Texas House Bill 946: Protecting Consumers from “Swoop and Settle” Insurance Practices

Understanding the “Swoop and Settle” Tactic

After an accident, some insurance companies employ a strategy known as “swoop and settle.” This involves quickly contacting accident victims, often before they fully comprehend the extent of their injuries or consult legal counsel, and offering a rapid, low settlement over the phone. Victims, still in shock or unaware of future medical expenses, might accept these offers, inadvertently forfeiting their right to fair compensation.

The Legal Precedent: Gilbert v. Fitz

In the 2016 case of Gilbert v. Fitz, the Texas Court of Appeals upheld that oral agreements made over the phone with insurance adjusters can be legally binding. This decision has empowered insurers to continue the “swoop and settle” practice, potentially disadvantaging consumers who agree to settlements without full awareness of their rights or the long-term implications of their injuries.

Introduction of Texas House Bill 946

To counteract this practice, Texas House Bill 946 (HB 946) was filed on November 12, 2024. The bill seeks to amend the Insurance Code by adding Chapter 1955, which would prohibit oral releases for automobile insurance claims. Specifically, it mandates that any settlement agreement related to property damage or personal injury claims under an auto insurance policy must be a separate written agreement to be enforceable.

Key Provisions of HB 946

• Prohibition of Oral Releases: The bill explicitly states that oral agreements between a claimant and an insurer regarding settlements for property damage or personal injury claims are not enforceable. Only written agreements will be recognized.
• Applicability: HB 946 applies to all insurers writing personal or commercial automobile insurance in Texas, encompassing a broad range of entities from mutual insurance companies to county mutual insurance companies.
• Effective Date: If enacted, the law would take effect on September 1, 2025, and would apply to contracts entered into on or after January 1, 2026.

Implications for Consumers

By requiring written agreements for settlements, HB 946 aims to:

• Ensure Transparency: Victims will have the opportunity to thoroughly review settlement terms, consult with legal counsel, and make informed decisions.
• Prevent Coercion: Eliminating the possibility of binding oral agreements reduces the risk of victims being pressured into unfavorable settlements during vulnerable moments.
• Promote Fair Compensation: With adequate time and information, victims are more likely to receive settlements that accurately reflect the extent of their injuries and associated costs.

Support and Advocacy

Consumer rights organizations, such as Texas Watch, have been vocal in supporting HB 946. They highlight the predatory nature of “swoop and settle” tactics and advocate for legislative measures to protect Texans from being exploited by insurance companies. These organizations encourage citizens to contact their lawmakers and express support for the bill, emphasizing the need to end deceptive insurance practices.

Texas House Bill 946 represents a significant step toward safeguarding consumers from exploitative insurance practices. By prohibiting oral releases and mandating written agreements for auto insurance settlements, the bill seeks to ensure that accident victims have the necessary protections to make informed decisions and receive fair compensation. As the legislative process unfolds, continued advocacy and public awareness will be crucial in enacting this pro-consumer legislation.

FAQs

What is the main objective of Texas House Bill 946?

The primary goal of HB 946 is to prohibit oral settlement agreements in automobile insurance claims, ensuring that all settlements are documented in written agreements to protect consumers.

How does the “swoop and settle” tactic affect accident victims?

“Swoop and settle” involves insurers quickly offering low settlements to accident victims over the phone, often before the victims understand the full extent of their injuries or consult legal counsel, leading to potentially unfair compensation.

What was the significance of the Gilbert v. Fitz case?

The 2016 Gilbert v. Fitz case established that oral agreements made over the phone with insurance adjusters can be legally binding, facilitating the continuation of “swoop and settle” practices.

When would HB 946 take effect if passed?

If enacted, HB 946 would become effective on September 1, 2025, and would apply to contracts entered into on or after January 1, 2026.

How can consumers support the passage of HB 946?

Consumers can support HB 946 by contacting their state legislators to express their backing and by participating in advocacy efforts led by consumer rights organizations like Texas Watch.

What are the expected benefits of HB 946 for accident victims?

HB 946 is expected to provide accident victims with the time and clarity needed to make informed decisions, prevent coercive settlement practices, and promote fair compensation by requiring written settlement agreements.