What a New Texas Insurance Law Means, and Doesn’t Mean, for Harvey’s Victims

This statute was a legislative response to perceived increases and abuses in homeowner claims from recent storms. Some press coverage, social media and other venues have suggested that insureds impacted by the hurricane must take action before that date or they will lose certain rights. As always, those suffering damages should always move promptly to preserve their rights under their policies. But while companies and organizations protected by commercial insurance coverage should be aware of this new statute, there is no reason to panic. For example, the claim process will look largely the same as before. If, however, an insured knows a potential claim from Harvey is likely, then providing written notice in accordance with your polic(ies) before the effective date of the statute is a prudent choice.

What will not change under the revised statute

Insurers’ claims-handling deadlines, including:

• 15 calendar days after notice to acknowledge the claim and request required materials;
• 15 business days to accept or reject the claim after receiving materials sufficient to establish the loss, or to notify the insured that it needs additional time up to 45 calendar days; and
• 60 calendar days to pay the claim after receiving information reasonably requested and required.

However, because Harvey is a “weather-related catastrophe or major natural disaster,” the current statute extends each of these deadlines by an additional 15 days.

What will change under the revised statute

• Requirement of an additional notice to the insurer at least 60 days before filing an action with details about the claim and damages. But the Texas Insurance Code already contains pre-suit notice requirements, so what is about to be different is that failure to give the required notice may preclude an award of attorneys’ fees;

• The insurer has 30 days from notice to request an opportunity to inspect the property and abate a lawsuit by the insured until the inspection is “completed”;

• Suits by insureds during the 60-day period are subject to abatement, while suits by the insurers are subject to dismissal;

• Calculation of the interest rate an insurer must pay for violations of the claim-handling deadlines goes from a set 18 percent rate to a variable, simple interest rate between 10 and 20 percent, though the rate is currently 10 percent;

• Awards of attorneys’ fees changed from “reasonable” to “reasonable and necessary,” including specific requirements for proving such fees; and

• Procedure allowing insurers to accept liability of their agents to prevent insureds from bringing a claim against the agents.

Some of these requirements are not fully defined or may intersect with other statutes without clear guidance on supremacy, so these issues will likely be addressed through the courts.

Many of these changes are less likely to affect corporate policyholders, and, again, they provide no reason to panic. It is possible, however, that some insurers may give priority to claims under the existing law due to some of these changes, such as the current interest rate differential. However, other Insurance Code provisions that are not changing still impose an obligation on insurers to attempt in good faith to bring about a prompt, fair and equitable settlement of claims once the insurer’s liability becomes reasonably clear. 

Considering all of this, if an insured knows a potential claim from Harvey is likely, then providing written notice in accordance with your polic(ies) before the effective date of the statute is a prudent choice, but not an imperative one.

Pillsbury’s Insurance Recovery & Advisory Group is a nationally acclaimed, market-leading policyholder-side insurance group within one of the most respected global law firms headquartered in the United States. Pillsbury stands ready to assist with Hurricane Irma and Harvey recovery efforts from its Miami, Houston and other offices nationwide.