Homeowners Set Forth Legislative Agenda for Texas Lawmakers

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August 1, 10:15 am Eastern Time

Press Release

SOURCE: Policyholders of America

Homeowners Set Forth Legislative Agenda for Texas Lawmakers

AUSTIN, Texas, Aug. 1 /PRNewswire/ -- " Rate abuse has gotten so out of

control in Texas that it has become the hottest issue in this campaign

season. Homeowners are up-in-arms, real estate closings are being thwarted,

homeowners who have put a claim in are being targeted and punished and all

of this has taken its toll on the already unstable Texas economy, " said

Melinda Ballard, President of Policyholders of America.

Ballard predicted the current crisis at a series of mold related public

hearings hosted by the Texas Department of Insurance ( " TDI " ) more than one

year ago.(1) Now, members of Policyholders of America and its coalition

partners are taking its fight for the Texas homeowner to the Capitol.

The proposals offered by members are outlined below:

The Problem:

Texas lawmakers, by accident, created a loophole that allows Lloyd's

and

county mutual companies to escape regulatory controls. Nearly 95% of

the

insurers operating in Texas today have used this loophole to dodge

regulation and reporting of requested claims information and

underwriting

data.

Insurers say they want to be left unregulated and that the free market

system will cure the problem. Insurance companies have been given

their

chance to operate fairly in an unregulated environment and they slapped

every Texan in the face. It's time to impose serious regulatory

controls

on this " out of control " industry and mandate rate rollbacks that are

commensurate with coverage Texas families get.

The Solution:

The loophole must be closed. All insurers must be required to get the

state to approve all rate hikes and provide documentation justifying

any

rate hike. If an insurer will not agree to these requirements, they

would be subject to benchmark rates.

The Problem:

Insurance-committed fraud and bad faith is on the rise. Penalties

imposed by courts have not dissuaded companies from committing these

offenses and some insurers can be categorized as " habitual

perpetrators " .

Texans should be protected from these habitual offenders.

The Solution:

Stronger, more effective tort reform is needed: the public embraces a

" Three Strikes; You're Out " penalty.(2) Under this plan, any insurer

found by a jury of Texas citizens to have committed fraud/bad faith

three

times, with in a three year period, would have to forego all business

in

the State of Texas. This penalizes repeat offenders of bad faith and

fraud and protects the citizens against such malfeasance.

If ousted, an insurer would be forced to follow State imposed mandates

for an orderly withdrawal.

The Problem:

Current language in the policy disallows homeowners from making

repairs,

such as removing wet building materials, until the insurer has

concluded

its investigation. While insurers are required to begin an

investigation

within a reasonable time, there are no time limitations on how long an

insurer takes to conclude its investigation. If a homeowner makes

repairs while an investigation is on-going, the homeowner may lose

coverage. However, if building materials are left wet, mold will grow.

In order to mitigate damage, homeowners must be allowed to make repairs

immediately in cases of water damage.

The Solution:

Insurers must adopt, into their internal claims handling policies, the

Best Practices as developed by a predominately industry-oriented Mold

Task Force and published in April 2002. If a homeowner makes repairs

in

order to mitigate damage, the homeowner must be required to store the

removed materials so that the insurer can conduct an inspection.

The Problem:

Insurers are canceling policies while a claim is in progress, black-

balling homeowners and properties with previously reported water damage

claims and this is impacting sales and exacerbating a real estate

crisis.

Basically, anyone filing a claim is being punished for taking advantage

of coverage for which they paid.

The Solution:

An insurer would be prohibited from canceling coverage until a claim is

resolved and if an insurer covered a home that had a water damage claim

and that home sells, that insurer is required to continue coverage on

that home for at least a three year period. The rate applied to the

new

owner is not to exceed a reasonable increase (up to 5%) over the

previous

premium. This will force insurance companies to better handle water

damage.

The Problem:

Many wrongful delays, denials or disputes have led to mold infestations

in homes. These expensive mold claims could have been repaired very

inexpensively if the insurer would have properly handled the claim when

it was filed. Insurers blame mold claims as justification for soaring

premiums yet provide no data to support this position.

The Solution:

Investigations must be demanded:

Industry-wide investigation on price gouging practices. If found

guilty,

those perpetrators should be forced to issue rebates to consumers and

significant fines should be levied against guilty parties.

Industry-wide investigation into insurance committed fraud and bad

faith

practices on water damage claims.

Investigation of insurers with greatest number of consumer complaints

into the cost incurred by the insurer when they opt to litigate a

legitimate claim versus if they had paid the claim when the claim was

made.

The Problem:

Insurers who have long been selling homeowner's insurance are

threatening

to abandon their customers and are refusing to write homeowner's

insurance but are more than happy to write auto, life and/or health

policies. They are cherry-picking Texas.

The Solution:

If an insurer opts to withdraw from the homeowner's market, it must

withdraw from the market in its entirety. Insurers would no longer be

allowed to sell only highly profitable lines to Texans and not sell

other, less lucrative lines.

The Problem:

Many insurers treat more powerful homeowners differently than others.

The Solution:

Insurance companies should be penalized for discriminatory practices in

claims handling. If there is coverage extended for a specific peril

for

one, it should be extended to all.

The Problem:

The homeowners policy contains provisions for an alternative dispute

resolution known as the " Appraisal Process " . The Appraisal Process is

not a level playing field. Insurers have an advantage that is systemic

to the process because of " Repeat Business Syndrome " , that is, insurers

are favored by mediators, arbitrators and umpires because they count on

insurers for repeat business.

The Solution:

The process needs to be reformed so that a more level playing field is

achieved. Three alternatives are provided: (a) state oversight of the

process using independent parties to serve as Umpires as done with

health

care claims, ( make it a voluntary process that both parties must

agree

to after a dispute arises as opposed to a mandatory process that only

one

side has to agree to, © the party demanding the appraisal has no

say-so

on who is selected as the Umpire. All awards, regardless of the venue,

are to be published and made available to the public.

The Problem:

Insurance companies are unfairly using credit reports as a basis of

underwriting. Even if a homeowner has been a customer for years, and

has

faithfully paid premiums, they are being non-renewed (or cancelled)

based

on their credit report.

The Solution:

Restrict the use of credit reports (credit scoring) only to cases where

the policyholder has been habitually late in paying mortgage payments

and

exclude unforeseen catastrophic life events as cause for non-renewal.

Additionally, the insurer must have in place a method to eliminate any

impact of negative credit information relating to an applicant or

policyholder being a victim of family violence, identity fraud, or

catastrophic life events such as a major illness, job loss, divorce or

the death of a spouse.

These are the major proposals being put forth by members of Policyholders of

America in the Texas legislative session to begin in January, 2003.

Policyholders of America will track legislators who prove they are champions

of public interests and those proving they are not. This information will be

made available to the public on our website: www.policyholdersofamerica.org

Policyholders of America is a nonprofit, nonpartisan association of

homeowners formed in early 2002. As of this date, it has 18,945 American

families in its membership. The association fights bad faith and fraud,

champions lower premiums to reflect actual coverage, raises funds for

treatment-driven medical research, and serves as an educational tool for the

public. Members include homeowners who are retired people on fixed incomes

to some of the most affluent in America.

(1) Melinda Ballard, President, Policyholders of America, testified at

public hearings held by the Texas Department of Insurance.

Ballard's prophetic testimony can be accessed through the TDI's

website.

(2) Polls conducted outside of Policyholders of America's membership

shows that 86% of the public embrace this penalty.

CONTACT: Policyholders of America 888-648-8823

SOURCE: Policyholders of America