If I am a property owner in Texas, and I am insured under a policy of insurance, and I have sustained property damage in Hurricane Harvey, what do I need to do right now?
- Don’t go back to your property if it’s unsafe. You can contact 3-1-1 to determine if your area is safe.
- What if I have to pay for a hotel because I can’t stay in my home? Some insurance policies have ALE (alternative living expenses). This could include temporary lodging. Keep all receipts and contact your carrier and ask if ALE is covered.
- Always communicate with your carrier in WRITING—this could be email, letter, fax, etc. Keep copies of all correspondence with your carrier and proof that you sent it. Build a file i.e., a paper trail, and tape record any conversations with insurance adjusters. Texas is a one-way consent state. As such, you can ethically tape record the other person without their permission. I can’t speak to other jurisdictions, but a call made in Texas to another person in Texas is covered by the “one-way” consent rule.
- File your insurance claim right now if there’s damage. The policy will tell you exactly who to contact, which can be easily done electronically, via email, in less than 5 minutes. Include your full name, address, insurance policy number, etc. You DO NOT need to provide evidence of damage or photographs; you can submit that later. Send the notice in a way that can be proven it was received, i.e. electronic receipt, certified mail receipt, fax confirmation sheet, etc. All you have do is put the insurance company on notice of a property damage claim under the policy upon which you are insured. If you’re one of the few people in this country who has a homeowners’ policy and a separate flood insurance policy, make a claim on both. Don’t worry about your insurance rates going up simply because you made a claim. That’s what insurance is for and an Act of God should not result in a carrier singling you out to raise your rates.
- Immediately take a cell phone video of the damage and as many photos as possible. Document, document, document. The property may look far better months later when an insurance adjuster finally comes to the home and inspects it. “Real time” evidence is of paramount importance. Seeing is believing.
What Does My Homeowners Policy Typically Cover?
Check the declarations page to your policy. There are all different kinds of policies, but even a bare bones one will typically cover hail, wind, and tornado damage (earthquakes are generally excluded). Flooding is generally excluded on a bare bones policy, but this is a very sticky issue. With respect to a hurricane, the salient point is that it will cover “wind” damage.
Don’t think, however, that just because your property was damaged by water that it will be automatically excluded under a “flood exclusion” in the policy. If a 135 mph hurricane wind created a “storm opening” in your home, the intruding water damage should be covered. So, if a tree fell on your house in a hurricane and water then flooded the home through the hole in the roof, the claim will likely be covered. However, it’s the type of claim a carrier will deny if they can take the position that the roof was in need of repair, etc. The issue often turns on “causality,” i.e. what caused my loss: “wind driven rain” or a true flood that seeps up from the ground? That’s the rub on why many, many property damage claims end up in litigation. That issue can often turn on expert testimony. Keep in mind, a separate flood policy DOES NOT cover wind-driven rain.
What exactly is “wind driven rain?”
It basically means that, but for the wind, there would have been no water in the home. In contrast, flooding caused by an overflowing creek or a plugged storm drain is not covered, generally speaking, under many homeowners’ policies.
About the New Insurance Law Signed by the Governor of Texas
If my claim is underpaid, slow paid, or denied in its entirety, how are my legal rights impacted by the new law the governor of Texas signed on May 26th that went into effect on September 1, 2017?
What does the new law apply to?
Property damage caused by forces of nature, including an earthquake or earth tremor, wildfire, flood, tornado, lightning, hurricane, hail, wind, snowstorm, rainstorm, etc. Yes, the statute is very broad.
What types of claims are not covered by the new law?
The new law does not apply to an action against the Texas Windstorm Insurance Association or arising from policies that are derivative to the TWIA. A true “flood policy,” which less than 10% of the population has, is governed by federal law—not state law—and those policies are part of the National Flood Insurance Program, which is part of FEMA. Texas rules and laws do not apply to these types of policies.
As a policyholder, do I have fewer legal rights today than I had yesterday? Why?
Yes, you have less rights today than you did yesterday (or before September 1, 2017). This doesn’t mean you won’t be paid the full value of your claim whenever you make it. What it does mean, however, is that if your carrier underpays your claim, slow plays your claim, or wrongfully denies your claim, there are new procedural rules that make it harder to go to court; it also may be more difficult to find a lawyer, and you cannot recover the full measure of compensation you could have yesterday. The result is that carriers are now more incentivized to slow play their insured. What is colloquially known as the “Blue Tarp Bill” (HB 1774) substantially reduces the penalties insurance companies must pay when they are liable for delaying resolution of a claim, underpaying a claim, slow paying a claim, or wrongfully denying a claim. The new “notice” requirements to contest a determination by an insurance carrier, as a practical matter, increase the costs and force an insured to hire a lawyer. The notice requirements are detailed and admissible
in court later. However, it will be more difficult to find a lawyer because there is now an 80/20 formula that makes it more difficult for a winning claimant to be reimbursed for the full value of their attorney’s fees. Also, the 18% penalty that applies as an interest rate on the full value of the claim that should have been paid has been slashed in half. This makes it harder to keep your carrier honest and it makes it that much more difficult to find a lawyer. The new law DOES NOT apply to frivolous claims. Indeed, the very first sentence of the Act says it relates to “actions on and liability associated with certain insurance claims.” Thus, the remedies at issue that have been limited IMPACT AND HURT only meritorious claims.
Why do I care that the 18% penalty (which was in effect up and until August 31, 2017) no longer applies?
An 18% interest rate on an underpaid claim could add an additional 50% to the value of your claim over 2 years. But at 5% above the judgment rate—which is the new rate as of today and after September 1, 2017 – a delayed payment would take almost 10 years to double the amount of the claim. That’s a very big deal.
How do I find a lawyer that can handle this type of claim, if necessary?
The State Bar of Texas has a toll-free hotline that can help you free of charge. The number is 1-800-252-9690.
What if the insurance company low balls me, but sends me a check? Do I deposit the check?
You must read the paperwork very carefully before you cash any check. If it states “payment in full” or “claims release,” etc., cashing the check could prevent you from pursuing additional monies you would otherwise be owed had you not cashed the check.
The New Law:
If the carrier is liable, they must pay the following, in addition to the amount of the claim: simple interest on the amount of the claim as damages each year at the rate determined on the date of the judgment under the finance code, plus 5% together with attorney’s fees.
If the carrier underpays or slow pays the claim, you must give notice in writing before you can do anything, including going to court (there are certain very limited exceptions such as the expiration of the statute of limitations). This notice should be drafted by a lawyer because it will be admissible before a jury if the lawsuit is tried. The notice must contain certain things, such as:
- A statement of what the insurance company did wrong (acts and omissions);
- The amount the insurance company actually owes (difficult to quantify unless the policyholder hires an appraiser, engineer, or someone with specialized expertise in valuing losses);
- The amount of attorneys’ fees incurred by the claimant as of the date of the notice
Once notice is given in writing, the insurance company can, but does not have to, give written notice to you (within 30 days after receipt of your Notice) a request to inspect, photograph, etc. your property. And, within 60 days of receipt of the notice, the insurance company must have inspected the property if it intends on doing so.
What happens if I don’t give notice and I just file my lawsuit?
Your case will be abated. This means the train will not leave the station. You case sits in idle until the statute is complied with.
If my claim is underpaid or slow paid, and I give the required notice, and the carrier still underpays or slow pays me, and I have to file a lawsuit… what court will my case be in under the new law?
Without making it unnecessarily complicated, the insurance company can agree that it will take responsibility for any screw-up by the insurance adjuster. If the insurance company elects to do that, the claim will end up in federal court rather than state court. So, this is a procedural technicality that basically allows the insurance company—which is liable—to forum shop and decide what court it prefers. Why does it matter? State court has more relaxed standards; the judges are elected by the people and they live in your county. Federal judges, on the other hand, may not live in your county at all, and are appointed for life by the President at the time of their appointment, and the procedural technicalities are extremely onerous in federal court, etc. That’s not to say federal court is unfair, but it is saying that you lose your choice of which court to be in – and that’s unfair to you as the claimant.
If I win, does the insurance company have to pay my attorney’s fees?
Yes. However, under the new law, the attorney’s fees that can be awarded are substantially curtailed (there’s an 80%/20% sliding scale that’s incredibly confusing). This makes it more difficult for the insured to be reimbursed for the full value of their attorney’s fees. What’s the practical impact of this? Most policyholders who have lost everything do not have cash to pay a lawyer and must therefore hire a lawyer on a “contingent” fee. If the lawyer does not believe he or she can be fairly paid for their time if the case is won, they won’t take the case. There must be a “risk and fair reward” calculus that makes sense to the lawyer from a business standpoint. If the insured can’t get a lawyer, he or she can’t meet the pre-suit notice requirements—the carrier is off the hook and the insured is stuck with the low ball offer or the denial of the claim in its entirety.
All of the insurance company people tell me the new law only applies to “lawsuits.” Are they telling the truth?
This is extremely misleading. Because a lawsuit occurs when the insurance company wrongfully underpays the claim, delays the claim, or wrongfully denies the claim, and when the insurance company is incentivized to slow play, delay, and deny, the likelihood of litigation increases if the consumer holds out for the full value of their claim. So, the “claims process” and how the claim is handled drives whether litigation does or does not occur. And before you can even go to court you must give the procedural notice set forth above.
For additional information and legal help, contact us at Lyons & Simmons, LLP. Our team of Texas trial attorneys is here to fight for you.