Opinion: Must Hurricane Harvey Victims File Insurance Claims Before September 1?

As if the tragedy and destruction caused by Hurricane Harvey in the Houston and Gulf Coast region wasn’t bad enough, a few opportunistic trial lawyers and public adjusters have taken to social media urging Houston homeowners to file their insurance claims by September 1 in order to avoid the “consequences” of a newly passed Texas law referred to as the “Hailstorm Bill.” A typical post that has been broadcasted and tweeted by trial lawyers over the past week reads as follows:

URGENT – REGARDING INSURANCE CLAIMS

Last May, the Texas legislature passed a law in favor of insurance companies, to the disadvantage of property owners, that might severely affect your recovery for damages sustained in Hurricane Harvey.

This new law goes into effect FRIDAY, SEPTEMBER 1, 2017.

It is imperative that you file your property damage claim with your insurer BEFORE this Friday, and do so IN WRITING (a phone call is not sufficient). The safest method would be to file your claim by both certified mail – return receipt requested, and by email.

PLEASE share this post with friends and family who have been affected by this storm.

As waterlogged victims are walking barefoot through three feet of dirty flood water, sitting on their roofs waiting for rescue by civilians in boats, and searching for loved ones and family pets, trial lawyers are using scare tactics by telling them that they must send their insurance claims by certified letter – return receipt requested – before Friday, September 1, or else. Nothing could be further from the truth. In its purest form, the new law reduces penalties for insurers sued for offering too little money on storm claims, including wind and hail damage, while making it harder for attorneys to collect attorneys’ fees. It became necessary as a result of an increase in post-severe weather event litigation and fraud — particularly hailstorms — in the past several years.

Since 2012, the property insurance industry has been under attack. There has been a 900 percent increase in the number of hail and wind claims which involve attorneys and public adjusters. The insurance industry points to a surge of lawsuits resulting from “opportunistic lawyers using extreme weather events as a pretext for exaggerating damages, suing innocent parties, and failing to give notice to insurers before filing lawsuits.” Following a weather event, neighborhoods are littered with yard signs and door hangers authored by roofing contractors, public adjusters and storm-chasing attorneys. They flood social media and set up folding tables and banners in front of grocery stores and flea markets. The attorneys urge victims of hail damage to call them before they call their insurance company. Storm damage claims no longer were about getting damage repaired – they are about preparing mass lawsuits in which attorneys’ fees result in the lawyers being the only winners.

Following a storm, canvassers hired by the “hail cartel” – lawyers or opportunistic contractors – blanket a neighborhood knocking on doors. “I’m here to get you a new roof,” the canvasser says. They tell the innocent homeowner that he or she is entitled to 20 percent more for “general contractor overhead and profit”, even if no general contractor is necessary. They locate and concoct damages which either didn’t exist or were pre-existing, and ask the homeowner to sign a contract promising the moon. This is repeated thousands of times across entire zip codes. A lawsuit is quickly filed against the insurance company, even before they are given notice of a claim. Policyholders are misinformed, contractors circumvent statutory and policy guidelines, contractors and general adjusters inflate damages, and attorneys apply mass tort models with the promise of large attorney’s fees to simple property damage claims. Claim solicitation efforts such as this have tangled up innocent homeowners in unnecessary lawsuits in recent years by promising big payouts at no cost following hail or other natural disasters. The result of the widespread scheme is higher insurance premiums and less choice in insurance companies throughout Texas.

In response to these mass litigation abuses, Texas HB 1774/ SB 10, dubbed the “Hailstorm Bill” and titled, “Relating to actions on and liability associated with certain insurance claims”, was passed on May 17 as a limitation on attorneys’ fees and lawsuit abuses following hailstorms and other weather events.

The new law also changes the interest rate applicable to late-paid claims from 18 percent to the equivalent of Prime Rate plus 5 percent. Lastly, the new law simply requires 61 days’ notice to an insurance company prior to filing suit. Absent such notice, the attorney can’t recover attorneys’ fees. A pre-suit inspection of the damages is allowed within 60 days of notice of the lawsuit. In its original form, the legislation only addressed claims lawsuits following hailstorms. It was later amended to include other severe nature-related events including earthquake, wildfire, flood, tornado, lightning, hurricane, wind, snowstorm and rainstorm.

Trial lawyers argue that the new bill limits the ability of property owners to hold insurers accountable for underpaid claims or poorly handled claims investigations. They say it slashes penalties for property insurers that wrongfully delay storm claims, forces many insurance disputes into federal court where it takes twice as long to receive justice, and imposes additional costs on policyholders. They say that the law guts the property rights of homeowners, business owners, churches, and schools, threatening access to justice for many. Admittedly, while the bill is only meant to prevent fraudulent hail damage claims, it is possible it will be used otherwise.

There will always be instances of bad insurance companies, just as there are instances of bad lawyers. Preventing the specious misleading of victims of Hurricane Harvey with careful wordsmithing and sky-is-falling rhetoric claiming they must file claims by September 1 or lose valuable rights under their insurance policy must be balanced with protecting against abuses by insurance companies in paying claims. However, the truth is that claims will be filed and claims will be paid as they always have. Harvey victims do not have to climb out of their boat and wade to the nearest Post Office to send a certified letter to their insurance company. The overwhelming majority of Texans won’t end up filing a lawsuit – and won’t be affected by the new law in any way. The Texas insurance industry has a truly amazing 98 percent success rate in resolving claims without litigation, and this bill won’t change that. Insurance claims following this new legislation will proceed as they always have, and if an insurance company wrongfully denies or delays a claim, Texas insureds will still have access to the courts to force their hand.

The only valid reason to file a claim before September 1 is that an insured could possibly benefit from the old interest rate of 18 percent as opposed to the statute’s new interest rate of 10 percent (Prime is 5 percent currently, plus 5 percent under the statute). That interest rate only comes into play, however, in the rare case that a lawsuit against the insurer is filed, that suit goes to trial, and there is a finding of delay in payment under the Texas Prompt Payment Statute found in the Texas Insurance Code, § 542.051, et. seq. Therefore, the hysteria revolves primarily around a needle in a haystack, with lawyers tweeting sky-is-falling rhetoric in order to get their names out there for public consumption.