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Hurricane Harvey Insurance Information

Recently you may have heard many conflicting and confusing stories and opinions about your insurance rights from damages related to Hurricane Harvey. Texas House Bill 1774 (“H.B. 1774”), which takes effect Friday, September 1, 2017 amends certain provisions of the Texas Insurance Code for first-party claims under property policies caused by a “force of nature” (including floods, hurricanes, and rainstorms). Included below is some key information that commercial policyholders need to know about H.B. 1774 to protect themselves and maximize recoveries under their property policies.

You are not REQUIRED to file a claim before September 1, but you may lose certain rights and leverage with the insurance company if you do not.

1. Hurricane Harvey property claims should be reported by today, Thursday, August 31 to avoid a reduction in the interest penalty from 18% to 10% for any violations of Texas statutory claims handling requirements by the insurer. Texas policyholders who initiate claims under property policies prior to September 1, 2017 can recover 18% interest in the event that a property insurer violates Texas statutory claims handling requirements (e.g., wrongly delaying or refusing payment of an insurance claim). Texas policyholders who initiate claims under property policies on or after September 1, 2017 can recover 10% interest at current market rates for the same violations. Although many property insurance claims are resolved with no allegations of violations of statutory claims handling requirements, and the vast majority of disputed property insurance claims settle before an interest penalty is awarded, the threat of the larger 18% interest penalty could provide additional leverage in negotiating a settlement in the event of a disputed claim. Of course, should a disputed claim result in protracted coverage litigation, the difference between an 18% interest penalty and a 10% interest penalty could be multiples of the full amount of the insurance claim.

2. Review your policy’s notification provisions before reporting any loss. Before filing any notice or report with your insurer, it is vital to review the notification provisions of your insurance policies. Many commercial property insurance policies allow a brief initial report of loss, to be followed within a period of time (often 60 or 90 days) with a “proof of loss” explaining the details of the loss and the amount claimed under the insurance policy. This process allows policyholders to initiate a claim quickly and fill in the details of the claim later. Given the changes set to occur on September 1, Texas policyholders can use this process to initiate Hurricane Harvey claims before September 1 even if details of the loss are not yet known. However, because some property policies require additional information regarding the loss at the time of initial notification, it is important to review notification provisions before reporting a Hurricane Harvey claim.

3. In the event that a Hurricane Harvey property claim is disputed, H.B. 1774 adds requirements to be met prior to filing a lawsuit. H.B. 1774 requires policyholders to send a pre-suit notice to an insurer 60 days prior to filing suit alleging that an insurer has violated statutory claims handling requirements. This pre-suit notice must provide details regarding the amount of the loss (i.e., the exact amount alleged to be owed), a statement of acts or omissions giving rise to the claim, and the amount of attorneys’ fees incurred by the time of the pre-suit notice. In addition, H.B. 1774 requires policyholders to permit inspections of the damaged property and limits the amount of attorneys’ fees that policyholders can recover in actions alleging violations of statutory claims handling requirements. Because these changes go into effect for all actions commenced on or after September 1, any disputed Hurricane Harvey property claim that ends up in litigation will likely be subject to these new requirements.

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