Severe weather can be unpredictable with devastating impacts.
This past spring, large hail storms pummeled Texas causing billions of dollars in property damage. Last April's hail storm damage in San Antonio totaled more than $2 billion and the National Weather Service verified reports of hail reaching 4.5 inches in diameter.
A tornado outbreak across the Plains and the Ohio Valley in April produced more than 50 tornadoes and 500 strong winds and hail reports. In July, large hail and high winds swept across the Rockies hitting Colorado particularly hard.
Following these events the industry's response was immediate. Catastrophe teams and adjusters quickly moved in to help consumers jumpstart the rebuilding effort.
However, after a severe weather event, we often see both the best in people as neighbor helps neighbor, but we also see some crooked contractors, public adjusters and lawyers who seek to prey on the misfortune of others and profit from the insurance payouts.
While state and local officials have little tolerance for scams and attempt to crack down on the criminals, it can be difficult to stop those who abuse and misuse the insurance and legal system with excessive claims and litigation.
Hail lawsuit abuse in Texas
Over the past few years in Texas the trial bar has developed a legal strategy, perfected on Hurricane Ike claims, that makes the insurance claims process more complicated than it has to be — and ultimately more costly — by encouraging homeowners to unnecessarily sue their insurance companies. The Texas trial bar is now using this strategy after nearly every hail storm or other catastrophe to circumvent the appraisal process in order to receive mandatory attorney fees and interest penalties. Having severe weather damage your home or roof shouldn't amount to a “lawsuit lottery” ticket for attorneys.
The Texas Legislature attempted to pass regulations to curb hail lawsuit abuse in 2015, but the effort died in the final days of session. With the Texas Legislature meeting every other year, 2017 provides a window of opportunity to once again make the insurance industry's case in Austin for reform.
One of the key elements of reform will be to allow an insurer to assume an agent/adjustor/employee's liability, resulting in dismissal of the action against the agent/adjustor/employee. It's important to note that a common practice in these suits is for agents and adjusters to be sued along with the insurance company. Being sued personally can be devastating for an agent or adjuster, which highlights the importance of advancing these reforms.
The PCI and its industry partners will support and sponsor roofing contractor reform legislation in several states including Ohio, Montana and Wyoming in 2017. (Photo: iStock)
Roofing contractor reform
In addition to fighting the lawsuit abuse being experienced in Texas, the Property Casualty Insurers Association (PCI) and its industry partners will support and sponsor roofing contractor reform legislation in several states including Ohio, Montana and Wyoming in 2017. Insurers support these legislative reforms in order to protect customers from contractors going door to door after major storms, making big promises and then not making good on those promises.
The reforms will prevent the waiver of deductibles and require specified disclosures and a complete estimate of work to be provided. Homeowners will be given 72 hours to rescind the contract if necessary. PCI has supported enactment of similar legislation in other states.
Curbing assignment-of-benefits fraud
There is also a growing problem in several states where homeowners are convinced to sign over control of their insurance policies to third-party entities and crooked lawyers. They take advantage of homeowners in stressful situations who simply want their property repaired. As soon as the homeowners sign the assignment of benefits (AOB) documents, they lose control of their claims and any litigation associated with it.
The major influx of AOB claims and lawsuits is hurting Floridians and potentially driving insurance costs up for everyone. Many of these vendors inflate claims costs and when an insurance company doesn't immediately pay the claim, lawyers are quick to file a lawsuit. This leaves the homeowner suffering through unnecessary litigation. Assignment of benefits reforms are needed to protect Floridians from dishonest companies and individuals looking to take advantage of people in bleak situations.
In 2016, PCI worked with the Consumer Protection Coalition, which includes the Florida Chamber of Commerce, construction firms, realtors, bankers, insurance agents and consumer advocates, to put forth meaningful legislation in the House and Senate to curb AOB fraud and abuse that increase consumer costs. Additionally, the Florida Office of Insurance Regulation and Citizens Property Insurance Corp. released compelling analysis on the significance of AOB abuse and its impact on homeowners. However, the coalition-supported bills died in committee.
Continue to educate homeowners
In 2017, the effort will continue to support legislation that will stop this type of abuse and allow agents and insurers to be the direct line of communication with their policyholders, rather than third-party vendors who may fraudulently advise the policyholders or inflate costs.
It's important we continue to educate homeowners about the importance of not signing any documents related to storm damage repairs. We as an industry must work together to encourage residents to talk with their insurance company first.
Chris Hackett, JD, MBA, CPCU, is director of personal lines policy for the Property Casualty Insurers Assn. of America (PCI). He can be reached at 847-553-3812 or at email@example.com.