I received this information today from Keith Strama of Beatty, Bangle and Strama, Attorneys at Law. Keith is the chief lobbyist for the Texas Surplus Lines Association. The information is from the Texans For Lawsuit Reform Newsletter. As I previously discussed, I have offered the services of the NAIIA if we are needed to walk the halls of the Capital in Austin to influence our legislators. Our national NAIIA officers have also volunteered their services if called upon. Please click on the blue lettering below to review this information and let me know if you have any questions.

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Great news from NAPSLO

NAPSLO is happy to deliver great news regarding H.R. 2901, the Flood Insurance Market Parity and Modernization Act, sponsored by Rep. Dennis Ross (R-FL) and Rep. Patrick Murphy (D-FL). This private flood legislation went through mark-up today in the House Financial Services Committee, and the revised bill passed with a 53-0 vote. Discussion on the bill was very positive and Committee Chairman Jeb Hensarling (R-TX), Ranking Member Maxine Waters (D-CA), Insurance Subcommittee Chairman Blaine Luetkemeyer (R-MO), Ranking Member of the Insurance Subcommittee Emanuel Cleaver (D-MO) and others gave their strong support. 

 

NAPSLO was pleased to be asked to testify in support of this legislation on behalf of the surplus lines industry in January. Since then we have led an effort, in collaboration with our industry partners, to present a unified voice to members of Congress as we educate to ensure that surplus lines insurers are eligible to offer private market solutions to consumers in need of unique and complex flood risk coverage. As always we remain vigilant with our top priority of ensuring legislation allows our market to participate and provide high-quality, financially strong coverage while maintaining our freedom from rate and form regulation. 

 

It is a great day for NAPSLO members and a strong endorsement of our advocacy and legislative strategy on your behalf.  For additional information about H.R. 2901 and background on this important issue, visit the NAPSLO website.  Contact NAPSLO: Email us at info@napslo.org or call 816.741.3910

 

84th Texas Legislative Session

EFFECTIVE JANUARY 1, 2016

SB 900 (L. Taylor/G. Bonnen) - TWIA reform, After several sessions of frustration, the Gulf Coast ("Coastal") interests finally succeeded in reforming TWIA in a manner that, while not completely satisfying their "wish list," produced very satisfying results for them. The admitted insurance industry whittled away at the many pro-Coastal provisions in the originally proposed version, but they were unable to block final passage of a somewhat watered-down version.

The following are among the key changes made to TWIA's operations by SB 900:

TWIA will remain "TWIA," as the originally-proposed name change to the "Texas Coastal Insurance Association" was eventually dropped from the bill.

If found to be in the best interest of the public and TWIA policyholders, the Commissioner is authorized, but not required (as originally proposed), to appoint an MGA or TPA as a contract administrator to manage TWIA.

The TWIA board makeup will now be three Coastal representatives (one each from three CAT geographical "zones," one of whom must be an independent P&C agent); three inland representatives (who must reside more than 100 miles from the Coast); and three (instead of the previous four) insurance industry representatives, all of whom will still be appointed by the Commissioner (instead of the Governor, as originally proposed).

The finally-passed version does not contain the original provision requiring a "primary insurer" having primary coverage for fire loss to administer and process all loss claims, including the coverage provided under a TWIA policy.

Excess loss funding is restructured with a new combination of premium, CAT Trust Fund assets, TWIA member assessments and public securities backed by member assessments and TWIA policyholder surcharges.

TWIA is required to maintain aggregate loss funding resources to the one-in-100 year level, and authorizes, but does not mandate, that TWIA annually purchase reinsurance to achieve that aggregate lost funding requirement.

A voluntary "take out" provision of the bill permits insurers to "take out" TWIA policy coverages only if they offer "generally comparable coverage and premiums" as determined by Commissioner Rules, and premiums may not exceed 115% of TWIA policy premiums. IIAT was successful in adding a modified version of its "expirations" proposal to provide that an insurer that "takes out" a TWIA policy "must offer the policy through the insurance agent of record for the association policyholder under the prevailing terms, conditions, and commissions of the agent [and]... shall allow the policyholder's agent to enter into a limited service agreement with the insurer for the agent to continue to provide services to the policyholder."

An adopted House floor amendments of possible special interest to surplus lines insurers provides that "an insurer engaged in the business of property and casualty insurance in this state may elect to participate in the depopulation program" provided by the bill. Thus, SB 900 appears to authorize surplus lines insurers to participate in the program. However, Representative Ken Sheets (R-Dallas) was unable to overcome admitted market opposition to a specific provision authorizing surplus lines insurers to participate and mandating a change by the Commissioner in the "diligent effort/unable to obtain" rule to eliminate that barrier to their participation (as he had provided for in his HB 3204 "stand-alone" de-population bill). This apparent conflict or ambiguity in SB 900, and the possible elimination of the "diligent effort/unable to obtain" barrier to surplus lines participation, may be addressed by the Commissioner in future as he adopts new rules to implement the bill.

 

MAJOR BILL WHICH DID NOT PASS

SB 1628 (Larry Taylor/Smithee) - first party property claim ("hail") reform - DIED
The failure to pass SB 1628 was the most significant disappointment of the Session. Its purpose was to address the abuses that have occurred in storm-related (principally hail damage) property loss claims all across the state since 2012, as plaintiff attorneys began to apply the litigation template developed during the Hurricane Ike/TWIA claims debacle. It has been reported that the percentage of hail-related claims being litigated following the Rio Grande Valley hail losses have soared to as high as 30-35% of all claims, with a similar explosion in the amount of losses being asserted.

SB 1628 suffered a surprising sudden death in the closing week of the Session when it failed to reach the House Floor for consideration. Four days prior to the House rules deadline for floor consideration of Senate-passed bills, it was scheduled to be heard on Memorial Day (Monday), the day immediately prior to the deadline. That meant that it would almost certainly get a vote by the full House, where previous plaintiff lawyer/business legislative fights indicated overwhelming support for its passage. Then, when the House Calendar for Memorial Day was released on Sunday, SB 1628 had disappeared from the Calendar, never to return.

The following were the highlights of the bill as it passed the Senate: 1) a mechanism by which the insurer could elect to assume the liability of any of its agents or employees, in order to block plaintiff attorneys from suing "straw man" defendants, such as adjusters, solely for the purpose of "forum shopping" their cases; 2) mechanisms to require claimants to notify insurers of their claims and provide them an opportunity to resolve any claim prior to filing suit; 3) provisions limiting the application of the 18% interest penalty for violations of the "unfair claims settlement practices" and "prompt payment of claims" statutes and prohibiting an attorney from sharing attorney's fees with claimants; 4) a provision that the failure of an insured to provide the notice of a claim to an insurer, specifically including an "eligible surplus lines insurer" (a TSLA amendment), by the 2nd anniversary of the date of the "occurrence" of the damage to or loss of the property (rather than its "discovery") is an absolute bar to recovery; 5) authorization for insurers (including surplus lines insurers) to utilize a mandatory and binding appraisal mechanism to resolve claim disputes outside of the courthouse; and 6) a number of provisions intended to prevent public adjusters from acting as agents or "runners" and soliciting claims litigation for attorneys

Following lengthy negotiations with plaintiff lawyer, consumer, and even some business groups, Rep. Smithee's House Committee Substitute for the bill moderated several of the provisions of the Senate-passed bill and substantially limited the "appraisal-based resolution" process provision. While the Smithee substitute bill passed the House Insurance Committee on a straight partisan vote of 6-3, it never made it to a vote of the full House.

The failure of SB 1628 is apparently the result of several factors: 1) the plaintiff lawyers delay tactics ultimately proved surprisingly successful; 2) the House Democratic Caucus, close allies of the plaintiff attorneys, threatened to delay or prevent consideration of many pending bills and to "block vote" its opposition to Senator Taylor's SB 900 TWIA bill, and thus kill it, unless he abandoned SB 1628; 3) it appeared that at least some Coastal House members who would otherwise support SB 1628 also "traded" their votes for passage of the Coastal-friendly TWIA bill; 4) even the more moderate Smithee substitute version of the bill was still opposed by important business representatives, who viewed it as "overreaching" and too favorable to the insurance industry, and, at the same time, by some of the insurance industry representatives, who viewed it as too weak due to the "watered-down" appraisal-based resolution mechanism.

Ultimately, the delay in getting the bill quickly out of the House Insurance Committee and onto the House floor for a vote gave the plaintiff lawyers and their Democratic allies the opportunity they needed to administer the procedural coup-de-grace to SB 1628. It was ironic that, as SB 1628 was dying in the closing days of the Session, Texans suffered another huge round of property losses from the Memorial Day Weekend floods, losses that promise yet another round of abusive and unnecessarily costly property loss claim litigation.