17]: This is vague and invites
mischief by the insurer when a policyholder
proves a cause of action that allows them to
(3) the amount calculated by: recover attorneys fees and also proves a
cause of action, like negligence, that does
not provide for the recovery of attorneys
(A) dividing the amount to be awarded in the fees. The insurer may argue that the lesser
amount between, say, a recovery of $20,000 in
attorneys fees under the Insurance Code and
judgment to the claimant for the claimant's claim under the $0 in attorneys fees under common law
negligence is, in fact, zero. The law
currently allows successful plaintiffs to
insurance policy by the amount alleged to be owed on the claim in elect their maximum recovery under the law
while preventing them from being overpaid
(through the one satisfaction rule). This is
a notice given under Section 542A.003; and important for making people whole under the
law. The bill does the opposite.
(B) multiplying the amount calculated under Commented [A18]: If a policyholder guesses
wrong in the notice, it can hurt their ability
to recover full attorneys fees.
Paragraph (A) by the total amount of reasonable and necessary
attorney's fees that was supported at trial by sufficient evidence
and determined by the trier of fact to have been incurred by the
claimant in bringing the action.
(b) Except as provided by Subsection (d), the court shall
award to the claimant the full amount of reasonable and necessary
attorney's fees that was supported at trial by sufficient evidence
Page -10 -
and determined by the trier of fact to have been incurred by the
claimant in bringing the action, if the amount calculated under
Subsection (a)(3)(A) is greater than or equal to 0.8, not limited
by this section or another law, and otherwise recoverable under
law; and
(c) The court may not award attorney's fees to the claimant
if the amount calculated under Subsection (a)(3)(A) is less than
0.2. Commented [A19]: A policyholder who wins their

case may have recovery of their attorneys
fees taken from them under this provision. Why
(d) If a defendant in an action under this Chapter pleads as is the state punishing policyholders with
valid, proven claims?
an affirmative defense, and proves by a preponderance of the
evidence, that the defendant was entitled to, but did not, receive
a presuit notice at least 61 days before the date the action was
filed by the claimant, as required by Section 542A.003, the court
may not award to the claimant any attorney's fees incurred after Commented [A20]: Insurance defense lawyers
will routinely argue that the pre-suit notice
did not sufficiently comply with the law in
the date the defendant asserts the affirmative defense in a an attempt to cut off attorneys fees.
Insurers will see strategic advantage in doing
so. This will make these cases difficult to
pleading filed with the court. take, meaning deserving policyholders will
have a hard time finding a good attorney to
bring their claims against the insurance
(e) The court may not award attorney's fees to the claimant industry.
if a defendant in the action under this Chapter pleads as an Commented [A21]: Currently, barratry is
punished under strong criminal and civil laws.
It is the clients right to raise the issue of
affirmative defense, and proves by a preponderance of the evidence, barratry. The bill makes it the insurance
defendants right instead, creating a conflict
for a good policyholder attorney who is now
that representation of the claimant resulted from conduct spending time defending their name instead of
prosecuting their clients case. Attorneys are
required to put their clients first. The bill
violating Section 38.12(a), Penal Code, unless the court puts policyholder attorneys in a conflict with
their clients. This creates an access to
justice issue and serves as a distraction from
determines that the claimant's attorney: the insurance companys wrongdoing.
(1) did not have actual knowledge of or reason to know
Page -11 -
of the violation of Section 38.12, Penal Code, before accepting
representation of the claimant; and
(2) reported the violation of Section 38.12, Penal
Code, as required by the Texas Disciplinary Rules of Professional
Conduct of the State Bar of Texas within a reasonable time after
learning facts that would lead a reasonable attorney to believe
that a violation of Section 38.12 had occurred.
(f) A defendant pleading an affirmative defense under
Subsection (e) must comply with and is subject to the imposition
of appropriate sanctions under Chapter 10, Civil Practice and
Remedies Code, and other applicable law.
(g) On motion of a claimant, the court shall provide for a
bifurcated trial to resolve questions of fact raised by the
assertion of an affirmative defense under Subsection (e).
SECTION 4. (a) Section 541.156(a), Insurance Code, as
amended by this Act, and Chapter 542A, Insurance Code, as added by
this Act, apply only to an action filed on or after the effective
date of this Act. A claimant who files an action within 60 days
after the effective date of this Act but who did not provide a
presuit notice complying with Section 542A.003 must give notice as
provided in section 542A.004. An action that is filed before the
effective date of this Act is governed by the law as it existed
immediately before the effective date of this Act, and that law is
Page -12 -
continued in effect for that purpose.
(b) Section 542.060, Insurance Code, as amended by this Act,
applies only to a claim, as defined under 542A.001, made on or
after the effective date of this Act. A claim made before the
effective date of this Act is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 5. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2017.
Page -13 -
ATTACHMENT B
EXISTING PENALTIES
EXISTING PENALTIES & PROCEDURES IN TEXAS LAW: INSURANCE
SUMMARY
Texas has many tough civil and criminal laws that empower insurance companies to dispose of
underserving policyholder lawsuits and prosecute substantiated fraud.
The Texas Insurance Code was heavily tort reformed more than 20 years ago, equipping insurers
with the ability to seek sanctions on policyholders in the form of costs and attorneys fees.
Policyholders are required to give specific notice more than 60 days before filing suit, presenting
insurers with the opportunity to make a qualified offer of settlement if, after their assessment,
they feel they do face liability for their conduct, including consequences if the policyholder
wrongly rejects the offer. Insurers may also seek the early mediation of cases under the Insurance
Code. If insurers are sued, they can immediately move to dismiss the suit under Rule 91a with
the ability to recover all fees and costs if they prevail. If the case is under $100,000, insurers can
move to expedite it under Rule 169, saving costs and time.
Our laws have been carefully crafted and balanced to protect insurers and policyholders alike for
many years. There are many tools currently at the insurance industrys disposal to punish any
policyholders who may seek to abuse the legal system. The Legislature has passed these laws,
but if insurers are not enforcing them, this is an indication that those policyholders claims have
merit and should be properly adjudicated.
TABLE OF CONTENTS
I. Texas Insurance Code p. 1
II. Texas Business & Commerce Code ..... p. 8
III. Texas Penal Code .. p. 12
IV. Texas Rules of Civil Procedure .... p. 15
V. Texas Civil Practice & Remedies Code p. 19
-1-
I. TEXAS INSURANCE CODE
Sec. 541.153. FRIVOLOUS ACTION. A court shall award to the defendant court costs and reasonable
and necessary attorney's fees if the court finds that an action under this subchapter is groundless and
brought in bad faith or brought for the purpose of harassment.
Sec. 541.154. PRIOR NOTICE OF ACTION. (a) A person seeking damages in an action against
another person under this subchapter must provide written notice to the other person not later than the
61st day before the date the action is filed.
(b) The notice must advise the other person of:
(1) the specific complaint; and
(2) the amount of actual damages and expenses, including attorney's fees reasonably
incurred in asserting the claim against the other person.
(c) The notice is not required if giving notice is impracticable because the action:
(1) must be filed to prevent the statute of limitations from expiring; or
(2) is asserted as a counterclaim.
Sec. 541.155. ABATEMENT. (a) A person against whom an action under this subchapter is pending
who does not receive the notice as required by Section 541.154 may file a plea in abatement not later than
the 30th day after the date the person files an original answer in the court in which the action is pending.
(b) The court shall abate the action if, after a hearing, the court finds that the person is entitled
to an abatement because the claimant did not provide the notice as required by Section 541.154.
(c) An action is automatically abated without a court order beginning on the 11th day after the
date a plea in abatement is filed if the plea:
(1) is verified and alleges that the person against whom the action is pending did not
receive the notice as required by Section 541.154; and
(2) is not controverted by an affidavit filed by the claimant before the 11th day after the
date the plea in abatement is filed.
(d) An abatement under this section continues until the 60th day after the date notice is
provided in compliance with Section 541.154.
(e) This section does not apply if Section 541.154(c) applies.
Sec. 541.156. SETTLEMENT OFFER. (a) A person who receives notice provided under Section
541.154 may make a settlement offer during a period beginning on the date notice under Section 541.154
is received and ending on the 60th day after that date.
-2-
(b) In addition to the period described by Subsection (a), the person may make a settlement
offer during a period:
(1) if mediation is not conducted under Section 541.161, beginning on the date an
original answer is filed in the action and ending on the 90th day after that date; or
(2) if mediation is conducted under Section 541.161, beginning on the day after the
date the mediation ends and ending on the 20th day after that date.
Sec. 541.157. CONTENTS OF SETTLEMENT OFFER. A settlement offer made by a person against
whom a claim under this subchapter is pending must include an offer to pay the following amounts,
separately stated:
(1) an amount of money or other consideration, reduced to its cash value, as settlement
of the claim for damages; and
(2) an amount of money to compensate the claimant for the claimant's reasonable and
necessary attorney's fees incurred as of the date of the offer.
Sec. 541.158. REJECTION OF SETTLEMENT OFFER. (a) A settlement offer is rejected unless
both parts of the offer required under Section 541.157 are accepted by the claimant not later than the 30th
day after the date the offer is made.
(b) A settlement offer made by a person against whom a claim under this subchapter is pending
that complies with this subchapter and is rejected by the claimant may be filed with the court
accompanied by an affidavit certifying the offer's rejection.
Sec. 541.159. LIMIT ON RECOVERY AFTER SETTLEMENT OFFER. (a) If the court finds that
the amount stated in the settlement offer for damages under Section 541.157(1) is the same as,
substantially the same as, or more than the amount of damages found by the trier of fact, the claimant may
not recover as damages any amount in excess of the lesser of:
(1) the amount of damages stated in the offer; or
(2) the amount of damages found by the trier of fact.
(b) If the court makes the finding described by Subsection (a), the court shall determine
reasonable and necessary attorney's fees to compensate the claimant for attorney's fees incurred before the
date and time the rejected settlement offer was made. If the court finds that the amount stated in the offer
for attorney's fees under Section 541.157(2) is the same as, substantially the same as, or more than the
amount of reasonable and necessary attorney's fees incurred by the claimant as of the date of the offer, the
claimant may not recover any amount of attorney's fees in excess of the amount of fees stated in the offer.
(c) This section does not apply if the court finds that the offering party:
(1) could not perform the offer at the time the offer was made; or
-3-
(2) substantially misrepresented the cash value of the offer.
(d) The court shall award:
(1) damages as required by Section 541.152 if Subsection (a) does not apply; and
(2) attorney's fees as required by Section 541.152 if Subsection (b) does not apply.
Sec. 541.160. EFFECT OF SETTLEMENT OFFER. A settlement offer is not an admission of

engaging in an act or practice defined by Subchapter B to be an unfair method of competition or an unfair
or deceptive act or practice in the business of insurance.
Sec. 541.161. MEDIATION. (a) A party may, not later than the 90th day after the date a pleading
seeking relief under this subchapter is served, file a motion to compel mediation of the dispute in the
manner provided by this section.
(b) The court shall, not later than the 30th day after the date a motion under this section is filed,
sign an order setting the time and place of the mediation.
(c) The court shall appoint a mediator if the parties do not agree on a mediator.
(d) The mediation must be held not later than the 30th day after the date the order is signed,
unless:
(1) the parties agree otherwise; or
(2) the court determines that additional time not to exceed 30 days is warranted.
(e) Each party who has appeared in the action, except as agreed to by all parties who have
appeared, shall:
(1) participate in the mediation; and
(2) except as provided by Subsection (f), share the mediation fee.
(f) A party may not compel mediation under this section if the amount of actual damages
claimed is less than $15,000 unless the party seeking to compel mediation agrees to pay the costs of the
mediation.
(g) Except as provided by this section, the following apply to the appointment of a mediator and
the mediation process provided by this section:
(1) Section 154.023, Civil Practice and Remedies Code; and
(2) Subchapters C and D, Chapter 154, Civil Practice and Remedies Code.
Sec. 541.253. FRIVOLOUS ACTION. The court may award to the defendant court costs and reasonable
attorney's fees in relation to the work expended on a finding by the court that a class action under this
subchapter was brought by an individual plaintiff in bad faith or for the purpose of harassment.
-4-
Sec. 701.051. DUTY TO REPORT. (a) Not later than the 30th day after the date the person makes the
determination or reasonably suspects that a fraudulent insurance act has been or is about to be committed
in this state, the person:
(1) shall report the information in writing to the insurance fraud unit of the department,
in the format prescribed by the fraud unit or by the National Association of Insurance Commissioners;
and
(2) may also report the information to another authorized governmental agency.
(b) A report made to the insurance fraud unit constitutes notice to each other authorized
governmental agency.
(c) A person who is a member of an organization primarily dedicated to the detection,
investigation, and prosecution of insurance fraud fully complies with the person's obligations under
Subsection (a) by authorizing the organization to report on the person's behalf information required to be
reported under Subsection (a). The person retains any liability resulting from the failure of the
organization to report in a manner that complies with Subsection (a).
Sec. 701.052. IMMUNITY FOR FURNISHING INFORMATION RELATING TO A

FRAUDULENT INSURANCE ACT. (a) A person is not liable in a civil action, including an action for
libel or slander, and a civil action may not be brought against the person, for furnishing information
relating to a suspected, anticipated, or completed fraudulent insurance act if the information is provided
to:
(1) an authorized governmental agency or the department;
(2) a law enforcement officer or an agent or employee of the officer;
(3) the National Association of Insurance Commissioners or an employee of the
association;
(4) a state or federal governmental agency established to detect and prevent fraudulent
insurance acts or to regulate the business of insurance or an employee of the agency;
(5) a special investigative unit of an insurer, including a person who contracts to
provide special investigative unit services to the insurer or an employee of the insurer
who is responsible for the investigation of suspected fraudulent insurance acts; or
(6) an organization described by Section 701.051(c), if the person is a member of the
organization and:
(A) the person has reported the information as required by Section 701.051(a);
or
(B) the organization has reported the information to the insurance fraud unit as
required by Section 701.051(c) on behalf of the person and in a manner that fully complies with the
person's obligations under Section 701.051(a).
-5-
(b) A person may furnish information as described in Subsection (a) orally or in writing,
including through publishing, disseminating, or filing a bulletin or report.
(c) Subsection (a) does not apply to a person who acts with malice, fraudulent intent, or bad
faith.
(d) A person to whom Subsection (a) applies who prevails in a civil action arising from
furnishing information as described in Subsection (a) is entitled to attorney's fees and costs.
(e) This section does not affect any common law or statutory privilege or immunity.
(f) Repealed by Acts 2005, 79th Leg., Ch. 1282, Sec. 3, eff. September 1, 2005.
Sec. 701.101. INSURANCE FRAUD UNIT. (a) The purpose of the department's insurance fraud unit
is to enforce laws relating to fraudulent insurance acts.
(b) The insurance fraud unit may receive, review, and investigate in a timely manner insurer
antifraud reports submitted under Chapter 704.
(c) The insurance fraud unit shall report annually to the commissioner in writing regarding:
(1) the number of cases completed by the insurance fraud unit; and
(2) recommendations for regulatory and statutory responses to the types of fraudulent
activities encountered by the insurance fraud unit.
Sec. 701.102. INVESTIGATION OF CERTAIN ACTS OF FRAUD. If the commissioner has reason
to believe a person has engaged in, is engaging in, has committed, or is about to commit a fraudulent
insurance act, the commissioner may conduct any investigation necessary inside or outside this state to:
(1) determine whether the act occurred; or
(2) aid in enforcing laws relating to fraudulent insurance acts, including by providing
technical or litigation assistance to other governmental agencies.
Sec. 701.103. DISCIPLINARY ACTION; REPORT TO OTHER AGENCIES. (a) The

commissioner shall take appropriate disciplinary action as provided by this code if the commissioner
believes a fraudulent insurance act has occurred. The commissioner shall report information concerning
the commissioner's belief that a person has committed a fraudulent insurance act to an authorized
governmental agency.
(b) The commissioner shall:
(1) provide all material, documents, reports, complaints, or other evidence to an
authorized governmental agency on request; and
(2) assist the authorized governmental agency as requested.
-6-
Sec. 701.109. REQUEST FOR INVESTIGATION BY INSURER. (a) An insurer who conducts an
independent investigation of suspected insurance fraud is not required to complete that investigation
before requesting that the commissioner conduct an investigation.
(b) When requesting the commissioner to conduct an investigation, the insurer shall draft a
report of the insurer's findings and submit the report and any related investigation file to the
commissioner as soon as practicable on the conclusion of the insurer's independent investigation.
Sec. 4102.103. CONTRACT FOR SERVICES REQUIRED. (d) A license holder may not enter into a
contract with an insured and collect a commission as provided by Section 4102.104 without the intent to
actually perform the services customarily provided by a licensed public insurance adjuster for the insured.
Sec. 4102.158. CONFLICTS OF INTEREST PROHIBITED. (a) A license holder may not:
(1) participate directly or indirectly in the reconstruction, repair, or restoration of
damaged property that is the subject of a claim adjusted by the license holder; or
(2) engage in any other activities that may reasonably be construed as presenting a
conflict of interest, including soliciting or accepting any remuneration from, having a financial interest in,
or deriving any direct or indirect financial benefit from, any salvage firm, repair firm, construction firm,
or other firm that obtains business in connection with any claim the license holder has a contract or
agreement to adjust.
(b) A license holder may not, without the knowledge and consent of the insured in writing,
acquire an interest in salvaged property that is the subject of a claim adjusted by the license holder.
(c) A license holder may not represent an insured on a claim or charge a fee to an insured while
representing the insurance carrier against which the claim is made.
(d) A license holder may not directly or indirectly solicit, as described by Chapter 38, Penal
Code, employment for an attorney or enter into a contract with an insured for the primary purpose of
referring an insured to an attorney and without the intent to actually perform the services customarily
provided by a licensed public insurance adjuster. This section may not be construed to prohibit a license
holder from recommending a particular attorney to an insured.
(e) A license holder may not act on behalf of an attorney in having an insured sign an attorney
representation agreement.
(f) A license holder must become familiar with and at all times act in conformance with the
criminal barratry statute set forth in Section 38.12, Penal Code.
Sec. 4102.160. CERTAIN PAYMENTS PROHIBITED. A license holder may not:

(1) advance money to any potential client or insured; or
(2) pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, to a person
who is not a licensed public insurance adjuster a fee, commission, or other valuable consideration for the
-7-
referral of an insured to the public insurance adjuster for purposes of the insured entering into a contract
with that public insurance adjuster or for any other purpose.
Sec. 4102.164. ACCEPTANCE OF REFERRAL PAYMENTS PROHIBITED. (a) A

licensed public insurance adjuster may not accept a fee, commission, or other valuable consideration of
any nature, regardless of form or amount, in exchange for the referral by a licensed public insurance
adjuster of an insured to any third-party individual or firm, including an attorney, appraiser, umpire,
construction company, contractor, or salvage company.
(b) The commissioner shall adopt rules necessary to implement and enforce this section.
II. TEXAS BUSINESS & COMMERCE CODE
Sec. 17.46. DECEPTIVE TRADE PRACTICES UNLAWFUL. (b) Except as provided in Subsection
(d) of this section, the term "false, misleading, or deceptive acts or practices" includes, but is not limited
to, the following acts: (31) a licensed public insurance adjuster directly or indirectly soliciting
employment, as defined by Section 38.01, Penal Code, for an attorney, or a licensed public insurance
adjuster entering into a contract with an insured for the primary purpose of referring the insured to an
attorney without the intent to actually perform the services customarily provided by a licensed public
insurance adjuster, provided that this subdivision may not be construed to prohibit a licensed public
insurance adjuster from recommending a particular attorney to an insured.
Sec. 17.50. RELIEF FOR CONSUMERS. (c) On a finding by the court that an action under this section
was groundless in fact or law or brought in bad faith, or brought for the purpose of harassment, the court
shall award to the defendant reasonable and necessary attorneys' fees and court costs.
Sec. 17.505. NOTICE; INSPECTION. (a) As a prerequisite to filing a suit seeking damages under
Subdivision (1) of Subsection (b) of Section 17.50 of this subchapter against any person, a consumer shall
give written notice to the person at least 60 days before filing the suit advising the person in reasonable
detail of the consumer's specific complaint and the amount of economic damages, damages for mental
anguish, and expenses, including attorneys' fees, if any, reasonably incurred by the consumer in asserting
the claim against the defendant. During the 60-day period a written request to inspect, in a reasonable
manner and at a reasonable time and place, the goods that are the subject of the consumer's action or
claim may be presented to the consumer.
(b) If the giving of 60 days' written notice is rendered impracticable by reason of the necessity
of filing suit in order to prevent the expiration of the statute of limitations or if the consumer's claim is
asserted by way of counterclaim, the notice provided for in Subsection (a) of this section is not required,
but the tender provided for by Subsection (d), Section 17.506 of this subchapter may be made within 60
days after service of the suit or counterclaim.
-8-
(c) A person against whom a suit is pending who does not receive written notice, as required by
Subsection (a), may file a plea in abatement not later than the 30th day after the date the person files an
original answer in the court in which the suit is pending. This subsection does not apply if Subsection (b)
applies.
(d) The court shall abate the suit if the court, after a hearing, finds that the person is entitled to
an abatement because notice was not provided as required by this section. A suit is automatically abated
without the order of the court beginning on the 11th day after the date a plea in abatement is filed under
Subsection (c) if the plea in abatement:
(1) is verified and alleges that the person against whom the suit is pending did not
receive the written notice as required by Subsection (a); and
(2) is not controverted by an affidavit filed by the consumer before the 11th day after
the date on which the plea in abatement is filed.
(e) An abatement under Subsection (d) continues until the 60th day after the date that written
notice is served in compliance with Subsection (a).
Sec. 17.5051. MEDIATION. (a) A party may, not later than the 90th day after the date of service of a
pleading in which relief under this subchapter is sought, file a motion to compel mediation of the dispute
in the manner provided by this section.
(b) The court shall, not later than the 30th day after the date a motion under this section is filed,
sign an order setting the time and place of the mediation.
(c) If the parties do not agree on a mediator, the court shall appoint the mediator.
(d) Mediation shall be held within 30 days after the date the order is signed, unless the parties
agree otherwise or the court determines that additional time, not to exceed an additional 30 days, is
warranted.
(e) Except as agreed to by all parties who have appeared in the action, each party who has
appeared shall participate in the mediation and, except as provided by Subsection (f), shall share the
mediation fee.
(f) A party may not compel mediation under this section if the amount of economic damages
claimed is less than $15,000, unless the party seeking to compel mediation agrees to pay the costs of the
mediation.
(g) Except as provided in this section, Section 154.023, Civil Practice and Remedies Code, and
Subchapters C and D, Chapter 154, Civil Practice and Remedies Code, apply to the appointment of a
mediator and to the mediation process provided by this section.
(h) This section does not apply to an action brought by the attorney general under Section
17.47.
-9-
Sec. 17.5052. OFFERS OF SETTLEMENT. (a) A person who receives notice under Section 17.505
may tender an offer of settlement at any time during the period beginning on the date the notice is
received and ending on the 60th day after that date.
(b) If a mediation under Section 17.5051 is not conducted, the person may tender an offer of
settlement at any time during the period beginning on the date an original answer is filed and ending on
the 90th day after that date.
(c) If a mediation under Section 17.5051 is conducted, a person against whom a claim under
this subchapter is pending may tender an offer of settlement during the period beginning on the day after
the date that the mediation ends and ending on the 20th day after that date.
(d) An offer of settlement tendered by a person against whom a claim under this subchapter is
pending must include an offer to pay the following amounts of money, separately stated:
(1) an amount of money or other consideration, reduced to its cash value, as settlement
of the consumer's claim for damages; and
(2) an amount of money to compensate the consumer for the consumer's reasonable and
necessary attorneys' fees incurred as of the date of the offer.
(e) Unless both parts of an offer of settlement required under Subsection (d) are accepted by the
consumer not later than the 30th day after the date the offer is made, the offer is rejected.
(f) A settlement offer tendered by a person against whom a claim under this subchapter is
pending that complies with this section and that has been rejected by the consumer may be filed with the
court with an affidavit certifying its rejection.
(g) If the court finds that the amount tendered in the settlement offer for damages under
Subsection (d)(1) is the same as, substantially the same as, or more than the damages found by the trier of
fact, the consumer may not recover as damages any amount in excess of the lesser of:
(1) the amount of damages tendered in the settlement offer; or
(2) the amount of damages found by the trier of fact.
(h) If the court makes the finding described by Subsection (g), the court shall determine
reasonable and necessary attorneys' fees to compensate the consumer for attorneys' fees incurred before
the date and time of the rejected settlement offer. If the court finds that the amount tendered in the
settlement offer to compensate the consumer for attorneys' fees under Subsection (d)(2) is the same as,
substantially the same as, or more than the amount of reasonable and necessary attorneys' fees incurred by
the consumer as of the date of the offer, the consumer may not recover attorneys' fees greater than the
amount of fees tendered in the settlement offer.
(i) If the court finds that the offering party could not perform the offer at the time the offer was
made or that the offering party substantially misrepresented the cash value of the offer, Subsections (g)
and (h) do not apply.
-10-
(j) If Subsection (g) does not apply, the court shall award as damages the amount of economic
damages and damages for mental anguish found by the trier of fact, subject to Sections 17.50 and 17.501.
If Subsection (h) does not apply, the court shall award attorneys' fees as provided by Section 17.50(d).
(k) An offer of settlement is not an admission of engaging in an unlawful act or practice or
liability under this subchapter. Except as otherwise provided by this section, an offer or a rejection of an
offer may not be offered in evidence at trial for any purpose.
Sec. 17.506. DAMAGES: DEFENSES. (d) In an action brought under Section 17.50 of this subchapter,
it is a defense to a cause of action if the defendant proves that he received notice from the consumer
advising the defendant of the nature of the consumer's specific complaint and of the amount of economic
damages, damages for mental anguish, and expenses, including attorneys' fees, if any, reasonably incurred
by the consumer in asserting the claim against the defendant, and that within 30 days after the day on
which the defendant received the notice the defendant tendered to the consumer:
(1) the amount of economic damages and damages for mental anguish claimed; and
(2) the expenses, including attorneys' fees, if any, reasonably incurred by the consumer
in asserting the claim against the defendant.
Sec. 27.02. CERTAIN INSURANCE CLAIMS FOR EXCESSIVE CHARGES. (a) A person who
sells goods or services commits an offense if:
(1) the person advertises or promises to provide the good or service and to pay:
(A) all or part of any applicable insurance deductible; or
(B) a rebate in an amount equal to all or part of any applicable insurance
deductible;
(2) the good or service is paid for by the consumer from proceeds of a property or
casualty insurance policy; and
(3) the person knowingly charges an amount for the good or service that exceeds the
usual and customary charge by the person for the good or service by an amount equal to or greater than all
or part of the applicable insurance deductible paid by the person to an insurer on behalf of an insured or
remitted to an insured by the person as a rebate.
(b) A person who is insured under a property or casualty insurance policy commits an offense if
the person:
(1) submits a claim under the policy based on charges that are in violation of
Subsection (a) of this section; or
(2) knowingly allows a claim in violation of Subsection (a) of this section to be
submitted, unless the person promptly notifies the insurer of the excessive charges.
-11-
(c) An offense under this section is a Class A misdemeanor.
III. TEXAS PENAL CODE
Sec. 35.02. INSURANCE FRAUD. (a) A person commits an offense if, with intent to defraud or
deceive an insurer, the person, in support of a claim for payment under an insurance policy:
(1) prepares or causes to be prepared a statement that:
(A) the person knows contains false or misleading material information; and
(B) is presented to an insurer; or
(2) presents or causes to be presented to an insurer a statement that the person knows
contains false or misleading material information.
(a-1) A person commits an offense if the person, with intent to defraud or deceive an insurer
and in support of an application for an insurance policy:
(1) prepares or causes to be prepared a statement that:
(A) the person knows contains false or misleading material information; and
(B) is presented to an insurer; or
(2) presents or causes to be presented to an insurer a statement that the person knows
contains false or misleading material information.
(b) A person commits an offense if, with intent to defraud or deceive an insurer, the person
solicits, offers, pays, or receives a benefit in connection with the furnishing of goods or services for which
a claim for payment is submitted under an insurance policy.
(c) An offense under Subsection (a) or (b) is:
(1) a Class C misdemeanor if the value of the claim is less than $100;
(2) a Class B misdemeanor if the value of the claim is $100 or more but less than $750;
(3) a Class A misdemeanor if the value of the claim is $750 or more but less than
$2,500;
(4) a state jail felony if the value of the claim is $2,500 or more but less than $30,000;
(5) a felony of the third degree if the value of the claim is $30,000 or more but less than
$150,000;
(6) a felony of the second degree if the value of the claim is $150,000 or more but less
than $300,000; or
(7) a felony of the first degree if:
(A) the value of the claim is $300,000 or more; or
-12-
(B) an act committed in connection with the commission of the offense places a
person at risk of death or serious bodily injury.
(d) An offense under Subsection (a-1) is a state jail felony.
(e) The court shall order a defendant convicted of an offense under this section to pay
restitution, including court costs and attorney's fees, to an affected insurer.
(f) If conduct that constitutes an offense under this section also constitutes an offense under any
other law, the actor may be prosecuted under this section, the other law, or both.
(g) For purposes of this section, if the actor proves by a preponderance of the evidence that a
portion of the claim for payment under an insurance policy resulted from a valid loss, injury, expense, or
service covered by the policy, the value of the claim is equal to the difference between the total claim
amount and the amount of the valid portion of the claim.
(h) If it is shown on the trial of an offense under this section that the actor submitted a bill for
goods or services in support of a claim for payment under an insurance policy to the insurer issuing the
policy, a rebuttable presumption exists that the actor caused the claim for payment to be prepared or
presented.
Sec. 38.12. BARRATRY AND SOLICITATION OF PROFESSIONAL EMPLOYMENT. (a) A

person commits an offense if, with intent to obtain an economic benefit the person:
(1) knowingly institutes a suit or claim that the person has not been authorized to
pursue;
(2) solicits employment, either in person or by telephone, for himself or for another;
(3) pays, gives, or advances or offers to pay, give, or advance to a prospective client
money or anything of value to obtain employment as a professional from the prospective client;
(4) pays or gives or offers to pay or give a person money or anything of value to solicit
employment;
(5) pays or gives or offers to pay or give a family member of a prospective client
money or anything of value to solicit employment; or
(6) accepts or agrees to accept money or anything of value to solicit employment.
(b) A person commits an offense if the person:
(1) knowingly finances the commission of an offense under Subsection (a);
(2) invests funds the person knows or believes are intended to further the commission
of an offense under Subsection (a); or
(3) is a professional who knowingly accepts employment within the scope of the
person's license, registration, or certification that results from the solicitation of
employment in violation of Subsection (a).
-13-
(c) It is an exception to prosecution under Subsection (a) or (b) that the person's conduct is
authorized by the Texas Disciplinary Rules of Professional Conduct or any rule of court.
(d) A person commits an offense if the person:
(1) is an attorney, chiropractor, physician, surgeon, or private investigator licensed to
practice in this state or any person licensed, certified, or registered by a health care
regulatory agency of this state; and
(2) with the intent to obtain professional employment for the person or for another,
provides or knowingly permits to be provided to an individual who has not sought the
person's employment, legal representation, advice, or care a written communication or a
solicitation, including a solicitation in person or by telephone, that:
(A) concerns an action for personal injury or wrongful death or otherwise
relates to an accident or disaster involving the person to whom the communication or solicitation is
provided or a relative of that person and that was provided before the 31st day after the date on which the
accident or disaster occurred;
(B) concerns a specific matter and relates to legal representation and the person
knows or reasonably should know that the person to whom the communication or solicitation is directed
is represented by a lawyer in the matter;
(C) concerns a lawsuit of any kind, including an action for divorce, in which
the person to whom the communication or solicitation is provided is a defendant or a relative of that
person, unless the lawsuit in which the person is named as a defendant has been on file for more than 31
days before the date on which the communication or solicitation was provided;
(D) is provided or permitted to be provided by a person who knows or
reasonably should know that the injured person or relative of the injured person has indicated a desire not
to be contacted by or receive communications or solicitations concerning employment;
(E) involves coercion, duress, fraud, overreaching, harassment, intimidation, or
undue influence; or
(F) contains a false, fraudulent, misleading, deceptive, or unfair statement or
claim.
(e) For purposes of Subsection (d)(2)(D), a desire not to be contacted is presumed if an accident
report reflects that such an indication has been made by an injured person or that person's relative.
(f) An offense under Subsection (a) or (b) is a felony of the third degree.
(g) Except as provided by Subsection (h), an offense under Subsection (d) is a Class A
misdemeanor.
(h) An offense under Subsection (d) is a felony of the third degree if it is shown on the trial of
the offense that the defendant has previously been convicted under Subsection (d).
-14-
(i) Final conviction of felony barratry is a serious crime for all purposes and acts, specifically
including the State Bar Rules and the Texas Rules of Disciplinary Procedure.
IV. TEXAS RULES OF CIVIL PROCEDURE
Rule 13. Effect of Signing of Pleadings, Motions and Other Papers; Sanctions
The signatures of attorneys or parties constitute a certificate by them that they have read the pleading,
motion, or other paper; that to the best of their knowledge, information, and belief formed after
reasonable inquiry the instrument is not groundless and brought in bad faith or groundless and brought for
the purpose of harassment. Attorneys or parties who shall bring a fictitious suit as an experiment to get an
opinion of the court, or who shall file any fictitious pleading in a cause for such a purpose, or shall make
statements in pleading which they know to be groundless and false, for the purpose of securing a delay of
the trial of the cause, shall be held guilty of a contempt. If a pleading, motion or other paper is signed in
violation of this rule, the court, upon motion or upon its own initiative, after notice and hearing, shall
impose an appropriate sanctions available under Rule 215-2b, upon the person who signed it, a
represented party, or both.
Courts shall presume, that pleadings, motions, and other papers are filed in good faith. No sanctions under
this rule may be imposed except for good cause, the particulars of which must be stated in the sanction
order. "Groundless" for purposes of this rule means no basis in law or fact and not warranted by good
faith argument for the extension, modification, or reversal of existing law. A general denial does not
constitute a violation of this rule. The amount requested for damages does not constitute a violation of
this rule.
Rule 91a.1. Motion and Grounds
Except in a case brought under the Family Code or a case governed by Chapter 14 of the Texas Civil
Practice and Remedies Code, a party may move to dismiss a cause of action on the grounds that it has no
basis in law or fact. A cause of action has no basis in law if the allegations, taken as true, together with
inferences reasonably drawn from them, do not entitle the claimant to the relief sought. A cause of action
has no basis in fact if no reasonable person could believe the facts pleaded.
Rule 91a.7. Award of Costs and Attorney Fees Required
Except in an action by or against a governmental entity or a public official acting in his or her official
capacity or under color of law, the court must award the prevailing party on the motion all costs and
reasonable and necessary attorney fees incurred with respect to the challenged cause of action in the trial
court. The court must consider evidence regarding costs and fees in determining the award.
Rule 167.1. Generally
-15-
Certain litigation costs may be awarded against a party who rejects an offer made substantially in
accordance with this rule to settle a claim for monetary damages - including a counterclaim, crossclaim,
or third-party claim - except in:
(a) a class action;
(b) a shareholder's derivative action;
(c) an action by or against the State, a unit of state government, or a political subdivision of the
State;
(d) an action brought under the Family Code;
(e) an action to collect workers' compensation benefits under title 5, subtitle A of the Labor Code;
or
(f) an action filed in a justice of the peace court or small claims court.
Rule 167.2. Settlement Offer
(a) Defendant's declaration a prerequisite; deadline.
A settlement offer under this rule may not be made until a defendant - a party against whom a claim for
monetary damages is made - files a declaration invoking this rule when a defendant files such a
declaration, an offer or offers may be made under this rule to settle only those claims by and against that
defendant. The declaration must be filed no later than 45 days before the case is set for conventional trial
on the merits.
Rule 167.4. Awarding Litigation Costs
(a) Generally. If a settlement offer made under this rule is rejected, and the judgment to be awarded on
the monetary claims covered by the offer is significantly less favorable to the offeree than was the offer,
the court must award the offeror litigation costs against the offeree from the time the offer was rejected to
the time of judgment.
(b) "Significantly less favorable" defined. A judgment award on monetary claims is significantly less
favorable than an offer to settle those claims if:
(1) the offeree is a claimant and the judgment would be less than 80 percent of the offer; or
(2) the offeree is a defendant and the judgment would be more than 120 percent of the offer.
(c) Litigation costs. Litigation costs are the expenditures actually made and the obligations actually
incurred directly in relation to the claims covered by a settlement offer under this rule for the
following:
(1) court costs;

(2) reasonable deposition costs, in cases filed on or after September 1, 2011;
-16-
(3) reasonable fees for not more than two testifying expert witnesses; and
(4) reasonable attorney fees.
(e) No double recovery permitted. A party who is entitled to recover attorney fees and costs under another
law may not recover those same attorney fees and costs as litigation costs under this rule.
(f) Limitation on attorney fees and costs recovered by a party against whom litigation costs are awarded.
A party against whom litigation costs are awarded may not recover attorney fees and costs under another
law incurred after the date the party rejected the settlement offer made the basis of the award.
(g) Litigation costs to be awarded to defendant as a setoff. Litigation costs awarded to a defendant must
be made a setoff to the claimant's judgment against the defendant.
Rule 166a. Summary Judgment
(a) For Claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to
obtain a declaratory judgment may, at any time after the adverse party has appeared or answered,
move with or without supporting affidavits for a summary judgment in his favor upon all or any
part thereof. A summary judgment, interlocutory in character, may be rendered on the issue of
liability alone although there is a genuine issue as to amount of damages.
(b) For Defending Party. A party against whom a claim, counterclaim, or cross-claim is asserted
or a declaratory judgment is sought may, at any time, move with or without supporting affidavits
for a summary judgment in his favor as to all or any part thereof.
Rule 169. Expedited Actions
(a) Application.
(1) The expedited actions process in this rule applies to a suit in which all claimants, other than
counter-claimants, affirmatively plead that they seek only monetary relief aggregating $100,000
or less, including damages of any kind, penalties, costs, expenses, pre-judgment interest, and
attorney fees.
(2) The expedited actions process does not apply to a suit in which a party has filed a claim
governed by the Family Code, the Property Code, the Tax Code, or Chapter 74 of the Civil
Practice & Remedies Code.
(b) Recovery. In no event may a party who prosecutes a suit under this rule recover a judgment in excess
of $100,000, excluding post-judgment interest.
(c) Removal from Process.

(1) A court must remove a suit from the expedited actions process:
-17-
(A) on motion and a showing of good cause by any party; or
(B) if any claimant, other than a counter-claimant, files a pleading or an amended or
supplemental pleading that seeks any relief other than the monetary relief allowed by
(a)(1).
(2) A pleading, amended pleading, or supplemental pleading that removes a suit from the
expedited actions process may not be filed without leave of court unless it is filed before the
earlier of 30 days after the discovery period is closed or 30 days before the date set for trial.
Leave to amend may be granted only if good cause for filing the pleading outweighs any
prejudice to an opposing party.
(3) If a suit is removed from the expedited actions process, the court must reopen discovery under
Rule 190.2(c).
(d) Expedited Actions Process.
(1) Discovery. Discovery is governed by Rule 190.2.

(2) Trial Setting; Continuances. On any party's request, the court must set the case for a trial date
that is within 90 days after the discovery period in Rule 190.2(b)(1) ends. The court may continue
the case twice, not to exceed a total of 60 days.
(3) Time Limits for Trial. Each side is allowed no more than eight hours to complete jury
selection, opening statements, presentation of evidence, examination and cross-examination of
witnesses, and closing arguments. On motion and a showing of good cause by any party, the court
may extend the time limit to no more than twelve hours per side.
(A) The term "side" has the same definition set out in Rule 233.
(B) Time spent on objections, bench conferences, bills of exception, and challenges for
cause to a juror under Rule 228 are not included in the time limit.
(4) Alternative Dispute Resolution.

(A) Unless the parties have agreed not to engage in alternative dispute resolution, the
court may refer the case to an alternative dispute resolution procedure once, and the
procedure must:
(i) not exceed a half-day in duration, excluding scheduling time;
(ii) not exceed a total cost of twice the amount of applicable civil filing fees; and
(iii) be completed no later than 60 days before the initial trial setting.
(B) The court must consider objections to the referral unless prohibited by statute.
(C) The parties may agree to engage in alternative dispute resolution other than that
provided for in (A).
-18-
(5) Expert Testimony. Unless requested by the party sponsoring the expert, a party may only
challenge the admissibility of expert testimony as an objection to summary judgment evidence
under Rule 166a or during the trial on the merits. This paragraph does not apply to a motion to
strike for late designation.
V. TEXAS CIVIL PRACTICE & REMEDIES CODE
Sec. 9.011. SIGNING OF PLEADINGS. The signing of a pleading as required by the Texas
Rules of Civil Procedure constitutes a certificate by the signatory that to the signatory's best knowledge,
information, and belief, formed after reasonable inquiry, the pleading is not:
(1) groundless and brought in bad faith;
(2) groundless and brought for the purpose of harassment; or
(3) groundless and interposed for any improper purpose, such as to cause unnecessary
delay or needless increase in the cost of litigation.
Sec. 9.012. VIOLATION; SANCTION. (a) At the trial of the action or at any hearing
inquiring into the facts and law of the action, after reasonable notice to the parties, the court may on its
own motion, or shall on the motion of any party to the action, determine if a pleading has been signed in
violation of any one of the standards prescribed by Section 9.011.
Sec. 10.001. SIGNING OF PLEADINGS AND MOTIONS. The signing of a pleading or

motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory that to
the signatory's best knowledge, information, and belief, formed after reasonable inquiry:
(1) the pleading or motion is not being presented for any improper purpose, including
to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) each claim, defense, or other legal contention in the pleading or motion is warranted
by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law
or the establishment of new law;
(3) each allegation or other factual contention in the pleading or motion has evidentiary
support or, for a specifically identified allegation or factual contention, is likely to have evidentiary
support after a reasonable opportunity for further investigation or discovery; and
-19-
(4) each denial in the pleading or motion of a factual contention is warranted on the
evidence or, for a specifically identified denial, is reasonably based on a lack of information or belief.
Sec. 10.004. VIOLATION; SANCTION. (a) A court that determines that a person has
signed a pleading or motion in violation of Section 10.001 may impose a sanction on the person, a party
represented by the person, or both.
(b) The sanction must be limited to what is sufficient to deter repetition of the conduct or
comparable conduct by others similarly situated.
(c) A sanction may include any of the following:
(1) a directive to the violator to perform, or refrain from performing, an act;
(2) an order to pay a penalty into court; and
(3) an order to pay to the other party the amount of the reasonable expenses incurred by
the other party because of the filing of the pleading or motion, including reasonable attorney's fees.
(d) The court may not award monetary sanctions against a represented party for a violation of
Section 10.001(2).
(e) The court may not award monetary sanctions on its own initiative unless the court issues its
order to show cause before a voluntary dismissal or settlement of the claims made by or against the party
or the party's attorney who is to be sanctioned.
(f) The filing of a general denial under Rule 92, Texas Rules of Civil Procedure, shall not be
deemed a violation of this chapter.
-20-

The Second Storm: Policy Report by Texas Watch

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

The Second Storm: Policy Report by Texas Watch

Enviado por

Direitos autorais:

Formatos disponíveis

THE SECOND STORM

Official Data Indicates Abusive Tactics

LEARN MORE AT WWW.TEXASATCH.ORG/PROTECTPOLICYHOLDERS

THE REAL WORLD EFFECT IS THAT

8 Tex. Ins. Code 2251.101.

SEVERE WEATHER INCREASINGLY

A CLOSE READING OF THE FACTS 4

RANK COST STORM DATE LOCATION

A CLOSE READING OF THE FACTS 5

THE TDI DATA CALL REPORT

A CLOSE READING OF THE FACTS 6

26 Id. at p. 7 & 54.

A CLOSE READING OF THE FACTS 7

A CLOSE READING OF THE FACTS 8

A CLOSE READING OF THE FACTS 9

4. CLAIMS DENIED & THE REFUSAL TO

A CLOSE READING OF THE FACTS 12

TRIAL IN TEXAS FEDERAL of the companies who

A CLOSE READING OF THE FACTS 14

LEARN MORE AT WWW.TEXASATCH.ORG/PROTECTPOLICYHOLDERS

Substitute the following for __.B. No. _____:

relating to insurance claims and certain prohibited acts and

practices in the business of insurance.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 541.156(a), Insurance Code, is amended to

(a) A person who receives notice provided under Section

541.154 or 542A.003 may make a settlement offer during a period

beginning on the date notice under Section 541.154 or 542A.003 is

received and ending on the 60th day after that date.

SECTION 2. Section 542.060, Insurance Code, is amended by

amending Subsection (a) and adding Subsection (c) to read as

(a) Except as provided by subsection (c), if [If] an insurer

that is liable for a claim under an insurance policy is not in

compliance with this subchapter, the insurer is liable to pay the

policy, in addition to the amount of the claim, interest on the

that is liable for a claim under an insurance policy is not in

compliance with this subchapter, the insurer is liable to pay the

holder of the policy, in addition to the amount of the claim,

interest on the amount of the claim as damages at the rate

determined on the date of judgment by adding five percent to the

Sec. 542A.001. DEFINITIONS. In this chapter:

(1) "Agent" means an employee, agent, representative,

or adjuster who performs any act on behalf of an insurer.

(2) "Claim" means a first-party claim that:

(A) is made by an insured under an insurance

(B) must be paid by the insurer directly to the

(C) arises from damage to or loss of covered

lightning, hurricane, hail, wind, snow, or rain.

(3) "Claimant" means a person making a claim.

(4) "Insurer" means a corporation, association,

partnership, or individual, other than the Texas Windstorm

Insurance Association, engaged as a principal in the business of

insurance and authorized or eligible to write property insurance

in this state, including:

(A) an insurance company;

(B) a reciprocal or interinsurance exchange;

(C) a mutual insurance company;

(D) a capital stock insurance company;

(E) a county mutual insurance company;

(F) a farm mutual insurance company;

(G) a Lloyd's plan;

(H) an eligible surplus lines insurer; or

(I) the FAIR Plan Association.

(5) "Person" means a corporation, association,

Substitute the following for .B. No. ___: