Texas 2011 Legislative Update

Ambulance-chasing attorneys, frivolous lawsuit filings and contractual indemnification clauses were all subjects addressed by the Texas 2011 legislative session.

Joanna Salinas, partner and manager of the Austin-based law firm of Fletcher, Farley, Shipman & Salinas, provided an update on the session for adjusters recently in Scottsdale, Ariz.

She questioned the value of the state’s “Loser Pays” statute, which went into effective Sept. 1, 2011. This new law, which applies to breach of contract claims, not typically covered under an insurance policy. It also applies to offers of settlements. According to Salinas, the defendant in a case has to invoke the process by making a settlement offer that is not accepted, trial has to occur, and the plaintiff has to receive less than 120 percent of the offer.

Reasonable and necessary attorney fees are considered from the date of offer. While the plaintiff gets cash added onto the judgment, the defendant only gets a credit. Salinas said this might come in handy if the case is a loser, but that’s at the risk of attorney fees exposure.

“Where’s the upside?” she asked. “In reality, it [loser pay statute] is useless.”

Within this statute the legislature also recommended the Supreme Court create rules to address non-meritorious claims by potentially dismissing them early on in litigation. This isn’t hard to do, Salinas said. If an insurer has competent defense counsel assigned to the case, dismissal of an obvious frivolous lawsuit should be considered early on anyway.

The statute also addresses the extraordinary costs of litigation, Salinas said. Lawmakers want to make litigation easier and more efficient, especially in smaller cases, targeting cases with a monetary value between $10,000 and $100,000 for inclusion in an expedited process. According to Salinas, there hasn’t been any agreement on whether inclusion in the process would be mandatory or voluntary.

Salinas foresees problems with the proposed expedited process. Because the values stated in a complaint are determined by the plaintiff pleadings, she said adjusters should expect to receive complaints with damage pleadings above the monetary value range in order to avoid participation in the expedited case process.

For cases involving a question of law, there’s been a rule change relating to the permissive interlocutory appeal process, Salinas said. The Texas legislature approved the amendment to the rules last year. The trial court can now state a request for an interlocutory review in the order. Parties have 15 days to file a petition with the court of appeals stating their reasoning for such a request. According to the rules, the petition must be no more than 15 pages in length.

Contractual Indemnification

Contractual indemnification — a hot topic for contractors— was also addressed during the 2011 legislative season.

The new law, HB 2093, addresses indemnification clauses within contracts where the indemnitor indemnifies the indemnitee against the indemnitee’s own negligence. Contracts now containing this language are void and the provision is unenforceable.

The anti-indemnity statute eliminates the possibility of waiving the anti-indemnity provision.

Adjusters will most likely see this in contracts between general contractors and their subcontractors. The statute applies to commercial construction contractors, but not to individual home builders or vendors like Home Depot.

The statute applies to any contract entered into on or after Jan. 1, 2012. New construction projects planned after that date are controlled by this statute.

Lastly, Salinas said the barratry (defined as the bringing of unreasonable lawsuits) statute may be the most interesting to come out of last year’s Texas legislative session. SB 1716 was codified on May 6, 2011 (GC 82.065). The law applies to lawyers who wrongfully pursue and acquire clients (also known as ambulance chasing). Salinas said she has already seen an increase in lawyers advertising for clients harmed.