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New Texas Law Aims at “Junk” Auto Insurance Policies Covering Only Certain Drivers

It’s about time the state did something about these near-worthless insurance policies. I can’t tell you how many of our clients have ended up with no payment for their damages because of this idiocy.

Details excerpted from an article in the Dallas Morning News:

More than a million Texas drivers with limited auto insurance coverage face increased scrutiny under a new state law that aims to shine a light on policies that cover just one driver, not an entire vehicle.

A measure that the Legislature enacted and Gov. Rick Perry signed into law this year requires that insurers who sell “named driver” auto policies disclose the limits of the coverage to drivers. They must also list the names of covered drivers on insurance ID cards they issue to customers.

Under such policies, often called “junk” policies, coverage is restricted to one person listed as the driver. They do not cover family members in the household. That means when family members other than the named driver use a family vehicle, they have no insurance protection.

The policies are usually cheaper, but policyholders are sometimes unaware of the coverage limits. As a result, other motorists are at risk of being hit by an uninsured driver.

House members tried to eliminate the policies outright, but the Senate balked.

“We are seeing these policies pop up more and more across Texas,” said Alex Winslow of Texas Watch, a consumer group active in insurance issues. He pointed to Texas Department of Insurance figures estimating that there are more than 1.2 million named driver policies in the state.

Accident victims

Many North Texas drivers in the past have lodged complaints with the insurance department against companies that have regularly sold the policies. The complaints typically center on the refusal of the insurer to pay for damage caused by a driver later disclaimed by the company.

The House approved it on a 108-24 vote. But the measure died in a Senate committee. Key insurance lobbyists representing agents and companies were among the opponents.

The named driver legislation that did pass both chambers, written by Sen. Wendy Davis, D-Fort Worth, tightens up state regulation of the policies. It requires insurers to notify policyholders orally and in writing that the policy covers no one else in the household. Further, the limited protection must be clearly stated on the insurance ID form. And the measure would prohibit insurers from selling policies that do not include state-required minimum coverage. The new requirements must be in place as of Jan. 1.

In the insurance policy that most Texans buy, liability coverage follows the vehicle. That means the vehicle is covered for damage caused to other drivers and vehicles, no matter who is at the wheel.

State complaint list

Among the companies that sell a large number of the policies is Loya Insurance Co. It has ranked near the top of the state’s complaint list for major auto insurers for several years. In 2012, the complaint rate for Loya was more than twice the state average for auto insurance companies.

Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

About This Blog

The title of this blog reflects my attitude toward those government agencies and insurance companies that routinely mistreat injured or disabled people. As a Dallas, Texas lawyer, I've spent more than 45 years trying to help those poor folk, and I have been frustrated daily by the actions of the people on the other side of their claims. (Sorry if I offended you...)

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