Legal disputes between insurance companies and homeowners may soon be handled through mediation and arbitration, with no access to a judge or jury.
A Texas insurance company wants to offer you discounted rates on your homeowner’s policy, but beware: This deal comes with a different kind of price.
The Texas Farm Bureau Insurance Companies have requested the Texas Department of Insurance approve an endorsement to all homeowner policies. If approved, it would have significant effect on the insured’s rights.
The proposed endorsement would provide for a discount in homeowner insurance premiums in exchange for the insured’s concession to give up his or her right to access to the courts and a trial by jury in a legal dispute with the insurance company.
Instead of suing the insurance company to settle a dispute, the insured would agree to mediation. If that is not successful, the dispute would be resolved through binding arbitration, using an arbitrator selected by the insurance company.
In the proposed endorsement, both the mediation and arbitration would be handled by Conflict Solutions of Texas, the company selected by the insurance company, which would pay for both the mediation and arbitration. Additionally, under the proposed endorsement, unless expanded by the arbitrator, discovery would be restricted to certain kinds of documents.
The amount of the discount in premiums in exchange for the trade of the right to trial by jury is anticipated to be 10-25 percent and would vary county by county.
According to the Texas Farm Bureau, the counties that would receive a 10-25 percent discount are Brooks, Cameron, Duval, Hidalgo, Jim Hogg, Jim Wells, Kenedy, Kleberg, Nueces, Starr, Webb, Willacy, Zavala and Zapata. The counties that would receive a 10 percent discount are Aransas, Brazoria, Calhoun, Chambers, Galveston, Jefferson, Matagorda, Refugio and San Patricio.
Although this sort of endorsement has been available in commercial policies, this is the first time such an endorsement has been sought with respect to personal policy lines.
As a whole, consumer groups appear against the proposal. In a letter to the Texas Department of Insurance, Alex Winslow of Texas Watch wrote that the endorsement would force insureds “out of the legal process and into a private kangaroo court, where the insurance company has picked the arbitrator. They’ve paid the arbitrator. They’ve decided where the arbitration is going to happen. They’ve set all of the rules to favor themselves over customers.”
The impetus for the request arose from the substantial amounts of litigation faced by insurance companies as a result of recent windstorm and hailstorm damage claims arising from the storms in December 2015.
“We feel that the current litigation environment around severe storm events has created a situation where we need to offer an arbitration alternative in some areas to preserve our ability to write insurance,” stated Texas Farm Bureau Executive Vice President Mike Gerik.
If approved, other insurance companies will likely jump on the bandwagon and make similar requests. Additionally, it is quite possible that this sort of endorsement would be requested for other kinds of insurance, such as auto policies.
Andrew Greenwell is a lawyer with a civil trial and appellate practice with a focus on commercial litigation. He was listed a Super Lawyer in 2011-12 and 2014-15, and a Best Lawyers since 2005.
