Texas homeowner hail lawsuit-restriction bill should worry collision repairers

May 1, 2015

A bill that would make it more difficult for property owners to sue insurers for unpaid claims and limit the amount they can collect has passed the Texas Senate, and collision repairers should be concerned with the implications should it pass and later be extended to auto insurance.

Senate Bill 1628 was inspired by a boom in property damage lawsuits over insurance claims following hailstorms in Texas, and collision repairers having their own battles with comprehensive insurers over hail might be able to relate to homeowner’s frustrations.

The rationale for supporters was similar to a Florida bill that would have blocked homeowners from assigning benefits— “ambulance-chasing” contractors and attorneys were swooping in after water damage incidents and inflating claims, according to media reports there.

Opponents agreed according to sources that litigation was getting a little out of hand in Texas, and the bill states that insurers have stopped offering coverage in some areas because of hail litigation. (Although you have to wonder if factors like not wanting to cover a place where hail is almost inevitable drove the exit more than litigation.)

But opponents said a bill that would also affect legitimately wronged policyholders wasn’t the answer, the newspaper said.

A companion version, House Bill 3646, was heard but left pending in the House Insurance committee April 22 and apparently not acted upon at the April 29 meeting.

What will happen next is unclear. A staffer for the committee said Friday that pending bills like that can be brought up at any committee meeting at the chairman’s discretion, without the public notice a bill needs the first time.

Typically, House bills less advanced in the legislative process will be altered to resemble the Senate’s version in situations like this where the other body has already debated and passed it, the staffer said.

Republican state Sens. Larry Taylor, who owns Truman Taylor Insurance Agency, co-wrote SB 1628 along with Van Taylor, director of Churchill Capital (it’s unclear if there’s any relation), and the bill has been attacked for being blatantly pro-insurer.

“Why are we looking at a bill that is pretty much strictly in favor of the insurance companies?” Roger Beasley Automotive Group owner David Stein said during a Senate committee hearing. “Where in this bill does it protect families? Where in this bill does it protect the small businesses, the medium or large businesses? Nowhere.”

But Larry Taylor has pointed out the interest of trial lawyers in attacking the bill, noting their connection to opposition group Texas Watch in a Wednesday op-ed that takes little responsibility for bad insurance practices. (Insurers and trial lawyers — there’s two well-regarded professions…)

Here’s some points in the bill, passed officially 21-10 on Friday that collision repairers should consider:

Dispute does not equal settlement

“A bona fide dispute as to whether an insurer is liable for a claim made under an insurance policy covering real property or improvements to real property does not constitute an unfair settlement practice under this section.”

We wonder if this could open the door to disputing virtually everything or stalling on claims as a matter of policy, knowing that doing so could be loopholed as a “bona fide dispute” instead of an “unfair settlement practice.”

You get less money

Only the unpaid amount of the claim collects 18 percent interest now, and you will now be taxed on it. Also, an attorney can’t share his or her attorney’s fees with you. (That practice, we’ll agree, does sound to court frivolous lawsuits.

Also, interest doesn’t start until 60 days after an insurer receives a supplemental claim, which means you won’t make as much in interest (and the insurer won’t pay as much) if your claim was justified.

You don’t have as much time

You can only bring “notice of a claim” for two years after the damage happened, and anything in an insurance policy restricting the “prompt notice” time further can also apply. So if you found damage down the road, you might be out of luck. Two years might be a stretch to discover damage that you can say for sure was tied to a specific event, but one wonders how low a time limit for notice could be inserted into a policy under this.

You need to submit a lot of paperwork

To even sue an insurer, your notice of action must be in compliance with a lot of paperwork before you can bring action. You’ll need to state specific damages and amounts, attorney’s fees, amount for which you’d settle the case, everyone connected with the claim, why the supplemental claim wasn’t mentioned earlier and anything else backing your case up. That’s different than the notice required in other insurance lawsuits.

EXPENSIVE HAIL DAMAGE MAY NOT BE OBVIOUS

Monday, April 20, 2015 -- The hail pounded a wide swath of our area. Now homeowners are cleaning up what's left.

Kathy, a homeowner, only has a few more scoops of debris to collect from her yard, but she's worried enough about her roof to get an inspector out to look for damage.

"I think we will call them and have them come out and it would ease my mind just to have it looked at," Kathy said.

Insurance agents say it's wise to have your roof checked even if you do not see any obvious damage from hail.

We're looking for damage to the shingles, the vents, (and) the matting of the shingles.

Agents say if there is damage, homeowners may only have a few months to file a claim depending on their insurance company, but it could be a year or more before a problem develops.

Another tip is be sure to research any company offering to do the work. 

One of the Presidents at Better Business Bureau, says homeowners should see someone who has been around and has a decent history.

"Even if they're not accredited with us but they've got a decent history, they resolve complaints (and) they take care of things. Also talk to your insurance company...they may have a vetted list that they've done on their own too," BBB explained.

In some cases, the damage caused by the storm will not be greater than a homeowner's deductible. In that case, do not be surprised if you have to pay for the repairs out of your own pocket.

DFW Metroplex 469-906-2600

Nationwide 855-631-ROOF

Choose a New Roof for Your Property

Style is an important factor when building your new home or renovating your existing property but it’s not the only factor. Cost, weight, and installation requirements commonly influence your selection. Here’s what you need to know:

Square vs. Square Foot

Let’s talk terminology. Roofing contractors don’t usually use the measure “square feet.” The term you usually hear is “squares”. A square is their basic unit of measurement—one square is 100 square feet in area, the equivalent of a 10-foot by 10-foot square. The roof of a typical two-story, 2,000-square-foot house with a gable roof will consist of less than 1,500 square feet of roofing area, or about fifteen squares.

Cost

Several thoughts will affect the cost of your roof. The price of the material is usually the starting point, but other factors also must be considered. One is the condition of the existing roof if you are remodeling a house—if old materials must be stripped off, and if the supporting structure needs repair, that will all cost money. The shape of the roof is another contributing factor. A gable roof with few or no breaks in its planes (like chimneys, vent pipes, or dormers) makes for a simple roofing job. A house with multiple chimneys, intersecting roof lines (the points of intersection are called valleys), turrets, skylights, or other elements will cost significantly more to roof.

Materials

Not every roofing material can be used on every roof. A flat roof or one with a low slope may demand a surface different from one with a steeper pitch. Materials like slate and tile are very heavy, so the structure of many homes is inadequate to carry the load. Consider the following options, then talk with your designer and get estimates for the job.

Asphalt Shingle. This is the most commonly used of all roof materials, probably because it’s the least expensive and requires a minimum of skill to install. It’s made of a fiberglass medium that’s been impregnated with asphalt and then given a surface of sand-like granules. Two basic configurations are sold: the standard single-thickness variety and thicker, laminated products. The standard type costs roughly half as much, but laminated shingles have an appealing textured appearance and last roughly half as long (typically 25 years or more, versus 15 years plus). Prices begin at about $50 a square, but depending upon the type of shingle chosen and the installation, can cost many times that.

How to Choose a New Roof 

Wood Shake.  Wood was the main choice for centuries, and it’s still a good option, though in some areas fire codes forbid its use. Usually made of cedar, redwood, or southern pine, shingles are sawn or split. They have a life expectancy in the 25-year range (like asphalt shingles) but cost an average of twice as much.

Metal.  Aluminum, steel, copper, copper-and-asphalt, and lead are all durable—and expensive—roofing surfaces. Lead and the copper/asphalt varieties are typically installed as shingles, but others are manufactured for seamed roofs consisting of vertical lengths of metal that are joined with solder. These roofs start at about $250 per square but often cost two or three times that.

Tile and Cement.  The half cylinders of tile roofing are common on Spanish Colonial and Mission styles; cement and some metal roofs imitate tile’s wavy effect. All are expensive, very durable, and tend to be very heavy.

Slate.  Slate is among the most durable of all roofing materials. Not all slate is the same—some comes from quarries in Vermont, some from Pennsylvania and other states—but the best of it will outlast the fasteners that hold it in place. Hundred-year-old slate, in fact, is often recycled for reinstallation, with the expectation it will last another century. But slate is expensive—typically prices start at about $800 a square—and very heavy.

Making the Choice

More often than not, if you are remodeling, the existing roof of your house will determine your choice of roofing material. Should you be considering other options, you’ll want to consider not only the cost but the color, texture, weight, and durability of your alternatives, as well as what traditionally has been used on houses like yours.

Installation Notes

Whatever your choice of roofing surface, you will probably need flashing. Flashing is a crucial part of all exterior work, both on the roof and siding. Flashing is metal (aluminum or copper, occasionally lead) or plastic film. It is applied in strips to areas where dissimilar materials adjoin, such as the intersection of the masonry chimney and the roofing shingles, where the siding abuts the window frames, and so on. Good flashing work is essential to keeping a structure watertight, as the most likely place for leakage to occur is where different materials meet.

Whatever the choice of roof materials, the coursing should be regular to the eye and parallel to roof edges. From one course to the next, the joints should be staggered to prevent leakage. Beware of a contractor who relies on tar for joints. Except with certain roofs where a membrane is used, tar is a lazy expedient that should not be used for a new roofing surface.

For most roofing, a material like building felt (nee: tar paper) is rolled on before the shingles are nailed in place. With cedar shakes, however, lengths of furring strips (sometimes called “cedar breathers”) will be laid across the roof in order to allow the roof to breathe. In snowy areas, a membrane called ice and water shield may also be laid.

Don't hesitate to contact us at:

Roofing Professionals of Texas Office: 469-906-2600 / Fax: 469-906-2601 9500 Ray White Rd. Ste. 200, Fort Worth, TX 76244  ww.roofingprotx. com

Mississippi Attorney General Jim Hood sues State Farm since they enriched itself through Katrina homeowner program

From ROGELIO V. SOLIS — AP SunHerald.com 

Attorney General Jim Hood is suing State Farm Fire & Casualty Co. over millions of dollars he claims the state lost because the insurance company "maliciously" denied Hurricane Katrina claims for wind losses while the federally funded Homeowners Assistance Program picked up the tab.

The lawsuit says: "State Farm benefited substantially and illicitly from HAP, because HAP grants ameliorated the financial pain to State Farm policyholders caused by State Farm's wrongful denial or underpayment of claims for wind damage under its homeowner policies.

"State Farm in effect converted a program designed to help Mississippians who were devastated financially by Katrina into a subsidy for itself."

State Farm had no immediate response to allegations outlined in the 50-page lawsuit, but in past cases brought by policyholders has denied any wrongdoing.

The lawsuit, filed in Hinds County Circuit Court, accuses State Farm of fraud, negligence and breach of contract. Hood is asking for a jury trial. The state is seeking unspecified compensation for its losses, plus punitive damages, court costs, interest and attorneys' fees. Although the lawsuit comes almost 10 years after Hurricane Katrina, no statute of limitations applies to the state under its constitution and state law.

Comparing payments

The HAP program was designed to compensate qualified homeowners for losses insurance did not cover. In some cases, the lawsuit says, State Farm delayed payments to policyholders so HAP grants would cover their losses.

The lawsuit says Mississippi paid 6,810 policyholders five times more than State Farm did for Katrina damage.

The state paid a total of $522 million to State Farm policyholders, the lawsuit says, or an average of $76,673.59 per policyholder. State Farm paid the same policyholders $98.7 million, or an average of $14,494.62 per policyholder.

The lawsuit details State Farm's efforts to minimize wind losses, first by characterizing Katrina as a "water" event. Tidal surge, excluded from coverage under private insurance policies, is covered by the National Flood Insurance Program. NFIP relied on State Farm and other insurers to adjust its claims.

State Farm coerced engineering firms to alter reports, then ceased ordering damage reports altogether, when engineers found wind covered under its policies caused homeowner losses, the lawsuit says. Those allegations are familiar to Coast residents, hundreds of whom sued State Farm and other insurers after Katrina over wind claims that were allegedly underpaid or denied.

AG investigates others

"We are aggressively investigating other insurance companies that may have unjustly enriched themselves at the expense of the HAP program," Jan Schaefer, spokeswoman for the attorney general's office, wrote in an email in response to questions from the Sun Herald. "We haven't ruled out future lawsuits against those other insurers.

"We are filing this suit against State Farm because we now have proven evidence of its fraud and because, as the nation's largest property insurance company, its activities harmed Mississippi more than any other insurer."

The proven evidence to which Schaefer referred came in a whistle-blower lawsuit that two sisters, insurance adjusters Cori and Kerri Rigsby, filed against State Farm. In the federal lawsuit, a jury in April 2013 found State Farm defrauded NFIP by attributing wind damage to tidal surge. State Farm was ordered to pay $750,000 in damages -- triple the amount of the false flood claim payment -- to NFIP, with 15 percent going to the Rigsbys for pursuing the claim. The case is on appeal.

"In the wake of that verdict," Schaefer said, "we spent considerable time closely evaluating the impact of this activity on the state through the HAP program."

Attorneys representing the state include the Rigsbys' lawyers, August Matteis of Washington, D.C., and Maison Heidelberg of Jackson, along with former assistant attorney general Ben Bryant of Balch & Bingham in Jackson. Mary Jo Woods, an assistant attorney general involved in litigation against State Farm after the hurricane, signed the complaint for the state.

Read more here: http://www.sunherald.com/2015/04/21/6187338_mississippi-ag-files-suit-against.html?rh=1#storylink=cpy

Roofing Professionals of Texas

Roofing Deductible Assistance Programs: Diagram of a Scheme Issues, Challenges, and Recommendations

Please be advised that this is an excerpt from 

Dallas BBB's report on Deductible Fraud from August 2012

 Purpose

On June 13, 2012, North Texas residents were pelted by a hailstorm which is estimated to eventually cost insurers a record $2 billion in insured losses. The previous hail damage record within the State of Texas was $1.1 billion caused by the 1995 Fort Worth Mayfest Storm.

For months after the 2012 storm, residents in the hardest hit areas found themselves pelted once more by more roofing contractor advertising than they had ever seen.

Each ad had its own unique leading pitch.  Some promoted their “66 years of experience.” Others promoted their “lifetime warranty.”  A riskier few skirted the line of insurance fraud by touting “Free Roofs-Call For Details” and “Ask Us How Your Deductible is Covered.”

The practice is called “deductible assistance” by some and “deductible fraud” by others. Depending on who you ask, the practice is illegal or, at best, deceptive. This point is highly debated within the roofing industry and rarely complained about by the consumers that might financially benefit in the short term.

It is believed that soaring homeowner’s insurance deductibles may play a significant role in the popularity and prevalence of such programs in recent years. According to the Wall Street Journal, Texas homeowners pay the highest insurance premiums in the country, and in the last few years, wind and hail damage deductible have shown a dramatic increase as well.

This increase came with a deductible model change which switched from monetary-based deductibles to percentage-based deductibles. Specifically, many homeowners recently found that their wind and hail deductibles which may have been as low as $500 was replaced with a new deductible between 1% and 5% of the value of their home. On a $250,000 home, that could account for a massive increase.

As it is one of the BBB’s primary missions to set standards which promote marketplace trust, this investigation’s purpose is to understand the current functioning model of deductible assistance programs used by roofing contractors in North Texas, as well as identify the regulatory challenges and criticisms.

Defining the Scheme

Roofing Deductible

For the purpose of this investigation, the term “deductible” refers to the agreement in which an insured home owner consents to share the financial responsibility of a contractually-agreed portion of a claimed loss. In the State of Texas, this amount is often expressed as a percentage of the value of the home.

For example, a 1% roof deductible on a $150,000 home would be $1,500. Therefore, the consumer would share the cost of a roof loss for an amount of $1,500.

The defined principle of an “insurance deductible” is that, by sharing the cost with the insured, insurers are able to reduce their overhead costs, which could result in lower monthly fees, or premiums, charged to their customers.

The Sales Advantage

For decades, some roofers have offered deductible assistance or reimbursement programs in an attempt to gain customers from competitors that would otherwise collect the owed deductible.

These programs are offered to the detriment of both insurers that are over-charged, as described below, and competitors that feel the act of covering deductibles is unethical or illegal.

Veiled Insurance Fraud?

If a roofer charges a customer $8,500 and that customer, in return, bills their insurance company $10,000 with a fake receipt, that consumer can end up in hot water for insurance fraud. Simply put, the insurance company is over-charged by the customer.

Noting the above scenario, the average consumer may have a general understanding of overt insurance fraud (i.e. the consumer financially gained an advantage by lying to their insurance company), and they may even agree that the fraud is unethical. However, deductible assistance programs are frequently convoluted enough to confuse even savvy consumers that participate in a scheme which usually results in a loss to the insurer, which is identical to the overt insurance fraud described above.

Advertising Reimbursement Scheme

Although there are numerous variations of deductible assistance programs, the most common reported in the Dallas area is the “advertising reimbursement” model.

In the advertising reimbursement model, a roofing contractor will bill the consumer for the full replacement value cost (RVC) of the roof, the maximum amount that the insurance company has agreed to pay, regardless of the actual replacement cost. The roofer will then adjust the final price in an amount equivalent to the customer’s deductible by using a “change order form.”  In return, the customer agrees to advertise for the roofing contractor by displaying a sign in their front yard.

In the end, the customer doesn’t have to come out of pocket to pay their deductible, and the insurer will receive a bill which is higher than the actual cost to replace the roof. In short, the insurer foots the deductible costs.

Purveyors of this model defend that the advertising agreement constitutes a second agreement and side-steps issues pertaining to insurance fraud. Though, in reality, the insurer is overcharged in the same spirit as a consumer that counterfeits a receipt. The only real difference is that, in the advertising reimbursement model, a consumer displays a $1 sign in their yard.

Legal Considerations

The most frequent argument expressed by those that oppose deductible assistance programs is that the practice appears to be illegal.

Section 27.02 of Texas’ Business & Commerce Code states, in part, that:

(a)  A person who sells goods or services commits an offense if:

(1)   the person advertises or promises to provide the good or service and to pay:

(A)   all or part of any applicable insurance deductible; or

(B)   a rebate in an amount equal to all or part of any applicable insurance deductible;

However, in 1990, Texas Attorney General Jim Maddox provided an opinion which differentiates between a person advertising that they will “pay a deductible” and one who advertises that they will “waive a deductible.”

Specifically, the opinion indicated that “declining to seek payment of all or part of the deductible is technically not the same as “pay[ing] all or part of any applicable insurance deductible.”

The opinion does indicate that “waiving” a deductible is the type of transaction that comes under the spirit of the section and accomplishes the same as rebating the amount of the deductible.

Nevertheless, a “technical” loophole exists. Roofers cannot advertise that they will pay or rebate an insured’s deductible, but waiving a deductible is not an offense under section 27.02.

Victims

Identifying likely victims is an important step when considering the negative impact of a particular business model on the marketplace.

It would be short-sighted to believe that insurance companies are the only true victims in deductible fraud schemes. The insurers may have the most immediate impact. However, in a simplified context, it is easy to understand that higher payout costs are eventually passed right back to the insured through increased premiums.

Additionally, there are still roofing contractors that struggle to compete in a marketplace full of deductible assistance programs. So, those contractors that refuse to offer such deductible programs, based on the spirit of the law, can find themselves to be victims of the model as well.

Recommendation

Although the BBB has been unable to find any recent regulatory action taken within the State of Texas against perpetrators of deductible assistance programs, the BBB recommends that roofing contractors and consumers alike exercise caution in participating in such programs.

These programs walk along a very fuzzy line of insurance fraud, and neither roofer nor consumer would want to be held liable for such serious allegations.