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Explaining the New Insurance Law for Policyholders

The same week that Harvey landed in Corpus Christi, a change to the Texas insurance code was scheduled to take effect: HB 1774. The code revision was ostensibly written to reduce “frivolous lawsuits,” but trial attorneys believe that the law weakens consumer rights.

The law makes the following changes to the insurance code:

  • Requires attorneys to provide 60 days’ notice to an insurer if they’re going to sue
  • Reduces the penalty for late insurer payments from 18 percent to 10 percent of the claim
  • Limits the conditions under which an insurance agent may be sued
  • Limits the conditions under which a claimant’s legal fees are covered by the settlement

Before, if an insurance company was taken to court and made to pay a claim, an 18% interest rate was applied to the final claim amount as a penalty for the time they forced the policyholder to wait for relief. Now, a market-based formula will be used to determine the interest rate (with a maximum of 20%). Currently, the formula means claimants will only receive 10% interest for their claim for months—even years—of delay tactics.

The Clear & Obvious Motive Behind the Changed Law

Some lawyers believe the change in penalty percentage is a brazen money-grab by the insurance company. They also believe that the 10% penalty is not as effective of a deterrent. Because insurers often delay or deny claims based on the potential risk to their bottom line (and not necessarily merit), lowering the penalty will encourage longer delays. This would necessitate more lawsuits to hold insurers accountable.

In addition, by limiting how much attorneys’ fees can be added to a claim, the insurance company just won a major victory. According to internal documents from the 1990s, it has long been the insurance industry’s goal to make lawsuits more expensive for consumers—expensive enough that lawyers would not consider their cases. By forcing consumers to more of their rightful settlement for attorney costs, they’re hoping less people will sue them—regardless of whether they deserve to be sued!

That’s not good for consumers. It’s not good for Texas—especially as hundreds of thousands of businesses and families fight for their rightful recovery in the wake of Hurricane Harvey. Consumers need more rights during the insurance process, not less.

Who the New Law Affects

The law affects the claims process for private insurance companies. If you’re filing a vehicle claim or a claim under the National Flood Insurance Program, then your process remains unchanged. However, if you’re filing a windstorm damage claim under your homeowner’s insurance policy, then this law will affect your case. Our firm wants to make sure you recover as much as you possibly can to pay for your home’s damages, helping you get back on your feet as soon as possible.

For areas that suffered the worst wind damage—Rockport, Port Aransas, Corpus Christi, and parts of the greater Houston area—this law will affect your cases the most.

If you’re filing a homeowner’s claim after Harvey, it will be subject to the new laws. Let our attorneys help you navigate the new obstacles your case is facing—call (888) 400-2101 or use our short online form for a free consultation today.