Businesses divided in support of high-priority insurance bill

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Weeks after major business interests blasted legislation that would make it harder for property owners to sue insurance companies over weather-related damages, other high-profile business interests are lining up in support of the bill.

Texans for Lawsuit Reform — the powerful tort reform group pushing Senate Bill 10 — is touting the newfound backing.

In early February, 15 businesses, including 7-Eleven and Ryan LLC, founded and led by Republican mega-donor Brint Ryan, condemned the high-priority insurance bill in a joint letter to Lt. Gov. Dan Patrick — who has championed the issue — and other top Republican leaders. They were particularly concerned that the legislation was not limited to hailstorms and would go beyond property claims. 

The letter said that the legislation “greatly harms businesses” by making it harder for anyone who insures property in Texas to get paid after filing a claim. Businesses in the Lone Star State already have minimal protections against insurance companies and the proposed changes would only strip away what remains, the letter contended. 

Since then, the bill's author, Sen. Kelly Hancock, R-North Richland Hills, acknowledged his legislation was too broad and introduced a new version that limits the proposed changes to weather-related insurance claims. (The House Insurance Committee will take public testimony on a companion bill, House Bill 1774, Tuesday.) 

Support from big name business leaders has been rolling in ever since, said Texans for Lawsuit Reform spokeswoman Lucy Nashed. The group has received more than 180 letters from the likes of auto magnate Red McCombs and billionaire real estate developer Ross Perot Jr., she said. And almost two dozen letters have been sent to lawmakers.

“The business community in Texas has always worked together to stop any kind of lawsuit abuse, whenever and wherever it happens,” Nashed said. “[They know that] now is not the time to turn a blind eye to the newest form of lawsuit abuse.”

Patrick has made the legislation a priority, and is leading the charge on punishing lawyers he says are taking advantage of homeowners and insurance companies to get big payouts.  

In a video posted on Facebook in February, Patrick said, "we need to end these skyrocketing claims we've seen over the last several years dealing with hailstorms."

Gov. Greg Abbott has also backed the initiative and reiterated his support for the legislation Monday at a luncheon for the Texas Conservative Coalition Research Institute, saying the hailstorm that ravaged North Texas over the weekend "demonstrates once again why we need that hailstorm litigation law to pass."

Proponents of the legislation argue it will preserve consumer protections and successfully crack down on lawyers who cash in on hailstorms at the expense of their clients and insurance companies.

A Texas Department of Insurance report found the amount of weather-related property lawsuits has increased by 15 times since 2012, before which only about 0.1 percent of claims resulted in lawsuits. Since then, about close to 2 percent of negotiations have involved legal action.

“A 1400 percent increase in anything is an explosion. Those aren’t subtle numbers,” Nashed said, describing it as lawyer-driven litigation.

The reform group estimates there have been $340 million in legal fees paid by insurance companies as a result of more than 35,000 lawsuits since mid-2012.

But more lawsuits does not mean more frivolous lawsuits, said Tori Sommerman, deputy director of Texas Watch, a nonprofit consumer rights group. 

“There are currently dozens of laws on the books that can prevent frivolous lawsuits,” Sommerman said, noting they should be better enforced.

Sommerman also worried that slashing the penalties for insurers that don’t pay up would strip away key consumer protections.

“Those are vital in not only punishing insurers that unfairly deny, delay and underpay claims but it also decreases the incentives for insurers to pay claims on time in the first place,” Sommerman said.

Nashed said several real estate companies are backing the legislation because it would make it easier to own a home by helping keep the cost of property insurance low.

In her letter of support for the legislation, the chairman emeritus of Sotheby’s International Realty said that a colleague had asked her to sign a statement opposing the the hailstorm-related legislation. Martha Turner said she looked into the issue to learn more and now “heartily supports” the Senate and House versions of the bill.  

“The bills actually help, as opposed to harm, homeowners, especially homeowners in poorer or middle-class neighborhoods who have seen their insurance rates going up and their deductibles increasing in many parts of our state,” Turner wrote.

Two years ago, business blowback killed a similar bill, after it passed the Senate. A slew of companies, pro-business trade associations, the Texas Association of Rural Schools and AARP all said the bill would leave them at a disadvantage in disputes over property damage claims.

Correction: An earlier version of this story incorrectly identified one of the business leaders supporting the legislation as former presidential candidate Ross Perot Sr. 

Disclosure: Ross Perot Jr. has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.

Related content:

• In early February, major corporate interests condemned the high-priority insurance bill in a joint letter to Patrick and other Republican leaders.
• Last session, several businesses lined up against a similar bill, worried that it would tip the balance of power in favor of already powerful insurance companies, at the expense of businesses and homeowners.