Self-proclaimed consumer protection group Texas Watch just launched a campaign urging consumers in Texas to convince the state Department of Insurance to drop its arbitration clauses in insurance disputes, reported Southeast Texas Record.
“Arbitration clauses force consumers with disputes into closed, costly, and biased proceedings without any appeal or public record. For years, TDI rightfully rejected policies with these dangerous clauses,” the group said in an email sent to supporters May 18.
“But, a new policy submitted to TDI could reverse this longstanding rule. The policy includes a binding arbitration clause, which would strip unaware consumers of their constitutional rights (to sue) in exchange for a discount.”
The consumer group believes that should the Department of Insurance finalize its arbitration clauses, policyholders would receive a discount that could convince them to waive their rights to file suit.
“Binding arbitration, as included in the policy, would allow insurance companies to buy Texans' rights for a few dollars a month,” the group said in a campaign ad. “Tell the Texas Department of Insurance that your rights are not for sale!”
Not everyone is convinced that the insurance industry should be held responsible for the addition of arbitration clauses.
“The insurance industry didn’t wake up on morning and say ‘hey, let’s add an arbitration provision to our policies,’” said Zelle LLP Partner and commercial insurance attorney Steve Badger. “Instead, the insurance industry is reacting to what is going on in the market place – and that is thousands of hail damage lawsuits.”
He asserted that the consumer group should instead turn their attention towards the “roofing contractors, public adjusters, and attorneys who have turned the first-party insurance market into their own little thiefdom.”
Badger mentioned the unnaturally high litigation rates in the state, which were caused by allegations that a number of contractors, adjusters, and attorneys are defrauding consumers claiming for storm damage.
“For the past hundred years, litigation rates were less than 2 percent in this area. The insurance industry never saw a need for mandatory arbitration. Now, with litigation rates approaching 40 percent after some hail events, it’s not surprising that some insurance carriers are looking for an alternative dispute resolution mechanism to stem the tidal wave of lawsuits,” Badger remarked.
