An editorial this month in the Austin, Texas American-Statesman talks about a recent Texas Supreme Court ruling that (surprise!) took the side of big insurance companies in a dispute with policyholders. The court’s ruling could make it far more difficult to collect claims under uninsured and underinsured motorists’ coverage in Texas. Here are excerpts from the editorial:
Texas motorists are required by state law to buy a minimal amount of liability insurance for personal injury and property damage if they cause an accident. But so many drivers don’t buy the required insurance that those who do are strongly encouraged by the state to buy “uninsured and underinsured” coverage. That coverage pays a claim if the other driver is liable but doesn’t have insurance or not enough to pay for the entire loss.
In recent years, disputes have arisen about just when an insurer is required to pay a claim under uninsured motorist coverage and, if the motorist making the claim has to hire a lawyer and sue to collect, how the legal fees are paid — separately, by the insurer, or out of the claim the insurer is finally required to pay.
In a 7-0 decision (two justices did not participate), the Supreme Court ruled Dec. 22 that an insurer was not required to pay a claim for uninsured motorist coverage until a court ruled on who was liable in the accident and for how much. And, the court said, the insurer was not responsible for the policyholder’s legal fees.
Insurance industry spokesmen say insurers will continue to pay most claims under uninsured motorist’s coverage as they already do, with little or no fuss.
Dick Geiger, general counsel for the Insurance Council of Texas, says insurers still face penalties under bad faith laws if they refuse to pay a good claim. And, he noted, the Supreme Court also held that insurers must pay the policyholder interest for any delay in paying a legitimate claim.
But Alex Winslow, executive director of Texas Watch, a consumer group, said the Supreme Court ruling gives insurers incentive to resist paying claims, forcing a claimant to settle for much less than is rightfully owed or to sue — and then pay a third of the claim to the claimant’s lawyer, months or years after suffering the loss.
If insurers do right by policyholders, there shouldn’t be a problem — and the Legislature and insurance commissioner should make sure they do. One way would be to require insurers to pay the legal fees of a policyholder who wins a lawsuit to collect on his coverage, as is routine in contract disputes.
But if lawmakers won’t do that now, then they and the insurance commissioner should find other ways to protect properly insured drivers.
Again: The Legislature requires drivers to buy liability coverage. Conscientious drivers who take the extra step and spend more of their hard-earned money to protect themselves against law-breakers shouldn’t be forced to settle for less from an insurer who doesn’t want to pay up.
