As the rest of the state watched helplessly as first Hurricane Harvey’s winds, then water, wreaked havoc on the coast of Texas and Houston, something else began circulating — a warning about a change to state law regarding weather-related claims on homeowners insurance.
House Bill 1744 was signed into law May 27 by Gov. Greg Abbott. Billed as tort-reform legislation that would reduce the opportunity for insurance fraud, some now say the law may very well get its first stress test in the wake of Hurricane Harvey.
The law reduces the penalties insurance companies can face if they settle claims for too little, and it lessens the chance the companies will have to pay the homeowner’s attorneys fees if the homeowner sues. It also protects individual agents from things like diminished credit scores if they are individually sued.
The bill addresses all weather-related damage — including floods, wildfires, hail, and hurricanes.
The legislation was sponsored by Texas Sen. Kelly Hancock (R) of North Richland Hills, an area not noted for its hurricane damage, but that has suffered from flooding in the past and is no stranger to hailstorms.
During Senate debate last May, Sen. John Whitmire (D-Houston) insisted the law would ultimately stymie policyholders’ efforts to sue because they would be on the hook for legal fees customarily levied against the losing party in a suit.
“I think we will hear from our constituents across the state when we have storms,” Whitmire said, adding that the bill could have far-reaching and detrimental consequences.
Hancock insisted that it would target a small group of lawyers that gin up policyholders to expect big payouts — that the bill would actually preserve consumer rights because policyholders would still be able to sue their insurance company.
The law goes into effect this Friday. “The majority law is retroactive,” said Plano attorney Terry Traveland. “It doesn’t matter when you file the claim, it is when you file the suit.”
Traveland explained that the only area of the law that may not be retroactive is the post-judgment interest. “Right now it’s 18 percent, but it’s going down to a lower variable rate — which is 10 percent currently.”
If the insurance company slow pays a claim, this law does make it harder to hold their feet to the fire.
But if you file before Sept. 1, this one part of the law could make a difference in how much money you get. “If they have to sue, the time between the time the judgment is granted and the time it is paid, the plaintiff can collect the 18 percent interest instead of 10 percent interest,” Traveland explained.
If you have property in the hardest hit areas of Harvey and will not be able to reach it to assess the damage before Friday, Traveland said it is smart to file anyway.
“They should go ahead and file a claim and let their insurance company know that they think they have damage,” she said. “If you get down there two or three weeks later and there is no damage, then you just call back and say, ‘Hey, we’re not damaged,’ and the insurance company is happy and the claim is closed.”
You can still wait to file, Traveland said, but if you do end up needing to sue, that post-judgment interest rate will become a factor.
Traveland also urged people to file flood claims with their insurance companies, despite federal law.
“To throw another kink into this, the actual federal common law preempts state law regarding flood damage,” she explained. “You should make a claim no matter what.”
“Yes, you will file with FEMA, too,” she continued. “But there is damage that will be flood, wind and from the rain, and you don’t know which. There are exceptions to the law that actually go under state law.”
“It doesn’t hurt to make the claim, and then have your company tell you that it falls under FEMA.”
In addition to filing a claim by Thursday, Traveland has advice as homeowners begin to assess the damage Harvey has wrought.
“I would advise them to make sure they have a camera — a real camera, although an iPhone will do if you don’t have one,” she said. “Video the car and your house. Open the trunk, open the doors, document all the damage.”
“As you are taking items out of your house, photograph them. Take a tarp, spread the items out, photograph, and then toss.”
“Photograph everything,” Traveland said. “You’ll forget what you threw out. You’re stressed, tired and your brain is fried from dealing with everything – you won’t get everything written down.”
“And follow the adjuster around,” she added. “Point out the damage they may not have noticed.”
CandysDirt.com will have more on how the bill came about and how Hurricane Harvey will be the first stress test for the law this week. But for now, this is what policyholders should know:
- File notice that you have a claim in writing, via fax or by a form of mail that requires a signature (we’ve provided a handy form at the end of this story).
- File it by Thursday, Aug. 31.
- Remember, this law addresses ALL weather-related claims. If you’ve been procrastinating on that minor roof damage or that cracked window from a hailstorm, you need to file by Thursday as well.