Recent flooding and property damage caused by Hurricane Harvey in Houston and other Gulf Coast communities have drawn public attention to the potential impact of HB 1774 by G. Bonnen, a new law that revises state statutes governing lawsuits on weather-related property insurance claims. The bill took effect September 1, shortly after the hurricane made landfall, and affects property damage claims and lawsuits filed after that date.
The bill establishes a new requirement for a person or company with property insurance to give an insurance carrier at least 61 days’ notice before filing a lawsuit against the carrier for a natural disaster-related property damage claim. Within 30 days of receiving the required notice, an insurer may request to inspect, photograph, or evaluate, in a reasonable manner and at a reasonable time, the property subject to the claim. The bill applies both to commercial and personal property insurance but not to Texas Windstorm Insurance Association (TWIA) policies or policies issued by the National Flood Insurance Program. Texas law currently requires the same notice for lawsuits related to unfair methods of competition and unfair or deceptive acts or practices in the insurance industry.
HB 1774 also changes the method of determining the amount of attorney’s fees and interest that a policyholder may be awarded from a lawsuit. Texas law previously required an insurance carrier that violated Insurance Code, ch. 542 regulations for processing and settling claims for property damage to pay the policyholder the amount of the claim, interest at an annual rate of 18 percent, and reasonable attorney’s fees. HB 1774 creates a new formula for determining the attorney’s fees a court may award a claimant and specifies a new method for calculating the post-judgment interest rate on claim damage awards.
Supporters of HB 1774 said the bill would mitigate a growing trend of frivolous severe-weather-damage lawsuits. They say some lawyers filing such lawsuits have taken advantage of hard-working Texans who file property damage claims after storms like Hurricane Harvey, causing the number of weather-related lawsuits to rise sharply in Texas since 2012. Supporters also said that by limiting frivolous lawsuits in Texas, the bill could reduce the price of homeowners’ insurance for policyholders by lowering the costs associated with unnecessary, expensive litigation for insurance companies.
Critics of HB 1774 said requiring 61 days’ notice before filing a lawsuit could be especially burdensome in extreme weather situations in which damage can worsen over time. They said the bill also could restrict the ability of policyholders to recoup the costs of contesting a legitimate, underpaid property damage claim, including attorneys’ fees, and could dissuade Texans from doing so. Denying or underpaying claims may be especially likely in an extreme weather event that affects a large number of people, critics said.
by Lauren Ames