On September 1, 2017, the so-called "Hail Bill" took effect in Texas, which requires an insured to give written notice to its insurer at least 61 days before filing a lawsuit. Among other items, the notice must include any alleged acts or omissions giving rise to a claim under the Texas Insurance Code, the "specific amount owed" by the insurer, and the reasonable and necessary attorneys' fees incurred. See Tex. Ins. Code § 542A.
On April 6, 2018, the first court decision interpreting the provision arrived in Carrizales v. State Farm Lloyds, currently pending in the United States District Court for the Northern District of Texas, Dallas Division. Gregorio Carrizales's home in Garland, Texas sustained storm damage in 2015 and he subsequently filed a claim under his homeowners' policy with State Farm. An attorney for Carrizales sent a demand letter on March 15, 2016, alleging breach of the insurance contract and estimating total damages at $29,806.64.
Carrizales filed suit nearly two years later – after the effective date of Tex. Ins. Code § 542A. State Farm Lloyds filed a motion to abate on February 6, 2017, alleging there was no pre-suit notice in compliance with 542A. Specifically, State Farm contended there was (1) no statement regarding their specific acts or omissions giving rise to a claim, (2) no amount of reasonable and necessary attorneys' fees incurred, and (3) no statement that a copy of the notice was provided to Carrizales.
In granting the motion and abating the action, the court arrived at two important conclusions: (1) the requirements imposed by 542A, although procedural, are "so intertwined with Texas's substantive policy" that they must be applied in federal court, and (2) the purpose of the statute was to encourage settlement of claims without litigation, and it would frustrate the purpose to allow a plaintiff who to failed to provide such notice to proceed with litigation. The Court abated the action until 60 days after the date State Farm Lloyds was provided with proper notice.
Carrizales permits insurers sued in federal court to abate lawsuits and avail themselves of the protections set forth in 542A in the event compliant notice is not given. Whether this results in an increased number of cases resolved via settlement remains to be seen.
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