Hurricane Harvey Tests New Tort Litigation Limits

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By Steven M. Sellers

Personal injury and property damage claims of hurricane-weary Texans could face a fresh legal obstacle Sept. 1 when a new state law will place limits on weather-related tort suits.

The tort overhaul law—which mandates notice to an insurer before a suit is filed and limits attorneys’ fees—is getting new scrutiny in light of Harvey’s wreckage.

Plaintiffs’ attorney Craig Eiland, of the Craig Eiland law firm in Galveston, Tex., urged policyholders in Texas to file insurance claims before the new law takes effect on Friday in order to ensure they get the full legal protections of current law if a coverage dispute results later on.

“If an insured finds it necessary to eventually file suit on their insurance claim, one of the deterrents and one of the elements of damages will be reduced after the new law takes effect on September 1,” Eiland told Bloomberg BNA Aug. 29. “Therefore, if you know you have a claim, there is no reason to wait, coupled with no benefit.”

But supporters of the bill, signed into law by Texas Governor Greg Abbot May 26, said the new law won’t impact Hurricane Harvey-related claims, or have much of an impact on litigation.

“Lawsuits are the exception, not the rule, and the the vast majority of Texans will resolve claims without needing to file a lawsuit,” Texans for Lawsuit Reform, a tort overhaul group that strongly supported the law, said in an Aug. 28 statement.

Law Comes in Wake of More Suits

The bill’s backers assert the new limits are necessary to stem a 1,400 percent increase in weather-related litigation against insurance companies since 2012.

“Opportunistic lawyers have been using extreme weather events as a pretext for exaggerating damages, suing innocent parties, and failing to give notice to insurers before filing lawsuits,” according to a bill analysis by the Texas legislature summarizing arguments in support of the bill.

Eiland questioned that characterization.

“There had been an increase in claims turning into lawsuits, but still significantly less than 5 percent of all claims,” and that may be attributable to stronger storms, changes in claims adjustment, and other factors, Eiland said.

Eiland, a former Texas legislator, represents policyholders in litigation against insurance companies.

The law’s reach includes damage and injury caused by earthquakes, wildfires, floods, tornadoes, lightning, hurricanes, hail, wind, snow, and rain.

Losses from Harvey may exceed $30 billion, and less than a third of Texas residents are adequately insured, according to an Aug. 28 Bloomberg analysis.

Insurers have something to gain under H.B. 1774, Eiland said.

Violations of Texas insurance laws by insurers are deterred under current law because “one of the elements of damages is 18 percent interest on what should have been paid,” Eiland said in an email, but the interest rate drops to 10 percent under the new law.

That gives policyholders a reduced recovery if they file a suit “and insurance companies will have a reduced deterrent to pay fully and quickly,” Eisland said.

‘Abusive’ Weather-Event Cases

Supporters say concerns over the law are overblown, and that the new requirements, which include a 60-day pre-suit notice window to insurers, are necessary to deflect a “growing trend of abusive severe weather event lawsuits.”

They also contend the law won’t hinder insurance claims arising from the cyclone.

“The primary purpose of the new statute is to require written notice of a dispute before a lawsuit is filed,” not the insurance claims process, Texans for Lawsuit Reform, the tort overhaul group said in its Aug. 28 statement.

Damages specified in the pre-suit notice to an insurer also guide the award of attorney’s fees in litigation, Lucy Nashed, a spokeswoman for Texans for Lawsuit Reform, said Aug. 29.

“At the end of the day, if you recover at least 80 percent of the amount claimed in the notice, you get 100 percent of your attorneys’ fees,” Nashed said.

Flood, Wind Claims

Not all hurricane-related property damage claims are controlled by the law, blunting its potential impact.

The law specifically exempts any action against the Texas Windstorm Insurance Association, a program that provides wind damage coverage for Texas coastal communities.

And flood damage claims—potentially the largest proportion of claims for the nearly two feet of rain dropped by Harvey—are governed by the National Flood Insurance Program, a federal program unaffected by the Texas law.

Many homeowners in flood-prone areas, however, lack any form of flood insurance, according to a February study by Washington, D.C.-based Resources for the Future, a nonpartisan research organization that studies natural resources and environmental policies.

Much of the Houston area also lies outside Special Flood Hazard Zones eligible for the federal flood insurance program, leaving many homeowners to cope with storm damage on their own.

As for types of claims expected to arise from Hurricane Harvey, Eiland said, “We will see wind and flood claims combined and a significant number of business interruption claims.” He didn’t foresee significant personal injury or mold claims from the storm.

A request for comment sent to Governor Abbott’s office Aug. 29 didn’t receive a response.

To contact the reporter on this story: Steven M. Sellers in Washington at

To contact the editor responsible for this story: Steven Patrick at

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