Uncertainty Surrounds New Texas Insurance Law: Divergent Views Emerge on the Impact of the Texas “Hail Storm Bill” on Hurricane Harvey Claims

As we reported here in May, the Texas Legislature recently passed legislation (House Bill 1774, a copy of which can be found here) which amends Chapter 542 of the Texas Insurance Code—Texas’s general prompt pay statute for insurance claims.  Most of the new law’s provisions are aimed at addressing prompt pay practices and disputes concerning “forces of nature” claims.  Moreover, the law goes into effect on September 1, 2017—a typical date for Texas laws passed in the preceding legislative session.  However, few could have predicted that a wide swath of Texas’s coastal communities would endure a Category 4 hurricane and related historic floods only days before the new law takes effect.  As a result, commentators have been quick to offer their views of how Hurricane Harvey claims will be impacted by this new law.

Some groups insist that the new law does not change the insurance claims process and that policyholders have no reason to hurriedly file claims.  Other commentators point to changes in the interest penalties for delayed payment of claims and have encouraged policyholders to do everything they can to file claims before September 1st.  And, still others point to the likelihood that the new law will not affect the lion’s share of Hurricane Harvey claims due to the special nature of Texas Windstorm Association policies and National Flood Insurance Program policies.

With Hurricane Harvey claims only beginning to trickle in and yet projected to set state and national records, the full impact of this new law remains to be seen.  In the meantime, any party interested in a Hurricane Harvey claim will need to carefully parse the language of the new statute and its various exceptions, including the following enactment language with parentheticals added:

SECTION 4.  (a)  Section 541.156, Insurance Code [concerning pre-suit notice], as amended by this Act, and Chapter 542A, Insurance Code [concerning forces of nature claims], as added by this Act, apply only to an action filed on or after the effective date of this Act.  An action that is filed before the effective date of this Act is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for that purpose.

(b)  Section 542.060(c), Insurance Code [concerning interest and attorneys’ fees], as added by this Act, applies only to a claim, as defined by Section 542A.001, Insurance Code [concerning forces of nature claims], as added by this Act, made on or after the effective date of this Act.  A claim made before the effective date of this Act is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for that purpose.

SECTION 5.  This Act takes effect September 1, 2017.

We will continue to monitor the impact of the new law as the extent and nature of its impact becomes clearer.