Texas Legislature should address hail litigation, R Street study finds
The study, “Come Hail or High Water: Texas’ Litigation Explosion,” was authored by R Street Texas Director Josiah Neeley. In it, he notes that homeowners’ insurers paid $10.4 billion for hail-related losses between 1999 and 2011, more than any other peril. At the same time, litigation over hail claims has grown significantly.
“Historically, only about 2 percent of property insurance claims result in a lawsuit,” said Neeley. “Yet closer to 35 percent of recent hail damage claims have seen some sort of litigation.”
Neeley writes that this increase can be partially blamed on “case-running,” an organized process of public adjusters and others soliciting and referring individuals with potential claims to attorneys, who then bring large numbers of coordinated suits against insurance companies. To further complicate matters, many of these cases may involve re-opened claims that previously had been settled, or claims of otherwise dubious merit.
“As with many forms of nuisance suits, the large number of cases and the cost of litigation can create an incentive for insurance companies to settle,” said Neeley.
Neeley outlines solutions the Texas Legislature should take to address hail litigation, including isolating the specific amounts at issue in a dispute (the difference between what the insurer and policyholder believe the claim to be worth, as opposed to the entire amount of the claim), and updating current statutory provisions that apply an 18 percent interest rate for late payments in insurance claims. The state should also look for ways to resolve more insurance disputes outside of the court system.
Texas should not look to increase professional regulation for public adjusters and others, Neeley writes. Nor should the state adopt rules prohibiting public adjusters from referring policyholders to attorneys.
“The growth of hail claim litigation is certain to continue until it is addressed by the state,” said Neeley. “Luckily, Texas has a menu of options it could use to make sure legitimate claims are processed and paid in a timely manner, while clamping down on questionable claims and abuse.”