There’s been a dramatic reduction in Texas hail litigation resulting from new legislation enacted last year, according to Steve Badger, senior partner with Dallas-based Zelle law firm and an outspoken advocate of hail litigation reform.
During the Combined Claims Conference held recently in Orange County, Calif., Claims Journal caught up with Badger and asked him “what the hail is going on in 2018?”
“The most important thing that we’ve seen is a dramatic reduction in the number of lawsuits arising from hail events. This is primarily because of the new legislation in Texas that became effective on September 1st, 2017,” said Badger. “We saw a mad dash to the courthouse, so everybody could file their lawsuits in advance of the effective date of the legislation. That was anticipated, so there was a huge spike in lawsuits in August, but after September the numbers have been very low.”
He’s noticed two things since the legislation has been enacted.
“We’re getting pre-notice letters, where they’re actually asking for information about the claim. We see …a real effort to try to properly investigate the claim before suing us…and we’re really pleased to see that,” Badger said. “We’re also seeing more moderate numbers come in. One of the problems we were trying to address were these grossly inflated estimates that we would get. Now, with attorneys’ fees for the plaintiffs’ lawyers being tied to their recovery at trial compared to the pre-suit estimate, as expected, the estimates are coming down to more reasonable numbers, probably more in line with what the true dispute is. Some of our clients are actually looking at these reasonable numbers and paying in advance of lawsuits, so we’re seeing a nice trend where matters, as we hoped would happen, are actually getting settled pre-litigation.”
He also offered his perspective on the impact of last year’s hurricane season.
“It’s a little too early to tell. We’re not sure at this point. We’ve seen a lot of emphasis placed by the policyholder attorneys, not on the insurance litigation, but on the inverse condemnation lawsuits against the governmental entities, so there’s a lot of focus on that right now,” said Badger. “Whether that’s all that we’re going to see or is that just the first wave and then we’ll see more insurance claim demands coming to us later is unclear.”
Badger expects there will be lawsuits arising from the storm.
“There’s no question. We had 650,000 claims from Hurricane Harvey in Texas, so there will be disputes, and there will be some lawsuits, but we’re not seeing an indication yet of the mass marketing model where we see hundreds of lawsuits coming in from a particular lawyer,” he added.
He explained there are several reasons why litigation arising from Harvey may differ from past hurricanes.
“The nature of the storm. In Houston, primarily, it was a flood event, and flood is clearly excluded from most of the residential policies and a lot of the commercial policies,” said Badger.
Another reason is the fix in Texas law that addresses mass marketing public adjusters who solicit contracts with hundreds of people, he said.
“They didn’t do anything and they just flipped them to lawyers. We fixed that in the 2015 legislative session, so that’s not happening now. Well, it’s happening a little, and we’re having to deal with those, but for the most part the model of just going up and signing hundreds of people up, flip them to lawyers is not happening. We’re not seeing the huge numbers yet, but we’re only six months after the storm, so we’ll wait for the next 18 months and see what happen,” said Badger.
Badger discussed past legislation and the new current focus for 2019.
In 2015, state legislation addressed public adjuster abuses.
“We fixed the problem of the mass marketing public adjusters to make sure the PA’s would only sign up those claims that they truly intended to try to adjust and resolve. We did that with the great cooperation of TAPIA, the Texas Association of PA’s. They helped us fix that problem. They were aware of the issue in their industry, and they helped us address it,” said Badger.
In 2017, the state addressed hail litigation lawsuit abuse with the hail bill.
“What’s left now, that we want to address in 2019, are contractor abuses. We have issues with storm chasing contractors and just regular roofing contractors who are creating a number of issues, not just for the insurance industry, but also for consumers,” Badger said. “Every single day I get a phone call from someone in Texas who has been ripped off by a roofing contractor.”
There are several ways to address contractor abuses, he added.
“We have to license and regulate contractors in Texas. It’s not an insurance industry issue, it is a consumer protection issue,” said Badger “We need to regulate the contractors, and in regulating them we can have either a simple or more complex form of licensing to ensure that there some barrier to entry to the market, so two Chuck’s in a truck can’t show up after a storm and just take people’s insurance checks and leave.”
In addition, deductible waivers need to be addressed, he said.
“Even though it’s illegal in Texas, there are some loopholes and it’s a real problem. We need to clarify the law to make it clear that cannot happen,” said Badger.
Lastly, consumer protection is a must.
“We need some type of stronger law that if somebody rips off a consumer’s insurance proceeds, that contractor is going to face penalties for that. One of the things…I’d like to propose to the industry is some type of insurance restoration contractor consumer protection act,” said Badger. “We don’t have to regulate all roofing contractors, but just those that are in the insurance restoration world where there’s lots of money changing hands, and a lot of the abuses occur there.”
Meetings with interested stakeholders from the roofing and public adjusting community have begun, he said.