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March 28, 2017

Via hand delivery

House Committee on Insurance

Attn: The Honorable Larry Phillips, Chair
Texas State Capitol - EXT E2.150
Austin, Texas 78701

Re: Written testimony in opposition to HB 1774

Dear Chairman Phillips and Members of the Committee:

Texas Watch is a non-partisan, non-profit citizen advocacy organization. Since 1998, we have fought for the rights of
policyholders and other consumers. We testify today in opposition to HB 1774 because this legislation would
unfortunately have a devastating effect on the rights of property owners across our state. Families and businesses alike
do not want their rights taken from them, and it would serve no legitimate purpose to do so.

The bill does nothing to distinguish good claims from bad. Its effect will be to punish property owners with good claims
while lessening penalties for carriers that cheat their customers. The bill has extremely broad application and slashes the
current 18% penalty interest rate to a floating rate, currently set at just 8%. This reduction will only pad insurance industry
profits. Our laws currently set out clear deadlines for insurers to investigate and pay valid claims promptly. The bill has the
effect of undercutting our prompt pay laws. The bill increases costs for real property owners, forces cases into our
overburdened federal courts where it takes twice as long to receive justice, and creates an access to justice issue,
threatening our 7th Amendment right to trial by jury. Under the bill, claims will only be paid slower and lower, if at all.

It is important for the committee to know that TDI did not say one word about TLRs so-called hail crisis in their Biennial
Report to this body. Moreover, TDI data contained in the enclosed binder demonstrates that homeowners insurers
have reaped billions in profits during the period of time they have cried crisis. Official TDI data shows carriers have
paid 10% fewer hail claims in this time (a reduction of 3.9% to 3.5%) and refused to reopen claims files in substantial
numbers short of a lawsuit being filed. Insurers who pay valid claims on time face no liability. Those who stiff-arm and
low-ball their customers do face accountability through our courts. The litigation rate fell to .7% in 2015.

Insurers have plenty of strong and balanced laws on the books if they are confronted with any unsupported suits. They
can seek dismissal the day they are sued and recover their costs. Barratry is a crime. Insurance fraud is punishable by 99
years in prison. We merely need to enforce the criminal and civil laws, not create more of them. Tipping the scales in favor
of insurers only hurts your constituents. We must ensure Texas homeowners, businesses, schools, and churches are
protected from insurance abuse. Please protect your constituents and vote no on HB 1774.

Very respectfully,

Ware V. Wendell
Executive Director
Encl.
cc: Members of the Committee (via Committee Clerk)
Members of the Press
ATTACHMENTS
Populated parts of Texas were hit with massive storms from 2012-2016. Insurance Council of Texas.
 Texas insurers paid 10% fewer claims in the years big storms hit the state, later crying crisis.
TDI Data Call Report at p. 59.

Insurers refuse to reopen claims until attorneys are involved. Policyholders are being stiff-armed.
TDI Data Call Report at p. 33.
 Many policyholders were forced to seek help from attorneys after being denied by insurers.
TDI Data Call Report at p. 25.

The Texas homeowners insurance market has only become more competitive and less concentrated since 2012.
TDI Data Call Report at p. 71.
Insurers have dozens of Texas laws locked and loaded today if they are served with an unsupported suit.
Insurance fraud is punishable by up to 99 years in jail. Barratry is punished severely under both the criminal
and civil law. Insurers have special laws under the Insurance Code and DTPA that abate (i.e., suspend) cases if
notice was not sent, provide for an offer of settlement period, and punish groundless cases. Cases can be
dismissed as soon as they are filed if they have no basis in law or fact, and the defendant can recover their fees
and costs when they do so. Bad public adjusters are punished under the law.

If insurers are not using these laws, it demonstrates these are valid disputes that are worthy of adjudication.

TEXAS INSURANCE CODE: Sec. 541.153. FRIVOLOUS ACTION. Sec. 541.154. PRIOR
NOTICE OF ACTION. Sec. 541.155. ABATEMENT. Sec. 541.156. SETTLEMENT
OFFER. Sec. 541.159. LIMIT ON RECOVERY AFTER SETTLEMENT OFFER. Sec.
541.161. MEDIATION. Sec. 541.253. FRIVOLOUS ACTION. Sec. 542.055. RECEIPT
OF NOTICE OF CLAIM. Sec. 542.056(d). NOTICE OF ACCEPTANCE OR REJECTION OF
CLAIM. Sec. 542.059. EXTENSION OF DEADLINES. Sec. 701.051. DUTY TO REPORT.
Sec. 701.052. IMMUNITY FOR FURNISHING INFORMATION RELATING TO A
FRAUDULENT INSURANCE ACT. Sec. 701.101. INSURANCE FRAUD UNIT. Sec.
701.102. INVESTIGATION OF CERTAIN ACTS OF FRAUD. Sec. 701.103.
DISCIPLINARY ACTION; REPORT TO OTHER AGENCIES. Sec. 4102.103. CONTRACT
FOR SERVICES REQUIRED. Sec. 4102.158. CONFLICTS OF INTEREST PROHIBITED.
Sec. 4102.160. CERTAIN PAYMENTS PROHIBITED. Sec. 4102.164. ACCEPTANCE OF
REFERRAL PAYMENTS PROHIBITED.

TEXAS PENAL CODE: Sec. 35.02. INSURANCE FRAUD. Sec. 38.12. BARRATRY AND
SOLICITATION OF PROFESSIONAL EMPLOYMENT.

TEXAS GOVERNMENT CODE: Sec. 82.061. MISBEHAVIOR OR CONTEMPT. Sec.

82.062. DISBARMENT. Sec. 82.0651. CIVIL LIABILITY FOR PROHIBITED BARRATRY.

TEXAS RULES OF CIVIL PROCEDURE: Rule 13. EFFECT OF SIGNING OF PLEADINGS,

MOTIONS AND OTHER PAPERS; SANCTIONS. Rule 91a.1. MOTION AND GROUNDS.
Rule 91a.7. AWARD OF COSTS AND ATTORNEY FEES REQUIRED. Rule 166a.
SUMMARY JUDGMENT. Rule 167.2. SETTLEMENT OFFER. Rule 167.4. AWARDING
LITIGATION COSTS. Rule 169. EXPEDITED ACTIONS.

TEXAS CIVIL PRACTICE & REMEDIES CODE: Sec. 9.011. SIGNING OF PLEADINGS.
Sec. 9.012. VIOLATION; SANCTION. Sec. 10.001. SIGNING OF PLEADINGS AND
MOTIONS. Sec. 10.004. VIOLATION; SANCTION.

TEXAS BUSINESS & COMMERCE CODE: Sec. 17.46(b)(31). DECEPTIVE TRADE

PRACTICES UNLAWFUL. Sec. 17.50(c). RELIEF FOR CONSUMERS. Sec. 17.505.
NOTICE; INSPECTION. Sec. 17.5051. MEDIATION. Sec. 17.5052. OFFERS OF
SETTLEMENT. Sec. 17.506(d). DAMAGES: DEFENSES. Sec. 27.02. CERTAIN
INSURANCE CLAIMS FOR EXCESSIVE CHARGES.