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Flooded Houstonians urged to file claims promptly, but don’t have to before Sept. 1

Houston Business Journal, August 28, 2017

By: Paul Takahashi

Attorneys are urging Houston homeowners affected by Hurricane Harvey to file their insurance claims before a new state law takes effect Sept. 1, but state officials say that’s not necessary.

The Texas Trial Lawyers Association is advising homeowners to file their claims before House Bill 1774 takes effect. The state attorney group argues the new law will make it more difficult for homeowners to sue their insurance companies after it takes effect.

A rescue underway in the Meyerland area of Houston on Aug. 27 during the floods from… more

However, the law’s author, Texas Sen. Kelly Hancock (R-Dallas), said through a statement that HB 1774 has no impact on the insurance claims process, only lawsuits that come to bear if there is a dispute between the homeowner and insurance company. HB 1774 maintains the homeowners’ ability to sue their insurance company, but limits lawyers’ fees, he added.

“The false narrative that the claims process changes on Sept. 1 is false,” Hancock said in a release. “There is no need to rush to file a claim. Put your safety first.”

The Texas Supreme Court and the Court of Criminal Appeals also issued an emergency order Aug. 28 allowing changes to court procedures in cases involving Hurricane Harvey. The order expires Sept. 27, well after HB 1774 takes effect Sept. 1.

HB 1774 also only affects homeowners' insurance claims, which does not cover flood or wind damage claims. Only a small percentage of insurance claims end up in court.

However, attorneys argue that HB 1774 would make it difficult for those homeowners to sue their insurance companies, particularly by mandating a pre-suit notice to insurers, permitting insurers to conduct a home inspection and reducing insurers’ penalties if they don’t pay out their claims promptly.

“The best thing to do to preserve the full measure of your rights under prompt pay statute is to submit written notification that you sustained damage related to Hurricane Harvey and do it before Sept. 1,” said Alex Winslow, communications director for the Texas Trial Lawyers Association. “We will be monitoring the situation to see if claims are handled fairly and promptly.”

Prompt pay penalties awarded through a lawsuit will now be calculated on a floating basis tied to interest rates, with a 20 percent ceiling rather than a static 18 percent penalty, according to Hancock.

Ed Wolff, a Houston Realtor, said he is recommending that homeowners file their insurance claims promptly, but not necessarily before Sept. 1. Wolff, whose Meyerland home was flooded during the storm, has been telling clients that HB 1774 only affects homeowners insurance, not flood or windstorm coverage that most Houstonians would be filing claims under if their homes were damaged by the storm.

“The new law still gives you the right to file a lawsuit in court against your insurance company,” Wolff said. “But that’s such a minute percentage, and for those who do, it puts a couple of hurdles in filing that suit.”

HB 1774 was sponsored by Hancock, and signed by Gov. Greg Abbott on June 1. The intent of the bill, which was backed by Texans for Lawsuit Reform, was to limit the number of frivolous lawsuits after major weather events. Hancock took up the bill after a major hailstorm in Dallas caused a number of frivolous claims.

“It’s clear the Legislature didn’t intend to make it more difficult for people to get their claims heard,” said Brandon Rottinghaus, a political science professor at the University of Houston. “The Republicans’ argument is to prevent frivolous lawsuits. But it’s still the case they made it more difficult for people to navigate this process. There could be some backlash on Republicans for passing this through.”