Texas Insurance Company Wanted To Stop You From Suing Them
Texas Farm Bureau lobbied the Texas Department of Insurance to take away a customer’s right to sue their insurance company – they have since dropped their proposal.
Insurance companies are in the business of collecting premiums and then paying claims only when they must. The less an insurance company pays in claims, the more it keeps for itself. So, insurance companies are always looking for ways to minimize what they pay in claims. But this time, one company tried to go too far.
Texas Farm Bureau, the largest Texas-based insurer, introduced a proposal to the Texas Department of Insurance (TDI) that would take away a homeowner’s right to sue his or her insurance company when the insurance company unreasonably delayed or denied a claim. In exchange for a modest discount in premiums, the Texas Farm Bureau wanted the TDI to allow it to require that policyholders waive their constitutional right to trial and instead resolve any such dispute through binding arbitration.
When a dispute arises such as one involving an insurance claim, Texas citizens have a constitutional right to file a lawsuit and have the dispute decided by a jury. After a dispute arises, the parties can agree to resolve their dispute in other ways including through arbitration or mediation. Arbitration can be an acceptable form of dispute resolution when fully informed parties agree through their own free will to arbitrate after a dispute arises. At that point the parties can agree to the terms of an arbitration, how it will be conducted, how the arbitrator – the decision maker – will be chosen, and any right to appeal the arbitrator’s decision.
What is problematic is when a more powerful party (an insurance company) requires that a less powerful party (an individual) give up a constitutionally guaranteed right in order to obtain insurance and before a dispute arises. It begs the question – “Why is an insurance company so interested in forcing arbitration on the policyholder.” Unfortunately, arbitration can put the individual at a disadvantage including by removing some of the protections consumers have in the legal system.
Consumer Rights Groups Said ‘NO’
Consumer rights groups such as Texas Watch opposed this proposal. Reasons for opposition included the proposal’s failure to adequately protect consumers and its requirement that consumers sign away their constitutional right to a trial when an insurance company unreasonably delays or denies a valid claim.
According to the Texas Tribune, opponents to the proposal also “….argued that approving mandatory arbitration plans would stack the deck against consumers, who may not understand the consequences of giving up their right to sue.”
After push back from these consumer groups and consumers on this proposal, Texas Farm Bureau dropped its proposal to the Texas Department of Insurance. This was a win for consumers across the state.
Upon learning of Texas Farm Bureau’s withdraw of the its proposal, the executive director of Texas Watch, Ware Wendell, declared “Texas homeowners will retain their constitutional rights and not fall prey to a flawed process that often rewards the powerful at the expense of justice.”
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Michael S Callahan is an attorney and founder of The Callahan Law Firm. He focuses his practice on representing individuals and families in personal injury cases involving motor vehicle and truck accidents, workplace accidents and defective products. With over 25 years of experience, he is dedicated to fighting on behalf of people whose lives have been forever altered by the negligence and carelessness of corporations and individuals. Originally trained as a mechanical engineer, Michael has been practicing law and fighting for justice for those who need it most since 1994. He is board-certified in Personal Injury Trial Law by the Texas Board of Legal Specialization and a member of various esteemed legal associations. Outside of work, Michael enjoys spending quality time with his family, outdoor activities, and continually striving to improve as a trial lawyer and human being.
