Critical Insurance Law Change

Did you know that your rights as an insurance policyholder will change on September 1.

If your claim is filed by midnight 8/31/2017, Insurance policyholders that underpay, wrongfully deny, or delay payment of claims may be entitled to receive a penalty of 18% of the underpaid, wrongfully denied or delayed portion.

Download a Written Notice of Claim Here

However, on September 1, the law will change.

HB 1774, which were championed by the Insurance Industry and its special interest lobbyists, and sponsored by many members of the majority party (who took large amounts of campaign money from insurance companies) in the Legislature and signed in to law by Gov. Greg Abbott (one of his priority pieces of legislation), takes effect. This bill changes the law and makes it more onerous to file a lawsuit against an insurance company (if necessary) and reduces the damages that insurance companies have to pay if they are found liable for violations of the law. The new law does the following:

1) Reduces the current 18% penalty that an insurance company must pay for underpaid, wrongfully denied, or delayed payment of, insurance claims to a floating rate of somewhere between 8-12% (Rate as published in the Texas Finance Code + 5%);

2) Requires insurance policyholders to get their damages almost exactly correct at the time of sending a demand letter (before the lawsuit is even filed) to the Insurance Company. If a jury awards an amount that is 80% or less of the demand letter, attorney’s fees are reduced significantly. If the jury finds that the demand is excessive (no definition of what is excessive), then there may be no attorneys’ fees awarded. This makes attorneys much more selective in the cases the choose to take on and makes it more difficult to find an attorney willing to handle a policyholders’ claim; and,

3) Allows an insurance company to accept liability for the acts of its adjusters. Under current law, until 9/1, an Adjuster can be found individually liable for any violations of law that he/she commits. Most adjusters are residents of Texas and this allows a lawsuit against the insurance company to proceed in State Court likely with a jury of one’s peers who live in the same county and likely have a better understanding of the same catastrophe. Since an Adjuster can no longer be sued for any actions that he/she commits, and since most insurance companies (State Farm, Allstate, and many other major carriers) are not incorporated in Texas, then these lawsuits wind up being removed to Federal Court and not in State Court. The effect is that juries will be made up of people who might not have experienced the same catastrophe, the procedures used in Federal Court tend to be more onerous, and it usually takes longer to achieve resolution in Federal Court.

The one right that an insured can maintain is to be sure to file their insurance claim by 9/1 and they can still preserve their right to the receive the 18% penalty rather than a lesser amount. This new law erodes consumer rights and works only to the insurance company’s benefit.

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