Sen. Middleton outlines bill to require Texas law and venue for arbitration in surplus-lines contracts; industry witnesses split

Sen. Royce Middleton laid out Senate Bill 455, which would require arbitration clauses in surplus‑lines insurance contracts involving Texas residents to be governed by Texas law and arbitration to occur in Texas when the insured’s home state is Texas.

“Surplus lines used to be solely for specialized risk,” Middleton said, explaining that arbitration provisions requiring New York law and venues have imposed high costs and short limitations periods for Texas policyholders. “Senate Bill 455 requires that the arbitration be conducted in Texas and governed by Texas law. It also requires that the insurance contract be interpreted according to Texas law,” he said.

Proponents told the committee that travel and forum choice have led to large arbitration costs that fall on Texas entities. Jeff Raisner, a board‑certified insurance lawyer, described a long arbitration for a Texas school district that resulted in more than $80,000 in arbitration fees paid to a New York arbitration society. “New York arbitrators were much more expensive, often charging over a thousand dollars an hour,” Raisner said. Chas Bostick, president of the Texas Association of Public Insurance Adjusters, said appraisal traditionally resolved many first‑party disputes quickly and cheaply; TAPIA supports SB 455 on the condition arbitration, if used, be held in Texas under Texas law. Both witnesses framed the change as a consumer‑protection measure.

Industry witnesses opposed or sought changes. Jay Thompson of the Wholesale & Specialty Insurance Association said the bill as drafted applies broadly to all surplus‑lines contracts and could interfere with the market for large or multinational risks, such as ocean marine or multinational commercial placements. He said surplus‑lines forms have “form freedom” and that the governor’s veto message last session emphasized freedom of contract. Shannon Maroney of Velocity Risk Underwriters, a surplus‑lines insurer, said the surplus market is a safety net for hard‑to‑place risks and warned that restricting freedom of contract could increase premiums or drive carriers from Texas.

Sen. Dean Zaffrani asked whether the bill addressed the governor’s earlier veto concerns. Thompson and others argued the current version is broader than last year’s bill and would apply to multi‑state coverages. Senator Middleton and other backers responded that the bill is tied to the surplus‑lines chapter—chapter 981 of the Insurance Code—and applies when the insured’s home state is Texas; the author’s office said the draft is intended to address specific abusive forum‑selection practices, not every arbitration provision.

The committee opened public testimony and took questions from members. After the panels and resource witness exchanges, the committee closed public testimony and left SB 455 pending for further work.

Ending: The author and several industry groups signaled willingness to negotiate language; the committee left the bill pending for amendment and additional information before any vote.