The controversial deal Texas Farm Bureau is proposing continues to draw ire from consumer advocates, but once fully approved the insurer’s mandatory and binding arbitration clauses could set a dangerous precedent for all insurers to follow.
The insurer asked Texas state insurance commissioner David Mattax to approve the clauses last week, reasoning that the arrangement will help cut down lawsuits against the company, particularly from homeowners who leave near the coast where strong winds generate a lot of claims.
"We've presented a solid case for optional and affordable choices in response to litigation costs in some parts of the state that cannot be sustained," a spokesperson for Texas Farm Bureau said. "Clearly arbitration is a viable and even desirable choice that has been welcomed by the courts and the Legislature to address similar issues."
"What the Farm Bureau is asking ... is to take disputes about insurance claims out of court, and push them into private, secret, arbitration proceedings where the industry has rigged the rules of the game," explained Texas Watch executive director Alex Winslow. "This is just the latest in a long line of efforts to make it harder for people to get what they're owed under the terms of their policy."
A feature recently published on the
Houston Chronicle believes that should Texas Farm Bureau’s clause be approved, it could open the floodgates to other insurers who would seek to pass similar clauses as well.
"It's 100 percent sure it will spread to every insurance contract. I don't think there is any reason why it would not," said Joanne Doroshow, executive director of the Center for Justice & Democracy at New York Law School.
Doroshow noted that most people have agreed (whether unknowingly or otherwise) to binding and mandatory arbitration to use credit cards, cellphones, and even social media.
"They are so prevalent now that there really is no bargaining power that the consumer has," she commented.
The
Houston Chronicle feature also pointed out that should the arbitration clauses be passed, the closed-door arbitration processes will make it impossible to set precedent cases, which means every consumer going through the arbitration process must start from scratch. The process’ secrecy also severely limits the amount of information consumers can request from their insurer.
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