Bay Area Houston

We won’t be fooled. Again.

Years ago the Texas Department of Insurance was considering allowing mandatory binding arbitration in home insurance contracts. This was due to a rash of hail damage claims in South Texas. I attended the hearing and watched as the Commissioner was warned about the abuse of arbitration in other contracts like new home construction. Eventually the Commission denied the request but I believe it is coming back.

Consumers should be very concerned about this for a number of reasons. First and foremost the right to a civil trial is protected (or was) by the 7th Amendment of the Constitution.

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.

Back in the mid 90’s the homebuilders decided to put mandatory arbitration clauses in their new home contracts. Home buyers were required to sign away their rights to the Constitution. Since the vast majority of home builders required mandatory arbitration there was not much of a choice. When you give up your rights and have a defect in your new home you are required to enter into a private justice system that is mandatory, secret, and final. There are no appeals. There isn’t a jury or a judge. The builders will never say arbitration is faster, cheaper, and just as fair as our time honored justice system because it is simply not true.

Recently State Farm is being sued for denying hail damage across the nation. NPR wrote an excellent article on the situation. I can see this being used as a way for the Texas Legislature to allow insurance companies to put arbitration clauses in home contracts. Just remember, just like new home construction, rates and cost of repairs will not go down. So called “tort reform” have never resulted in lower prices for consumers. It only helps the insurance companies from being held accountable in a public trial.

More on this issue later.

This entry was posted on Tuesday, May 12th, 2026 at 7:21 am and is filed under Consumer. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.