I. Insurance Articles

WHERE DO ALL OF OUR PREMIUMS GO?

The newspaper article March 4, stating that Texas Home Insurance Rates are Highest In Nation did not surprise those of us who follow Texas politics. Recent financial reports (2008) released by the Texas Department of Insurance show that, in spite of a slowing economy, most of the insurance companies in Texas had one of the most profitable years of the decade. This is the fifth straight year that Texas insurance companies have meet or beat a standard benchmark for reasonable profits. Remember, this is in spite of the weather losses from Hurricanes Katrina and Rita in 2005.

The percentage paid out in claims is known as the loss ratio. After overhead expenses such as salaries, office overhead, sales commissions, advertising, lobbying, defense costs, etc. (usually about 30% of its premium dollars), an insurance company that pays out less than 58% of its premium dollars for losses is considered a profitable company. In 2007 Texas insurance companies only paid out 36.5% of your premium dollars in losses. This means profits, after overhead expenses and loss payments, of more than 30%.

The Texas Insurance Board (appointed by Governor Perry) chooses the Commissioner of the Texas Department of Insurance. This agency is supposed to control the amounts Texas Citizens are charged by insurance companies selling insurance in Texas, but it refuses to do so. Of course it is just a coincidence that the insurance industry and its PACs and allies are some of Governor Perry's staunchest supporters.

The Texas Department of Insurance reviews all rate filings by insurance companies and has the legal tools to bring them back into line when they charge excessive rates. Mr. Ben Gonzales, a spokesman for the insurance department publicly admits that even after the very low loss ratios and very high profits reported by insurers last year, no companies were ordered to lower their rates as a result of the agency's the reviews. In spite of the record low losses and high profits reported this year, no similar reviews have been announced by the agency this year.

The Texas Legislature has passed serious tort reform every session since 1995, but our insurance premiums have not come down. The insurance companies have kept the savings from tort reform as increased profits. The only real solution to high insurance premiums in Texas is major insurance reform. However, this is not likely under the current political climate.

DISABILITY POLICIES - THE ICEBERG UNDERNEATH

The basic purpose of a disability insurance policy is straightforward. If there is an injury or illness of any kind that prevents or significantly interferes with your ability to do the job that you were hired to do, you will be compensated as long as you are disabled. But insurance lawyers have a saying, The big print giveth and the small print taketh away.

The most unpleasant surprise in disability insurance policies is that the definition of a disability is different between the short term disability and the long term disability parts of the policy. Disability is usually defined in the short term section of the policy as the inability to do the specific job that you were doing when you became disabled. After the policy's short term time period ends and the policy switches from short term to long term, the definition changes. The long term section of the policy usually defines a disability as the inability to do any work that you are qualified to do by training or past experience. This means that after the short term coverage expires, your disability coverage may disappear.

For example, if I had a head injury or a stroke that affected my memory, I could not do my job as a lawyer. But I worked my way through college and law school as a plumber's helper, a carpenter's helper, and as a machinist. I also farmed and ranched with my dad and have experience operating heavy equipment on the farm. A brain/memory disability would prevent me from doing my job as a lawyer, but I would not be disabled under the long term definition.

Another surprise to some is that disability policies usually require you to file for social security disability after the short term disability expires. If you do not file, the insurance company is allowed to reduce your monthly disability check by the estimated amount that you would receive. If you do qualify, they then deduct the actual amount from your check.

The biggest surprise to many is that if your employer paid any part of the premiums for the disability policy, you have lost your rights under our Constitution to have a jury decide if you are disabled. In those cases, the documents in the insurance company's appeal file control whether you will get disability payments or not. For this reason, if your disability is denied or terminated, it is smart to request a copy of all the documents in your file and hire a lawyer immediately to help you find and file the documents that support your claim in the insurance appeal file.

TREE DAMAGE FROM WIND - COVERED OR NOT?

Many of us have tree damage from high winds in the recent storms. Is this covered by our Texas Homeowner's Policy? Maybe, maybe not. Here are the basic facts:

  1. Any damage to building or structure (garage, tool shed, fence, mailbox, etc.) from falling trees or tree limbs is covered. The cost to remove the tree or limb from the damaged structure is covered. There is no limit to these coverages other than the policy limits of your contract.
  2. Damage to fences may be excluded if you have an AA coverage policy with a form HO-47OT attached.
  3. After the tree or limb is removed from the damaged structure, the cost to remove the tree or limb from your yard and dispose of it is limited by the debris coverage of your policy. This debris removal coverage may be subject to your deductible, depending on the contract language in your policy. ISO form policies may have a $1,000 limit for tree or limb debris removal.
  4. If there are downed trees or limbs in your yard, but they did not damage any of the insured buildings or structures, did not block your driveway, and did not block a handicap access ramp, there is no coverage for removal.
  5. If your trees or limbs fall on or damage your neighbor's property that is his/her problem and if your neighbor's trees or limbs fall on your property that is your problem. It does not matter who owns the tree, you look only at whose yard is it in now. The only exception to this rule is if the trees were possibly rotten or diseased and your neighbor was negligent in not removing or pruning the trees before they fell on your property.
  6. If the falling trees or limbs damaged your car that is covered under your auto policy, not your homeowner's policy.
  7. The cost to replace a damaged tree or shrubbery is probably not covered. Loss from vandalism, fire, explosion, lightning or other named perils is often covered, but weather damage to trees and shrubs is rarely covered. Remember, in the world of insurance fair or unfair does not count. The only thing that matters is what does your insurance contract say, or not say.

A COVERED PERSON - TEXAS STANDARD AUTO POLICY

Personal Injury Protection Through Your Car Insurance

A full coverage Texas Standard Auto Policy is a collection of fault and no fault coverages. These are Liability, Medical Payments, Personal Injury Protection, Uninsured/Underinsured Motorist, Comprehensive, and Collision.

If the collision is your fault, the Liability coverage covers the property and injury damages of other people and the Collision covers damage to your car. If the collision is not your fault or you are merely a passenger in the car, you are covered under the no fault coverages.
Simple enough, but what about overlapping coverages from other auto policies? Auto policy coverages follow you and your family around, even when you or a family member is in someone else's car. Which policy has to pay, and in what order?

The general rule is that the policy covering the car that you are in is the first level or primary coverage. A covered person under the Texas Standard Auto Policy includes the owner of the policy (and the car), anyone else driving the car with permission, and anyone who lives under the owner's roof who is related to the owner by blood, marriage, or adoption. If the driver is not the owner and he/she also has auto coverage through other policies, those coverages will also kick in if the cars primary coverage is not big enough to cover the damages.

For example, you borrow your Father in law's/neighbor's/buddy's truck to haul something and while driving it cause an accident with serious injuries. The truck owner's liability policy would pay first. If that policy is not big enough, your personal auto policy kicks in second to make up the difference. What if your brother is living with you while he is going to college and also has a policy on his car? Since you are related to him by blood and live under the same roof that he does, his auto coverage also covers you since you do not own the borrowed truck, so it would kick in third if the other policies were not big enough.
The no fault coverages that provide Medical coverage and Uninsured/Underinsured motorist coverage for every passenger in the car also follow you and your family around when you are in other people's cars and can be stacked in similar ways, subject to the general rule that you are not allowed to collect more insurance than your actual damages.

If you have serious injuries, it pays to have a board certified injury lawyer who knows how to find and collect all of the coverages that you need for your and your family's injuries.

CLAIMS AGAINST INSURANCE COMPANIES

Most people and businesses carry insurance. This insurance may provide coverage for damaged property, personal injury, life, or health. When filing a claim against an insurance company, your rights are determined by whether the claim is against your insurance company or the claim is against someone else's insurance company.

If it is a claim against your own insurance company, what is fair or unfair has little value. The value and coverage of your claim is totally controlled by the language in the insurance contract. Because of repeated abuses, the Texas Department of Insurance now mandates a bill of rights to protect Texas policy holders and insureds.

For example, on casualty (property) claims your insurance company now must: (1) acknowledge receipt of the claim and begin its investigation within 15 days, (2) send notice accepting or rejecting the claim within 15 days after receiving all written items, statements, and forms required by the company, and (3) pay the claim within 5 days after accepting a claim. But if the loss is weather related or a natural disaster, the insurance company can take 45 additional days to approve or deny your claim and 15 additional days to pay your claim.

Your bill of rights should be sent to you with the policy contract (not the bill). If you do not have one or cannot find it, you can get a copy from the Texas Department of Insurance at http://www.tdi.state.tx.us or at 1-800-252-3439.

If the insurance company does not perform under the terms of the contract, then an insured is entitled to bring a claim for damages. Depending upon the circumstances, an insurance company that does not provide coverage according to the terms of the contract may be sued, not only for breach of contract, but deceptive trade practices and failure to deal fairly with its policyholders. Under special circumstances, an insurance consumer may be entitled not only to monetary compensation for the injuries he has received, but also additional damages, reimbursement for attorney's fees, costs, and even punitive damages.

But, if your claim is against someone else's insurance company (like an injury or death claim), the only rule is that the insurance company must defend their client against your claim. You have no rights, except to file a law suit. The other party's insurance company does not have to return your phone calls, does not have to be prompt, does not have to be helpful, does not have to be polite, does not have to make an offer, does not have to make a fair offer.

Insurance companies will usually try to settle small claims to avoid the cost of litigation, but on larger or more serious claims they will often drag their feet or try to avoid liability all together. This forces many people to hire a Trial Lawyer to collect their damages.

HOW AUTO LIABILITY INSURANCE IS PRICED

Many people attempt to cut corners by carrying the smallest auto liability policy the law allows. This is a serious mistake if you own a home, have savings or investments, own recreation vehicles such as motorhomes or boats, or may inherit property.

The law requires every driver to have only a $20,000 liability policy. (This is why it so important to carry uninsured/ underinsured motorist coverage to protect your family from serious injuries if the guilty driver doesn't have enough insurance.)

With vehicles driven mostly to work and a good driving record, the minimum $20,000 liability policy benchmark rates are only about $350 per year per vehicle (additional vehicles are about 15% less, rates will vary for added drivers, tickets, teenagers, etc.). Yet a $100,000 liability coverage would only cost about $450 per year. Only $100 more per year for five times more coverage!

Why? Two reasons: (1) Most insurance companies refuse to sell all policies below $100,000 at the benchmark rates. Instead they price a policy below $100,000 as if you were a high risk driver with accidents, DWI's, etc. (2) Insurance premiums are based on the amount of risk to the insurance company. The first $20,000 level is the most expensive because every claim filed would affect this first level. The next level from $20,000 to $50,000 is cheaper because most claims are too small to affect this level. The next level from $50,000 to $100,000 is even cheaper because even fewer claims will be large enough to affect this level.

If your driving record is not too bad, a good agent should be able to upgrade you to $100,000 liability and add on $100,000 uninsured motorist coverage for only about $150 per year per car. You get much more insurance per dollar if you buy at least $100,000 in coverage.

MANDATORY AUTO INSURANCE DISCOUNTS

Your auto insurance company must give you discounts for the following:
1. Two or more Autos. 20% discount on liability, medical payments, and personal injury protection; 15% discount on collision coverage. You do not get these discounts if you let them write a different policy on each car or one of the autos is operated by a male under 25 or a female under 21. If you have more than 3 autos and one is operated by a young driver, some agents recommend that you have a separate policy for that one auto, so that you and your spouse can still get the discount on the other autos. Otherwise, be sure all of your autos are on one policy.

2. Air bags or seat belts. 30% discount on personal injury protection and medical payments.

3. Anti-theft Devices. A 2% to 30% discount, depending on where you live and the type and number of qualifying devices installed on your vehicle to prevent vandalism or theft.

4. Defensive Driving Course. 10% discount on liability, medical payments, personal injury protection and collision for completion of a defensive driving course within the last three years.

5. Driver's Education. 10% discount on liability, medical payments, personal injury protection and collision for completion of a driver's education course by a male driver under 25 or a female under 21. You cannot claim this discount and the Defensive Driving discount at the same time.

6. Alcohol and Drug Awareness Course. 5% discount on liability, medical payments, personal injury protection and collision coverages for completion of an alcohol and drug awareness course within 3 years. But you are not eligible for this discount if you have been convicted of a DWI or Minor in Possession 7 years from the date of conviction.

CAUTION: If your insurance agent has put your insurance with an insurance company that has county mutual as part of its name, you may not be offered these discounts, or if offered, they may be offered in different percentages. Be cautious about being placed in "county mutual" policies.

PERSONAL INJURY PROTECTION

Personal Injury Protection is an important insurance protection to carry on your auto policy, especially if you do not have health and disability insurance through your employment. Personal Injury Protection or P.I.P. covers any medical bills or up to 80% of lost gross wages before withholding related to injuries caused by a motor vehicle.

P.I.P. covers every occupant of your insured vehicle no matter whose fault the collision is and no matter who was driving your car at the time. It also follows you and every member of your household and covers all of you even if you are in someone else's car at the time you are injured. Because it is a no fault coverage, it should not affect your premiums or your ability to get insurance in the future.

It is important to have P.I.P. to get the medical treatment you need and to help your family survive while you are off work because of injuries. In many families missing only three or four paychecks can cause serious financial hardship. In car collision cases the guilty party's insurance company does not have to pay any of your medical payments or lost wages until after you sign the final release of all claims. If you do not have P.I.P. coverage you may be forced to settle your claim quick and cheap before you are fully recovered because of the financial hardship on your family.

Even if you have an HMO or major medical for your family, the P.I.P. can be used for co-pays, prescriptions, deductibles, etc. not covered by your plan.

You usually do not need a lawyer to collect your P.I.P. benefits. All you have to do is fill out the claim form, send it to the company, and it will send you a check. If you have a lawyer representing you on the liability claim, he will usually assist you with the P.I.P. paperwork at no charge.

P.I.P. coverage costs less than $100 per car for a whole year of coverage. You should check your policy to see if you already have P.I.P. coverage.

THE DUTY TO DEFEND

In many cases, the most valuable protection of an insurance policy is not the coverage amount, but the duty to defend. Everyone knows that an insurance policy contract provides that the insurance company will pay claims that you may be legally liable for under the policy. However, not everyone is aware that liability insurance policy contracts (such as auto, home owner's, or commercial) provide that the insurance company will defend you against all claims covered by the policy. In other words, the insurance company must hire a lawyer to defend you at no cost to you or your company. (An injured/damaged party must pay/hire his own lawyer.)

For those of you who have sat on Bell County juries on injury or property damage cases, this is why the defense lawyer for the person or company that caused the injury is almost always from outside of Bell County. Hardly any Bell County law firms have the size and political influence to get and keep the big insurance companies= business.

To decide if an insurance company must defend a claim for you, Texas Courts apply the eight corners rule. The insurance company (or the Court, if the insurance company refuses to defend) looks at the type of claim in the four corners of the petition the claimant filed to start the lawsuit and then compares that with the types of claims covered in the four corners of the insurance contract. If the claim is within all eight corners they must pay a lawyer to defend.

This duty to hire a lawyer to defend you at no cost to you applies even to worthless or frivolous claims. This is why, in my opinion, it is more important for a new or small business to pay for a good liability policy than it is to pay for fancy corporation or partnership documents.

So the next time that you are called to jury duty on an injury or property damage case in Belton and you see/meet an out of county defense lawyer on the case, you can smile to yourself and say, AI know what is really going on here. This is a lawsuit about an insurance claim.

CAN YOU TRUST YOUR INSURANCE POLICY?
MAYBE, MAYBE NOT

Texas auto insurance policies contain many provisions that are void and unenforceable under the law. This is because insurance companies have used their political influence to persuade the State Board of Insurance to include language in the Texas Personal Auto Policy that violates Texas law.
In Texas (and most other states) a family member has the right to collect under their auto liability insurance for injuries in an accident, even if another member of their family was driving the car and caused the accident. Yet, every Texas Personal Auto Policy for liability has language that excludes injury claims by family members against the driver, if the driver is also a family member. THIS EXCLUSION IS VOID AND UNENFORCEABLE UNDER TEXAS LAW.

Here are some other examples of void and unenforceable language contained in every auto insurance policy:
- Reduction of Uninsured/underinsured motorist coverage by
payments under the Personal Injury Protection coverage;

- Reduction of Uninsured/underinsured motorist coverage by
payments under the Medical Payments coverage;

- Reduction of Uninsured/underinsured motorist coverage by
payments under Workers' Compensation or disability benefits;

- Reduction of Uninsured/underinsured motorist coverage by
government supplied medical benefits such as Medicare.

This is not even half the list, but all I have room for in this space. If insurance companies continue to put void and unenforceable language into their auto insurance policies, how can the public know what their rights are under their auto insurance policy without talking to a personal injury lawyer?


DO I NEED UNINSURED MOTORIST INSURANCE?


If you are a safe driver, the most important auto insurance to have to protect yourself and your family is uninsured/underinsured motorist coverage. Statistically, the most likely place for serious injuries to occur are either in a car or at work.

Your liability insurance required by law does not give you or your family any coverage whatsoever if the collision is someone else's fault. Uninsured/underinsured coverage covers you and every member of your family that lives in your household if someone else causes injuries related to the use of a motor vehicle.

Uninsured/underinsured coverage covers all occupants of your insured car or all members of your family if the guilty driver does not have a policy. The latest study indicates as many as 30% of Texas drivers may be driving without any insurance. Many times this is because a guilty driver's monthly payment is late. There is no grace period for auto insurance payments.

Under UIM, you and your family are covered at all times, even while riding in someone else's vehicle such as during a school trip or car pooling. It provides coverage if there are injuries caused by a person committing a crime such as hit and run, driving a stolen car, fleeing from the police, or even DWI. There is coverage if you or a member of your family is hit by a car while walking or even riding a bicycle.

This coverage can also be used if the guilty driver does not have enough insurance to cover all of the damages. The law only requires a driver to carry $20,000 liability. This will not cover the past and future medical bills and lost earning capacity if there is a serious injury.

$100,000 uninsured/under-insured motorist coverage costs only about $100 per year. Additional cars are about 15% less. You should add or carry this protection even if you do not want a "full coverage policy". Uninsured/under-insured motorist coverage is the best buy available under a Texas Automobile Policy.