Estimates for damages from Hurricane Harvey are coming in in the billions - with Fortune reporting costs may "top $100 billion" as of August 29, 2017. Given this news, upcoming revisions to the Texas Insurance Code are in the spotlight. Specifically, HB1774, effective September 1, 2017, changes some aspects of the litigation process pursuant to the Texas Insurance Code should an insured bring a first-party suit. Ultimately, we expect that the ability of an insured to make a property claim will remain the same.
Both insurers and insureds should be mindful of the following changes:
Q: What claims are impacted by the new legislation?
A: The new legislation applies to property damage claims arising from damage caused by nature-related events. However, the new law does not apply to claims made against flood insurance issued through the National Flood Insurance Program, a federal program administered by the Federal Emergency Management Administration, which is not regulated by the state of Texas. Likewise, insureds who have wind and hail insurance through the Texas Windstorm Insurance Association, which provides insurance to some in coastal counties, are not impacted by the new legislation.
Q: What is the effective date of the statute?
A: The statute goes into effect on Friday, September 1. However, the statute is not clear if the changes are applicable to claims made prior to September 1, 2017, or if the filing of suit is required prior to the effective date for the pre-September 1 statute to apply.
Q: What are the changes to the litigation process?
A: An insured must provide the insurer notice 61 days before a lawsuit can be filed, as well as provide details including "acts or omissions" leading to the claim; the dollar amount the insured believes is owed; and "reasonable and necessary" attorney fees already incurred (Sec. 542A.003). Also, an insured must permit the insurance company to perform an inspection upon request after receiving a pre-suit notice (Sec. 542A.004). Failure to provide pre-suit notice or the opportunity to inspect could result in abatement.
The new legislation also allows an insurer the ability to assume potential liability by an agent or adjuster. If the insurer makes such an election by giving written notice before the insured files an action, any cause of action against the agent or adjuster shall be dismissed with prejudice.
Q: What about interest and attorney's fees?
A: Interest and attorney's fees are still recoverable if an insured brings suit: The new law reduces the amount of interest if an insurer must pay if it violates Texas Prompt Payment statute. Currently, if a court finds that the company delayed payment, the company must pay the claim with 18% interest. The new law will reduce the interest owed to 5% plus the judgment rate, currently 5%. (Sec. 542.060).
The law also establishes a threshold for insureds to recover the full amount of their attorney's fees in the event of a lawsuit. If a jury decides to award a plaintiff 80% or more of the amount they are claiming, then all of that individual's attorney's fees will be covered. If a jury decides to award 20% or less, none of their attorney's fees are covered. If a jury awards 21-79%, attorney's fees are prorated. (Sec. 542A.007).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
