Proposed CSSB 10 (HB 1774) Helps Foreign

Insurance Companies, Not Texas Business

CSSB 10 remains a flawed piece of legislation. It contains most of the provisions objected to by an ever
increasing chorus of industry, small businesses, churches, homeowners, and many others. The substitute
does not include language offered to alleviate these concerns nor does it address the abuse of the current
appraisal process that insurers use as a get out of jail free card. Instead, CSSB 10:

Benefits foreign insurance companies over Texas businesses and homeowners

Punishes all policyholders with weather-related damage to improvements to real property
Does not distinguish between legitimate claims and those allegedly generated by bad actors
Slashes slow-pay penalties, which incentivizes delays in paying claims
Burdens property owners with costly bureaucratic notice requirements

In its comprehensive review of the market, TDI confirmed that:

Premiums in areas with hail litigation have not risen faster than the rest of Texas
Texas insurance market has been competitive and has become increasingly competitive
Insurance companies posted higher profits between 2012 and 2015 than over the longer term
Additionally, TDI found that after the storms insurers:

Took less time to investigate claims

Closed 30% more claims with no payment, requiring large numbers of claims to be re-opened
Failed to properly adjudicate 1/3rd of all claims
Paid 10% fewer claims per 100 policies

INSURER FORUM SHOPPING ~ MOST CASES FORCED INTO

OVERBURDENED FEDERAL COURTS
CSSB 10 allows insurance companies to use federal law to force most homeowner cases and virtually all
business disputes into backlogged federal courts, where it takes twice as long to receive justice. CSSB 10
immunizes agents and adjusters by allowing insurers to accept their liability (Sec. 542A.005). Individual
adjusters and their employers are often the most important witnesses in an insurance lawsuit, and the
substitute not only provides them immunity, it fails to require their availability for discovery, deposition,
and/or trial.

GOTCHA NOTICE REQUIREMENTS ADD LOOPHOLES AND TRAP DOORS

FOR POLICYHOLDERS TO FALL THROUGH
The substitute shifts the burden to policyholders to conduct a costly investigations and provide a
duplicative, detailed pre-suit notice that includes all acts or omissions and specific damages, as well
as a false calculation of attorney fees before they have the ability to discover the full extent of the
insurance companys wrongdoing (Sec. 542.003(b)). In other words, policyholders are required to have a
 crystal ball. If they guess wrong at the outset or learn more information through the course of the suit
that changes their damages, it can harm their ability to be made whole by reducing the policyholders
rightful recovery, threatening the policyholders ability to make necessary repairs and reducing or denying
the recovery of attorneys fees, (Sec. 542.006 (c)&(d)).

SLASHES SLOW-PAY PENALTY ON WEATHER CLAIMS

Insurance companies pay a penalty only when they fail to meet their obligation to timely pay claims.
Section 2 of the substitute cuts the penalty interest rate for slow payment of weather-related from 18%
to a rate as low as 10%. Reducing the penalty harms small businesses and homeowners who rely on their
insurance company to quickly resolve just and appropriate claims.

INCREASED LITIGATION AND ACCESS TO JUSTICE PROBLEMS

CSSB10 invents new standards and processes that will only create confusion, increase litigation, impose
additional costs, and add unnecessary delays:

VIOLENCE OF NATURE - CSSB 10 creates a new Chapter 542A dealing with real property claims
caused by the violence of nature, which is a standard that does not exist in law. Not only does
this definition extend the bill well beyond the alleged problem, but it seems to approximate Acts
of God without saying so, creating confusion. Additionally, the standard will likely lead to legal
disputes over damage caused by intentional acts which result in a natural disaster (e.g. wildfires
sparked by arson).
ATTORNEY FEES CSSB 10 keeps juries from determining reasonable attorney fees and requires
judges to apply never before seen provisions regarding the calculation and ultimate award of
attorney fees. Reasonable and necessary, hours actually worked, hourly rate that is
customary, and numerous other provisions all become areas of dispute that required discovery,
litigation between the parties, and decisions by Judges.
BARRATRY CSSB 10 takes a serious criminal offense and civil action away from the client and
gives it to the insurance company to use against its own policyholder. This taking threatens the
policyholder with losing her lawyer and forfeiting the right to recover attorney fees. (Sec.
542A.006(e)). Once pled as an affirmative defense, the policyholders attorney will be forced to
defend herself in discovery, potentially divulge attorney-client privileged materials, be deposed,
and defend her professional reputation instead of prosecuting their clients claims against the
insurer. CSSB 10 adds an entirely separate and additional trial of alleged barratry claims
duplicating time and expense for both parties.

CSSB 10 creates serious questions about whether the policyholder can be made whole, what law pertains,
what notice is due, and what penalty applies.

All such concerns increase both the cost and amount of litigation. All in favor of the insurance companies
and at the expense of Texas property owners.

Leg. Adv. Paid for by Texas Trial Lawyers Association, John L. (Lin) McCraw, III, President
1220 Colorado Street, Suite 500, Austin, TX 78701

Rev. 3/16/17