Texas could set a national precedent in the coming weeks that would damage the rights of homeowners across the country.
The Texas Farm Bureau has asked the state insurance commissioner to approve language that would offer lower premiums to homeowners in return for giving up their right to a jury trial if they think the insurance company is shortchanging them. These agreements, known as pre-dispute binding arbitration endorsements, would be the first of their kind in the nation for insurance.
"What the Farm Bureau is asking ... is to take disputes about insurance claims out of court, and push them into private, secret, arbitration proceedings where the industry has rigged the rules of the game," said Alex Winslow, executive director of Texas Watch, a consumer protection group. "This is just the latest in a long line of efforts to make it harder for people to get what they're owed under the terms of their policy."
Mandatory arbitrations, which cannot be appealed, have become popular in other industries as a way for corporations to prohibit unhappy customers from organizing class-action lawsuits, or frankly, lawsuits of any kind. The companies get to choose the arbitrator, and the outcomes are almost always secret.
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Almost everyone who uses a credit card, cellphone or social media has agreed to mandatory, binding arbitration as part of signing up for the service. Since most companies within a given industry use the same arbitration clause, consumers don't have any choice but to agree, according to Joanne Doroshow, the executive director of the Center for Justice & Democracy at New York Law School.
"They are so prevalent now that there really is no bargaining power that the consumer has," she said.
So far, state insurance commissioners have protected homeowners who are often required to buy insurance. For decades, most states have said that homeowners should always have access to the courts to get a fair hearing and the public has an interest in knowing how they are resolved.
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"It's 100 percent sure it will spread to every insurance contract. I don't think there is any reason why it would not," Doroshow said.
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