State can’t help with most unpaid insurance claims

Hail storm from April 2013 that Carol Fredenburg says damaged the roof of her home. (Courtesy: Fredenburg)
Hail storm from April 2013 that Carol Fredenburg says damaged the roof of her home. (Courtesy: Fredenburg)

AUSTIN (KXAN) -- The Texas Department of Insurance claims it can help resolve complaints against insurance companies and boasts of helping Texas consumers get millions of dollars in unpaid claims every year. However, a KXAN Investigation finds that only happens in certain situations and most of the time the state has no power to do anything at all, leaving you—the consumer—without much recourse.

In the spring of 2013, a storm swept through pummeling hail down on Carol Fredenburg's house. A roofing contractor told her the roof needed replacing but when she filed a claim with State Farm, they told her the damage only affected part of her roof and they would not pay for the entire roof to be replaced. They estimated her repairs at $7,600, with a $2,841 deductible.

"Well, they said that's not covered. So, you're out of luck," Fredenburg said. She even went to an appraisal hearing where an independent appraiser ruled in her favor and determined her loss was close to $19,000, but State Farm still wouldn't pay. So, in early 2014, she turned to the Texas Department of Insurance. “I was hoping that the state would investigate."

Average homeowners Insurance PremiumsThe TDI website says it could help with claim denials and when an insurance company is paying too little. But weeks after Fredenburg filed her complaint, she got a letter from the state agency stating it couldn’t do anything and she'd have to file a lawsuit against the massive corporation to get the money she wanted.

Since 2012, records show TDI has "confirmed" or ruled 22 percent of the consumer complaints were valid and the company should pay up. The data also showed the agency could not confirm the other 78 percent of complaints. Of those complaints not confirmed, 60 percent are cases where TDI simply said it can't help because of a “question of fact,” “contract language or legal dispute,” or because it simply had “no jurisdiction.” In those cases, the agency tells consumers like Fredenburg their last resort is to hire an attorney and fight their insurance company in court.

Consumer advocates like the insurance industry watchdog group Texas Watch believe consumers deserve more assistance from the state regulatory authority.

“They're misleading consumers in this process,” said Tori Sommerman, the group’s deputy director. “They go through this lengthy process that takes months and then, in the end they're told actually we can't help you. We find that very frustrating on the side of the consumer.”

KXAN Investigator Brian Collister asked to speak with Insurance Commissioner David Mattax, but our request was denied, instead we got the agency's spokesperson.

“For the consumers that haven't gotten help from TDI what do you say to them?” asked Collister.

“Well, we do everything within our power in the law to make sure the companies are following the law and that they are honoring their insurance policy,” TDI’s Jerry Hagins responded. “We can't make a medical judgment. We can't determine negligence. So, there's certain things that are just above our authority to do and that's really the area that the civil courts are there for."

Fredenburg eventually sued State Farm, and the day her case was set for court in November of 2014, the insurance company settled.

“They know if they say ‘no’ long enough and just deny everything and you get no help from any of your state agencies or anything, you can't do anything,” said Fredenburg. “People usually don't have time to fight it back.”

KXAN reached out to State Farm about Fredenburg's case but the company declined to comment.

Because of our investigation, the Texas Department of Insurance is already promising changes saying it will now take steps to make it more clear on its website what types of complaints it can and cannot help resolve.

Hail storm from April 2013 that Carol Fredenburg says damaged the roof of her home. (Courtesy: Fredenburg)
Hail storm from April 2013 that Carol Fredenburg says damaged the roof of her home. (Courtesy: Fredenburg)

TDI Complaints

These are the most common reasons TDI lists as a reason why it can’t resolve a consumer complaint:

  • Contract Language/Legal Issue (17%): The subject matter of the complaint involves the contractual obligations of one or more affected parties; such matters generally are subject to litigation
  • No Jurisdiction (13%): TDI is not authorized to intercede in the subject of the complaint (e.g. non-insurance/HMO matters)
  • Question of Fact (9%): The subject matter of the complaint requires, for resolution, a determination of facts which must be made by some entity other than the TDI
  • Company Position Upheld (8%): The party complained against has a valid basis for not yielding to the complainant's requests/demands/claims

 

Insurance Claims

This legislative session at the Texas State Capitol, lawmakers are tackling what many see as excessive lawsuits against insurance companies. Senate Bill 10 does not prevent policy holders from suing their insurer, but it does aim to stop lawyers who actively recruit clients after an event like a hail storm.

Supporters like Lt. Gov. Dan Patrick, R-Texas, claim an increasing number of Texas attorneys are only padding their own pockets to increase premiums for home and business owners, forcing some insurance companies out of business.

Texas Watch points out a TDI report showing only up to two percent of cases actually go to court, but the report also found the number of lawsuits has increased by 1,400 percent in the past five years.

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