It has been brought to our firm’s attention that there has been quite a bit of misinformation circulated on social media about a purported September 1, 2017 deadline to file claims for damage related to Hurricane Harvey. Additionally, it seems that some of the confusion has been caused by unscrupulous lawyers hoping to capitalize on storm claims. The purpose of this post is to clarify Texas House Bill 1774 and provide a general overview of the of insurance regime applicable to Hurricane Harvey.
Hurricane Harvey was and continues to be an extremely costly storm. Texas Governor, Greg Abbott, estimates that the storm has caused damage of up to 180 billion dollars (For purposes of comparison, Katrina is estimated to have caused 120 billion in damages.) Most of this damage is attributable to flooding—not wind or hail. The cause of any damage to property is significant, because the cause determines what type of insurance may cover such damage.
Almost all homeowners in the Houston area carry private insurance that covers damage from wind and hail. This private insurance specifically DOES NOT cover damage from flooding. A homeowner must carry flood insurance (almost exclusively covered by the National Flood Insurance Program and administered by FEMA) to be covered for damage related to flooding. A homeowner’s decision to purchase flood insurance is often driven by lender requirements, and most lenders have only required flood insurance to be purchased when properties are in a Special Flood Hazard Area. The bad news for Houston is that initial data after Harvey is showing that ONLY 15% of homes damaged in the Houston area are covered by flood policies. Residential properties with flood insurance are limited to $250,000 in claims and commercial properties are limited to $500,000.
Any disputes regarding flood insurance claims are governed by federal law and have nothing to do with Texas House Bill 1774 and its amendments to the Texas Insurance Code. Moreover, our firm’s initial conversation with insurance lawyers familiar with the federal law governing flood insurance disputes indicate that there is not much opportunity for lawyers to make money representing clients disputing flood insurance payouts. A more involved analysis of federal law concerning flood insurance disputes is beyond the scope of this post.
We can now see that the effects of Texas House Bill 1774 would only apply to a small percentage of property owners with disputes against private insurance companies related to wind or hail disputes. If you or someone you know has a claim related to wind or hail (e.g. a tree that may have fallen on a home from high winds related to Harvey), it is important to file a claim with your insurance company promptly. However, the September 1, 2017 date that was circulated in social media as some critical deadline has very little bearing on any eventual disputes with your insurance company.
Texas House Bill 1774 makes one change to the insurance code that affects claims made on or after September 1, 2017. Where a homeowner successfully sues his insurance company and that claim was filed on or after September 1, 2017, the homeowner would be limited to a market rate of interest (10% at the time of this post) instead of 18%. Tex. Ins. Code Ann. § 542.060 (West).
The other changes enacted by House Bill 1774 would apply to any lawsuits filed against an insurance company after September 1, 2017—regardless of when the claim was filed. This means that since the storm hit the Houston area on or around August 27, 2017 (only four days prior to most of House Bill 1774 affecting lawsuits against insurance companies), the only benefit that could have been derived from filing a claim on August 31, 2017 or prior was an 8% difference in interest on the claim and attorney’s fees.
However, if you have suffered wind or hail damage from Harvey and you find yourself in a dispute with your insurance company months from now, you may be interested in the other effects of Texas House Bill 1774. Changes to the law require an insured to provide pre-suit notice (like the notice currently required under a DTPA action) to an insurer. The bill also changes the way in which attorney’s fees are awarded and limits certain claims under the insurance code in combination with a DTPA claim. While these changes are clearly the work of lobbyists to benefit the insurance industry, the changes do not appear to be so significant to seriously threaten an insured’s path to a meaningful recovery against insurance companies for violations involving payments of claims.
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