Claims, Appeals and Judicial Review under HB 3

[Tony Brown]

Dear Group:

However, I thought I would give you a very general analysis of how
claims and judicial review would be handled, and the applicable
deadlines.

Note that on most of these, there are extensions that the Commissioner
may grant for good cause. Subject thereto, here’s how it would work
under the bill:

1. DEADLINE TO FILE CLAIM. A policyholder must file a claim within one
year of the date the damage to their property occurs.

2. DEADLINE TO RESPOND TO CLAIM. TCIP (formerly TWIA) must respond
within 90 days, stating the amount of money it will pay on the claim.
TCIP may extend this for up to 90 days. TCIP may also request
information from the policyholder, and the response date is tolled
pending production of the requested information. If TCIP takes no
action (i.e. no extension or request for information) and does not
respond within the initial 90 day period, the claim is presumed to be
covered by the policy.

3. INTERNAL REVIEW OF TCIP RESPONSE (REQUIRED STEP FOR JUDICIAL
REVIEW). If a policy holder is dissatisfied with TCIP’s response, they
may request internal TCIP review. During the review period, the
policyholder may request copies of TCIP’s documentation on the claim
(but must pay the copying cost). The policyholder may also provide
TCIP additional documentation supporting the claim. TCIP must respond
to this request for review within 60 days. This must be done to
preserve the right to go to court.

4. "APPRAISAL" FOR DAMAGE DISPUTES FOLLOWING INTERNAL REVIEW (REQUIRED
STEP FOR JUDICIAL REVIEW). Following TCIP’s review, if a policyholder
still disputes the amount of damage (but not causation or coverage,
which is discussed below), the policyholder may request appraisal of
the extent of damage, or cost of repair/replacement. Doing this is
required, in order to preserve the right to judicial review.

a. The policy holder must request appraisal within 30 days of actual/
constructive notice of the decision from TCIP’s internal review. [This
may be extended for good cause.]

b. The policy holder designates an appraiser and pays the cost. TCIP
pays for its appraiser. If they don’t agree and a third appraiser is
required, the policyholder and TCIP share the cost.

c. There is no specified deadline by which the appraisers must
complete their work and render a decision.

5. APPEAL TO "INTERNAL REVIEW PANEL" FOR COVERAGE /CAUSATION DISPUTES
FOLLOWING INTERNAL REVIEW (REQUIRED STEP FOR JUDICIAL REVIEW).
Alternatively, following TCIP’s internal review, if a policyholder
disputes coverage or causation, they may seek review of these issues
by an “independent review panel.” (This appeal may include damage
issues; i.e. the policyholder is not required to seek appraisal
separately.) The panel is chosen by the Commissioner from a roster of
qualified persons, which is to be maintained and published by the
Commissioner. Again, doing this is required, in order to preserve the
right to judicial review.

a. The policy holder must appeal within 30 days of actual/constructive
notice of the decision from TCIP’s internal review. [This may be
extended for good cause.]

b. The panel must decide the claim within 120 days of appointment,
unless they find that significant technical issues warrant referral to
a separate “technical review panel.” The 120 day period is tolled if
this occurs, until the technical review panel answers the questions
asked.

c. The technical review panel will consist of experts to decide issues
such as whether damage was caused by wind, waves, tidal surges, rising
waters not caused by waves, etc.

6. JUDICIAL REVIEW. If a policyholder is dissatisfied with the outcome
of appraisal or the Independent Review Panel, they may appeal to
court. This can occur either as (1) a “contested case” filed in Travis
County District Court, under the Texas Administrative Code, or (2)
appeal to District Court in the County in which the loss occurred.

a. Suit must be filed within 30 days of receipt of the determination
of Appraisal or the Independent Review Panel.

b. Issues in local district court are limited to coverage, causation,
the amount of the loss, attorneys fees and court costs.

c. Damages are limited to actual damages, attorneys fees and court
costs. There are no “extra” damages, such as punitive damages, DTPA
treble damages, etc.

d. There is a State Panel on Multi-District Litigation appointed by
the Texas Supreme Court, known as the “MDL Panel.” (This already
exists. It usually handles matters like asbestos and silicosis
litigation).

i. In a suit filed against TCIP in local District Court, the MDL Panel
in Austin will appoint a judge to preside over the case.

ii. The MDL Panel must appoint a judge who resides in either a Tier 1
or Tier 2 coastal county. The Panel is not required to appoint a judge
from the county in which suit was filed.

iii. This is a change from what occurred in Galveston County following
Hurricane Ike. In that instance, the Local Senior District Judge
ordered that all Ike-related cases be transferred to Judge Susan
Criss. This cannot occur under the proposed legislation.

iv. At trial, the court can only consider evidence offered previously,
during appraisal or before the Internal Review Panel. Nothing “new”
may be considered.

Please note that this is a very rough, quick first-take analysis; I
will supplement as I read more and/or the bill changes. There are many
other issues to review, such as direct renewals, agent issues,
security sales, etc., which I will defer in part to our insurance
industry brethren.

Hopefully, you will find this information useful as an initial guide.

Thanks,
Tony

Anthony P. Brown | McLeod, Alexander, Powel & Apffel, P.C. | 802
Rosenberg/ P.O. Box 629 | Galveston, TX 77553 | tel: 409.795.2022 |
fax: 409.762.1155| email: apb...@mapalaw.com | www.mapalaw.com