Natural Disasters

New Texas law, taking effect in September, could affect some homeowners filing Harvey claims

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Rain from Hurricane Harvey falls Aug. 27 on an apartment complex in Humble, Texas./Trong Nguyen(

A Texas law that takes effect on Sept. 1 could affect some homeowners filing claims with their insurance companies in the wake of Hurricane Harvey.

House Bill 1774 reduces the penalty interest rates insurers have to pay if they are late in paying weather-related claims, report the Texas Tribune, Click2Houston, Community Impact Newspapers and the Dallas Morning News. On its website, the Texas Trial Lawyers Association called the bill “a flawed piece of legislation.”

Currently insurers have to pay 18 percent interest each year for delayed claims. The rate under the new law will be determined by a market rate formula that currently is 10 percent. Prejudgment interest can also be recovered.

The bill also requires insurers be notified before a suit is filed to allow them to address outstanding claims, and limits attorney fees if the recovery at trial is less than 80 percent of the pretrial demand, according to an article written by Zelle partner Jennifer Gibbs in Law360.

If recovery is 20 to 79 percent of the presuit damages demand, the corresponding percentage of attorney fees is recoverable, according to the story. If recovery is less than 20 percent of the pretrial demand, no attorney fees may be recovered. The limits were intended to end inflated damage estimates being used as a negotiating tactic.

Some lawyers were advising homeowners to file written notice of insurance claims before Sept. 1 because the 18 percent penalty interest could be preserved. It’s unclear, though, whether the notice amounts to “initiating an action” under the law, according to Click2Houston.

Republican State Sen. Kelly Hancock, a sponsor of the bill, warned homeowners not to rush home in dangerous conditions to file claims.

“There is no need to rush to file a claim,” Hancock told the Dallas Morning News. “Put your safety first. Do not return to seriously damaged property unless you are informed that it is safe.”

The new law was intended to crack down on suits that didn’t need to be filed, Lucy Nashed, a spokesman for Texans for Lawsuit Reform, told the Texas Tribune. She said most claims related to Hurricane Harvey will be flood-related and not affected by the law because flood damage is covered by policies obtained through the National Flood Insurance program.

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