Harvey victims urged to file insurance claims fast

Homeowners whose properties were damaged by Harvey may face another challenge: filing insurance claims before a new Texas law takes effect on Friday.

The statute, House Bill 1774, limits penalties for property-casualty insurers when policyholders sue them for being slow to settle a claim, offer a lowball payout or decline a claim altogether. In light of the new law, some lawyers, and even a Texas legislator, are urging victims of Hurricane Harvey to file their damage claims by September 1.

The new law doesn't prohibit homeowners, renters or businesses from filing claims later on, or from receiving compensation. And it doesn't affect flood insurance claims. But it does tilt the playing field more toward insurers, buffering them from potential legal actions by policyholders.

The bill, which was in the works prior to the onslaught of Hurricane Harvey, takes the pressure off these insurers at a time when they will be facing a multitude of claims. Meanwhile, it adds another hurdle for people who think their claims are unfair or are taking too long.

Some Texas legislators feel that, given the ongoing flooding problems in the Houston area, implementation of the law restricting these types of claims should be delayed. 

"The Texas Legislature should be called into special session before September 1 to delay implementation of HB1774," said Rep. Joaquin Castro, who represents San Antonio, in a tweet.

Texas Gov. Greg Abbott's office could not be reached for comment on whether he could, or would, delay the law's implementation.

Some homeowners may struggle to understand the law, let alone file claims before it kicks in. The law requires an insurance company to receive written pre-notice of legal action by the policyholder, or his or her lawyer, and an opportunity to inspect the property in question.

If insurers are late paying claims as a result of a lawsuit, they must still pay an additional penalty to the policyholder. The difference is that under current Texas law, that penalty comes in the form of a fee that totals 18 percent of the claim. After Friday, that amount would be determined by a market-based formula. The current rate is 10 percent.

"The process for filing a claim hasn't changed," said spokesperson Loretta Worters of the Insurance Information Institute, which represents property-casualty insurers. "And consumers still retain all legal remedies. HB1774 does, however, require notice before a lawsuit is filed."

Consumer advocates predict that the battle over claims for the millions in the Houston area affected by Harvey and their insurers will be contentious, particularly because flood damage represents the major part of these losses and isn't covered under normal homeowner's policies. It would not be affected by the new law.

Due to the flooding, thousands of area residents are still being forced to evacuate, sometimes to places across the state, and so will have no idea how serious their damage is until they return. That could take several weeks, rescue workers warn.