Proposed CSHB 1774 - Still Helps Foreign

Insurance Companies, Not Texas Business

CSHB 1774 remains a flawed piece of legislation. It still contains a number of the provisions objected to
by an ever increasing chorus of industry, small businesses, churches, homeowners, and many others. It
does not address the abuse of the current appraisal process that insurers use as a get out of jail free
card. Instead, CSHB 1774:

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
CSHB 1774 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. CSHB
1774 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;
the substitute recognizes this process but fails to require that these bad actors appear at trial. Immunizing
bad actors does nothing to reduce lawsuits but it does frustrate the search for justice.

GOTCHA NOTICE REQUIREMENTS ADD LOOPHOLES AND TRAP DOORS

FOR POLICYHOLDERS TO FALL THROUGH
The substitute shifts the burden to policyholders to conduct a costly investigation 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 claims 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

CSHB 1774 invents new standards and processes that will only create confusion, increase litigation,
impose additional costs, and add unnecessary delays:

FORCES OF NATURE - CSHB 1774 creates a new Chapter 542A dealing with real property claims
and changes those caused by the violence of nature to those caused by forces of nature. This
definition extends the bill well beyond the alleged problem HAIL STORMS and will likely lead
to legal disputes over damage caused by intentional or negligent acts which result in a natural
disaster (e.g. wildfires sparked by arson).
ATTORNEY FEES CSHB 1774 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, contemporaneous time records, hourly
rate that is customary, and numerous other provisions all become areas of dispute that require
discovery, litigation between the parties, and decisions by Judges.

CSHB 1774 creates serious questions about whether the policyholder can be made whole, what law
pertains, what notice is due, and what penalty applies. The fundamental problems remain removal to
federal court, more litigation not less and treating all claims the same the good with the bad.

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. 3/27/17