Texas State House Bill 1774 is call the Blue Tarp Bill because opponents say passage will lead to neighborhoods and cities with damaged roofs covered by blue tarps after a storm. The tarps become a common and long-term sight when insurance companies don’t pay quickly for repairs.
In an attempt to slow the steady increase of lawsuits brought by consumers against insurance companies for weather damage — mostly from hail — the Texas Legislature sent House Bill 1774, known as the Blue Tarp Bill, to Gov. Greg Abbot on May 19. A similar Senate bill never made it out of committee, but the Senate did vote its approval of the Blue Tarp Bill just before the close of the state’s 85th legislative session in May. The bill is not expected to be vetoed by the governor and will go into effect Sept. 1.
Consumer advocates oppose the bill on the grounds it will discourage insurance companies from paying claims for storm damage on a timely and fair basis. They call it the Blue Tarp Bill because they say passage will lead to neighborhoods and cities with damaged roofs covered by blue tarps after a storm. The tarps become a common and long-term sight when insurance companies don’t pay quickly for repairs.
Proponents of these bills, which include insurance companies and tort reform advocates, prefer to call them Hailstorm Lawsuit Abuse bills. They point to the 1,400 percent increase in lawsuits filed against insurance companies and agencies since 2012. That’s 36,000 such lawsuits against insurance companies for slow or no pay on storm damages. If not protected against these lawsuits, advocates of the bills say insurance companies will have to stop writing hailstorm damage policies in storm-prevalent areas of the state.
HB 1774 amends the existing Insurance Code. Among other things, it requires attorneys to file a notice letter with an insurance company more than 60 days prior to a lawsuit being filed. The letter must identify the “acts and omissions” that justify the claim as well as the amount of damages suffered.
If a lawsuit is brought without such a notice, it will be abated or delayed to allow for the notice to be given. The notice provision allows inspection of the property and provides additional time for insurance companies to avoid litigation by settling the dispute, claim proponents. Opponents say that leads to further delays in paying damages, frustrating insurance policy holders into lower settlements or no settlements at all.
HB 1774 also reduces interest on unpaid claims for which the insurance company is found liable from 18 percent to effectively 8 percent.
The house bill also takes aim against the source of the lawsuits. Lawyers are frequently informed of potential lawsuits by roofers. Under the bill, insurance companies can defend against attorney’s fees if they can establish that the lawyer obtained the case through violation of the barratry (ambulance chasing) laws. This would prevent lawyers from soliciting cases through roofers and others or from paying them fees for referring such cases.
Though tied to hailstorms, the bill is broader than that and includes claims relating to earthquakes and tremors, wildfire, flooding, tornados, lightning, and wind, snow, and rain storms. HB 1774 does not apply to the Texas Windstorm Insurance Association, which is expressly excluded from its provision.
