AUSTIN – Texas Watch, a self-proclaimed consumer protection group, recently launched a campaign urging Lone Star residents to tell the Texas Department of Insurance to keep arbitration out of insurance disputes.
“Arbitration clauses force consumers with disputes into closed, costly, and biased proceedings without any appeal or public record. For years, TDI rightfully rejected policies with these dangerous clauses,” reads a May 18 Texas Watch email sent to supporters.
“But, a new policy submitted to TDI could reverse this longstanding rule. The policy includes a binding arbitration clause, which would strip unaware consumers of their constitutional rights (to sue) in exchange for a discount.”
In December, Texas, after being absent from the top 10 for several years, reappeared on the American Tort Reform Association’s annual “Judicial Hellholes” report for the thousands upon thousands of lawsuits filed in Hidalgo County after a couple of 2012 hailstorm strikes.
Now, trial lawyers advertise heavily after every major storm in Texas, seeking to sign up as many clients as possible. As a result, hundreds to thousands of lawsuits are filed against insurance companies following a destructive weather event.
Steve Badger, a commercial insurance attorney and partner at Zelle LLP, says Texas Watch is directing their concerns at the wrong group.
“The insurance industry didn’t wake up on morning and say ‘hey, let’s add an arbitration provision to our policies,’” said Badger. “Instead, the insurance industry is reacting to what is going on in the market place – and that is thousands of hail damage lawsuits.”
On May 17, the Record reported on a barratry lawsuit alleging groups of Texas hail lawyers, public adjusters and roofers are currently involved in an “elaborate web of fraud” to “line their pockets” by taking advantage of storm victims, essentially duping them into filing lawsuits.
“Texas Watch should be looking at the roofing contractors, public adjusters, and attorneys who have turned the first-party insurance market into their own little thiefdom,” Badger said.
“For the past hundred years, litigation rates were less than 2 percent in this area. The insurance industry never saw a need for mandatory arbitration. Now, with litigation rates approaching 40 percent after some hail events, it’s not surprising that some insurance carriers are looking for an alternative dispute resolution mechanism to stem the tidal wave of lawsuits.”
If TDI approves the change, policyholders would receive a discount, coercing policyholders, according to Texas Watch, into giving up their right to sue for a “harmful” arbitration process.
“Binding arbitration, as included in the policy, would allow insurance companies to buy Texans' rights for a few dollars a month,” states Texas Watch’s campaign ad. “Tell the Texas Department of Insurance that your rights are not for sale!”
During the last legislative session, groups such as Texans for Lawsuit Reform opposed Texas Watch’s efforts to kill a hailstorm lawsuit reform bill, calling the consumer group “a trial lawyer front.”