Texas Supreme Court Hurts Policyholders (Again) 

In a much-anticipated decision, the Texas Supreme Court declined to help policyholders who have covered claims. The decision, Safeco v. Rodriguez, was pretty straightforward – statutes in Texas allow for the recovery of attorney’s fees in policyholder disputes. This is a good rule because it incentivizes attorneys to work on these cases, even if the matter is small. It has been a long-standing rule in Texas, and many other jurisdictions, that when insurance companies fail to timely pay for covered benefits, policyholders can at least have their attorney’s fees covered if they successfully challenge the insurance company’s position.

To be sure, attorney’s fees are recoverable in disputes about insurance coverage and scope of damage under various provisions: the Civil Practice and Remedies Code (Sections 37 and 38), Texas Insurance Code Chapter 541, Texas Insurance Code Chapter 542, as well as the Deceptive Trade Practice Act. The high court wiped all of those out while overplaying the effect of an appraisal award – a decision that runs in line with prior poor Texas Supreme Court decisions on appraisal dating back to 2008.

We filed a brief in the case – called an amicus brief, which was featured in our January 2024 newsletter as well, based on a current Texas case we have. In our case, our client had invoked the appraisal clause prior to hiring an attorney. In fact, they did so to avoid hiring an attorney. The appraisal provision works to determine the amount of damage in a loss. The appraisal clause is limited to that analysis leaving other issues for courts to decide: like if there were damages outside the contract, or if the insurance company failed to timely pay, attorney’s fees, if the insurance company acted in bad faith, etc. The cost of appraisal is born by the policyholder and costs on average about $5,000 per appraisal (because you have to hire an appraiser and usually an umpire). Most insureds do not have that kind of money laying around to participate. But in the case we presented to the Texas Supreme Court, our client did. They participated in appraisal with their insurance company, received an award for a new roof (amongst other damages), but then their insurance company, Liberty Mutual, still refused to pay the appraisal award. So our clients were forced to hire us. We then provided a notice and demand – it was rejected. We had to file suit – it was met with rejection. Then, over 500 days from the date the award was given, Liberty Mutual decided to pay the award, but failed to pay any attorney’s fees. And now, Liberty Mutual has filed a motion with the Court asking it to dismiss our case, simply because they paid the appraisal award at some point, even though it was more than 2 years later. We’re still waiting for a decision on our case, but the Texas Supreme Court’s ruling in Safeco makes it possible for insurance companies to play these sorts of games.

So, that leaves us with the big question: what can and should you do about this? Our simple answer: talk to your representatives about amending Texas Insurance Code Section 542A.007 to remove the phrase “is the lessor of.” You may wonder why a simple phrase like this matters or how these four words can alter the state of what you’re able to recover. But that’s what the Texas Supreme Court focused on. These four words gave the Texas Supreme Court a way to completely eradicate attorney’s fees in cases where Texas homeowners file a claim with their insurance company, at some point go to appraisal, and at some unknown point pay the award. If an insurance company does that, and pays some interest, then the Rodriguez decision gives them an out for any other damages.

We’re still taking these cases because we’re committed to helping homeowners and business owners across this great State. But we need you to help get in the fight too. Call your state representative and senator and demand that they change the statute back to its intended meaning. In the meantime, if you ever need us for a fire loss, wind loss, hail loss, vandalism claim, pipe burst, etc…, please don’t hesitate to contact us. We’ve been helping homeowners and business owners since 2006 and are not going to stop now. And the same rules of insurance that apply to homeowners and property claims, apply to other claims as well, whether it’s a long-term care denial or some other type of insurance.

We serve residents living all throughout Texas; call our office today at (888) 989-2889.