On March 22, the American Property Casualty Insurance Association released a report highlighting the harmful impact that rising commercial automobile litigation is having on businesses and consumers in Texas. The timing of the report was crucial to APCIA’s support of SB 207 by Sen. Charles Schwertner, M.D., R-Georgetown, a bill that provides the judicial procedure for consideration of medical expenses in civil litigation.
The legislation is a priority proposal supported by the Texas Trucking Association, the Texas Civil Justice League and the Texans for Lawsuit Reform. The legislation, if passed, creates rules of evidence to assure that medical expenses sought through litigation are limited to the amount actually paid or incurred on behalf of the claimant.
Lining up against the bill with testimony on March 29 in the Senate State Affairs Committee were a host of medical providers, including a physician representing the Texas Orthopedic Association. Schwertner, the bill’s author, is an orthopedic surgeon. The bill was reported by substitute on April 7 on a 6 yeas, 3 nays committee vote.
The APCIA report is also a resource for HB 19, by Rep. Jeff Leach, R-Allen, a bill that was heard in the House Committee on Judiciary and Civil Jurisprudence on March 9. This proposal, which has the same supporters as SB 207, would provide a distinct framework for trial procedures and determination of civil liability in civil actions involving commercial motor vehicles.
The legislation would allow for bifurcating a trial on liability and damages, with the first phase on liability and compensatory damages and a second trial phase on liability and exemplary or punitive damages. The bill further would isolate consideration of the employer’s liability into the second phase only if the first phase found negligence of the employee defendant. HB 19 was reported favorably by committee substitute on April 8.
APCIA’s report, Trends in Attorney Representation: Texas Commercial Automobile Insurance, was based on a study conducted by the Milliman actuarial firm. The study examined thousands of claims over a five-year period. The report concludes that larger losses in Texas grew at a faster pace than other losses. During the same period, attorney representation increased, even on smaller claims, and the relative costs of resolving claims were significantly higher for claims with attorney representation. Key findings:
-The number of commercial auto liability claims over $500,000 in value grew by 60 percent in Texas from 2015 to 2019.
-Attorney involvement in commercial auto liability claims continues to rise in Texas, increasing over 14 percent compared to 2015. Attorney involvement also continues to increase in commercial auto liability claims, reaching nearly 40 percent of all claims.
-When an attorney is involved in a commercial auto claim in Texas, both the average time to report claims (17 days v. 31 days) and resolve them (165 v. 516 days) are considerably longer than when no attorney is involved.
-The average commercial auto claim payout, for commercial auto claims with attorney involvement, is increasing faster than the costs for claims without an attorney.
-In 2019, the average total loss with attorney involvement was 17.1 times higher, while the average cost for adjudicating a claim was 52.8 times higher.
“Increasing attorney involvement in commercial auto claims is a real concern in Texas. Consumers are led to believe through aggressive advertising that they need to sue in order to be compensated for losses. The real winners when this happens are the lawyers. Studies suggest that most claimants do not actually improve their recoveries by involving an attorney, but they do incur higher costs, and it takes much longer to resolve their claims,” said Lee Ann Alexander, APCIA’s state government relations vice president.
Alexander’s comments find support in another study, one by The Institutes’ Insurance Research Council completed in 2018. The IRC study, Countrywide Patterns in Auto Injury Claims, 2018 edition, examined more than 80,000 closed claims for auto injuries, and found a five-year trend then for increased attorney involvement and medical losses rising more than three times the medical inflation rate.
“Lawsuit abuse is a top concern for insurers. APCIA is working with policymakers, industry leaders, consumers, and the business community to enact meaningful reforms that address lawsuit abuse and restore balance to the civil justice system. Our primary focus is a balanced civil justice system – one that is fair to all participants, promptly resolves legitimate claims, and increases certainty and predictability for all participants,” continued Alexander.
These two legislative bills have companion bills originating in the opposite house, but which have not progressed as far as these. SB 207’s companion, HB 1617, by Rep. Greg Bonnen, R-League City, received a public hearing on April 2, and, as of April 10, remains pending in the House Committee on Judiciary and Civil Jurisprudence. HB 19’s companion is SB 17 by Sen. Larry Taylor, R-Pearland, which has been referred to the Senate Transportation Committee and awaits a hearing.