General State Policy
Since 2003, the Legislature has enacted a landmark conservative reforms including tort reform, restructuring of the insurance market, and deregulation of the telecommunications market.
House Bill 4 (78R) Tort Reform
House Bill 4 improved the fair and equitable application of justice in the state while maintaining a balanced system that continues to make Texas an attractive place for business and industry. The bill addressed the threat to economic growth and development that is posed when a litigation system seems uncertain and jeopardizes the success of business, health care, and many other economic drivers as a result. HB 4 was a responsible reform of the civil justice system that ensured appropriate protections for consumers as well as the business interests of the state.
In particular, the bill addressed "class action" lawsuits by establishing conditions under which such cases may be dismissed, as well as circumstances under which a court must abate or dismiss an action. The bill also limited the amount of any fee that a court could award to the attorneys representing plaintiffs in a class action suit.
The bill also made minor adjustments in venue provisions in multidistrict litigation by clarifying procedures for consolidating cases in a single forum. Importantly, the bill relieved manufacturers or sellers of liability for a product if the product was manufactured or sold in compliance with a federal or state law, rule, or regulation unless the manufacturer or seller intentionally withheld from or misrepresented to the applicable regulatory agency information concerning the product that could have caused a harmful defect.
With regard to public schools, the HB 4 provided that professional school district employees are immune from personal liability for any act that is incident to or within the scope of their duties, except when they use excessive force in the discipline of students or cause bodily injury to students through negligence. This was an important reform because it eliminated an existing legal uncertainty over public school employee liability and provided protection for teachers.
Finally, the bill asserted that in cases related to emergency medical care, a jury must consider whether the person providing care did not have the patient’s medical history or was unable to obtain a full medical history; the lack of a preexisting physician patient relationship; the circumstances constituting the emergency; and the circumstances surrounding the delivery of emergency medical care. The bill raised the standard of proof in cases involving emergency room care from a preponderance of the evidence to "clear and convincing evidence."
The evidence is clear that these reforms are working and is a great public policy success story: The Texas Medical Board reported in 2006 that 4,026 doctors sought Texas medical licenses. This is a huge increase from the 2,446 who sought licenses in 2001, before the tort reforms were enacted. Aside from the sheer number of doctors who are seeking to practice in Texas, Citizens Against Lawsuit Abuse (CALA) has noted that historically underserved regions of the state are seeing increased levels of coverage. CALA president Bill Summers notes that "even in areas that have been underserved for years, such as the Valley and rural Texas, we’re seeing medical professionals return to high-risk specialties."
Key point: House Bill 4 enacted comprehensive tort reforms to bring greater balance to the civil justice system, reduce the costs associated with litigation, and address the role of litigation in society.
Senate Bill 5 (79S2) Telecommunications Market Restructuring
Senate Bill 5 restructured the regulation of the telecommunications industry by allowing electric utilities to provide broadband internet services through power lines, providing that the Public Utility Commission (PUC) could administer a statewide video and cable franchise, and requiring a study of the Universal Service Fund. The statewide video and cable franchise permitted new entrants into the video and cable business, while allowing broadband internet service to be provided over through power lines creates additional competition and promotes greater choice for consumers.
The PUC report into the Universal Service Fund was published in December 2006 and included recommendations for consideration by future Legislatures. The report noted specifically that the "Large Company Area High-Cost Program is overdue for updating (it uses data from 1997), and that the Commission should conduct a contested case and/or rulemaking under current law to consider, at a minimum, any appropriate resizing and retargeting of funding." In 2008, the PUC acted on this recommendation by reducing and restructuring the Large Company Area High-Cost Program.
Key point: Senate Bill 5 deregulated aspects of the state’s telecommunications market and introduced reforms to increase competition in the industry.
Senate Bill 14 (78R) Insurance Market Restructuring
In 2003, the Legislature enacted a range of reforms to the Texas insurance marketplace. These reforms were aimed at making the insurance market more competitive. More competition in the insurance market benefits Texas consumers in a number of ways: Specifically, allowing a broader choice of products and attracting a greater number of insurers to do business in Texas both increases the availability of coverage and leads to lower premiums.
Under Senate Bill 14 the old "flex-band" system of residential property and auto rate regulation was replaced by "file-and-use", under which insurers are permitted to use rates after they have been filed with the Department of Insurance without awaiting prior approval from TDI – provided that the rates are based on sound actuarial principles and are non- discriminatory.8 Both insurers that had been subject to state-set benchmark rates and insurers that previously were not rate regulated were brought under this unified rate regulation.
The evidence shows that Texas’ homeowners insurance market is far more competitive today than it was before the SB 14 reforms were passed. Between 1997 and 2003, the number of companies writing homeowner insurance in Texas declined from 166 to 101. By 2006, there were 17 new companies writing homeowners insurance, and there was a significantly higher level of competition in the market.9 Furthermore, companies began offering many different policy options for coverage, deductibles and exclusions, and Texans were no longer required to purchase the "one size fits all" state-promulgated policy form.
In a July 14, 2008 editorial, The Dallas Morning News commented that:
Except for along the hurricane-prone coast, the residential insurance market in Texas is the most stable, profitable and competitive it has been in years. The main reason is that lawmakers in 2003 gave insurers greater flexibility to compete for customers.
Homeowners' rates have dropped 6 percent in the past five years, even as home values and replacement costs have climbed dramatically. At least 29 new companies have begun writing home insurance policies in Texas. Average premiums statewide also are lower, a trend that probably will continue if lawmakers don't yield to election-year impulses.
Key point: Senate Bill 14 restructured the insurance marketplace to make it more competitive. The bill ensured availability and price competition and prohibited price fixing and other non-competitive behaviors. As a result, homeowners’ insurance rates have dropped and new companies have entered the marketplace.
