Representative Ed Thompson Introduces Bill to Protect Lienholders in Insurance Claims
Rep. Ed Thompson (R—Pearland) works as an insurance agent during the time he is not performing his duties as an elected official. He has pulled on that experience to address many concerns citizens have with the insurance industry.
In 2019, TIADA worked with Rep. Ed Thompson to require insurers who sell named-driver-only policies to specifically name each excluded driver and not allow for an excluded class of drivers. This session, Rep. Thompson has continued to address concerns with the insurance industry a top priority of his. His authored bills related to insurance policies for automobiles include requiring the inclusion of diminished value in the minimum motor vehicle liability insurance coverage requirement and requiring insurance companies not to renew the insurance policies for the insured's failure to cooperate in a third-party liability claim or action.
TIADA reached out to Rep. Thompson to express concern about some lienholders that insurance companies are not including their name on insurance checks as it was similar to other things he was looking to address. As a result of that conversation, Rep. Thompson introduced HB 4142. This bill amends Property Code Chapter 61 to provide that a prevailing party in a lawsuit can recover attorney fees and court costs.
So, What is Property Code Chapter 61?
Property Code Chapter 61 is a law that TIADA helped get enacted. Prior to 1989, lienholders often suffered financial losses when a debtor had an accident caused by someone other than themselves because often the debtor would cash the check and the lienholder had no recourse against the insurance company and the debtor was insolvent. Then in 1989, the 71st Legislature enacted Property Code Chapter 61 which provided that “a mortgagee has a lien on a cause of action or other claims of a mortgagor in connection with an accident that involves a motor vehicle on which the mortgagee has perfected a lien and that is attributable to the negligence of another person.” Or, to put more simply, if your customer is involved in an accident, then you have a lien on the check issued to them even if the accident was not their fault due to Property Code Section 61 covering the claim when it is not their fault. If it is their fault, then it is under the contract with the insurance company that you are covered. However, some insurance companies are still ignoring the requirements to include lienholders on the check if the claim is below a certain threshold, as insurance companies bank on the fact that you will not pursue a lawsuit against them due to court costs and attorney fees. Under current law, you recover those attorney fees and court costs if it is the customer's fault, but this bill would ensure that you recover those costs regardless of who is at fault. Please note that a skilled attorney can often file additional claims when your name is left off of a check in many instances, so please speak with qualified counsel before not pursuing a claim.
On Wednesday April 19th, TIADA members came to the Capitol to testify about HB 4142 and the impact it will have on their business.