Group calls on Texas to weaken exemption powers for insurance companies

A coalition of businesses and industry organizations wants the Texas Supreme Court to overturn a 31-year-old legal opinion it says allowed insurance companies to avoid property damage payments by imposing a charge of unfair proof to the insured.

At stake is a 1991 ruling which the group says put policyholders at a “disadvantage” because it gives insurance companies more power to deny claims by classifying damage as “normal wear and tear”, a writes the group’s attorney, Marc Gravely, in a recent court filing. The ruling requires companies to prove that their claims are covered by their policies, unlike other states, where the onus is on the insurer to show why a claim would be excluded by the policy.

The coalition includes the Texas Hospital Association, as well as groups related to the automotive, hotel and lodging, and charter school sectors.

The group argues that Texas is the only state in the nation with such a rule and noted that their appeal to the state’s highest court comes amid a hurricane season that weather experts say could be particularly active and damaging.

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“All other states follow the well-established rule – repeatedly reiterated in all major academic treatises on insurance law for decades – that the insurer bears the burden of proving that a loss falls within the language of exclusion of a police,” the lawyers for the group wrote. “The fact that we are in the middle of hurricane season highlights this injustice.”

The request to the Texas Supreme Court also comes days before the fifth anniversary of Hurricane Harvey’s landfall in southeast Texas. Harvey would eventually become the costliest storm in the nation’s history, causing at least $20 billion in estimated insurance losses and resulting in at least 670,000 personal or commercial property insurance claims from private insurers, according to the Texas Department of Insurance.

The business coalition’s appeal was filed recently in an ongoing lawsuit that the group says is emblematic of a power imbalance. In that lawsuit, a Euless owner accuses Allstate Vehicle and Property Insurance of improperly denying him coverage for damage caused by a hailstorm in 2018. Allstate instead claimed that most of the damage was due to normal wear or tear. a previous storm, the owner said.

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Neither the owner nor Allstate could be reached for comment Thursday.

A district court ultimately dismissed the lawsuit, saying the plaintiff failed to prove that the damages met what’s called the “concurrent causation doctrine,” the part of Texas law under which insureds are required to prove that the property damage is solely attributable to the specific coverage they have.

Then, in May, the United States Court of Appeals for the Fifth Circuit revived the case and asked the Texas Supreme Court to take up three key issues in the lawsuit to better clarify what falls under the “doctrine of concurrent causation”.

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Kristan F. Talley