In the aftermath of Hurricane Laura, we saw most of our area was spared, but unfortunately there is still significant damage to property throughout east Texas. With property damage, comes insurance claims. The claims process can seem very daunting, especially when there is significant destruction to your home and property. Read on to learn your legal rights as an insured property owner with references to your Consumer Bill of Rights that you can use going through the claims process.
Insurance policies are legal contracts, so legal rules come into play when you file a claim after a loss. If you arm yourself with basic knowledge about your rights and the claim process, you can speed up your settlement and improve your odds of getting paid what you are owed.
The Texas Department of Insurance (“TDI”) created a Consumer Bill of Rights (“BOR”) for homeowners and renters that gives you the basic knowledge you need. It’s in the Texas Administrative Code at: 28 Tex. Admin. Code § 5.9970(d). Your insurance company is required by law to send a copy of the Bill of Rights with your policy and upon renewal. Review this Bill of Rights and keep a copy handy during the claim process so you can refresh your understanding. The Bill of Rights can also be found online at the Office of Public Insurance Counsel’s website.
The tips and guidance included here will give you a basic understanding of your rights and the claim process in general. Consult a qualified attorney if you have questions about how the law would apply to your specific situation. What we mean by “qualified attorney” is one who has experience in successfully representing insurance consumers in claim disputes and who is a member in good standing of the Texas Bar Association. To find one, click on the state of Texas in the “Find Help” section of www.uphelp.org. You can also give us a call for a risk free case evaluation at 888-588-1695.
COMMUNICATING WITH YOUR INSURER
It is a good idea to communicate with your insurance company and your agent in writing so that you have a clear record and a good paper trail. This does not mean you should stop talking to your adjuster during the claim process. It just means you should communicate in writing when possible and/or send follow-up email summarizing what was said or agreed to during a conversation. For suggestions on communicating effectively with an insurance company, read “Speak UP…”
THE CLAIM PROCESS
To trigger many of your legal rights, you must give your insurer written notice of your claim. Once you provide this notice, your insurance company must begin investigating your claim within 15 days (Tex. Ins. Code § 542.055; BOR ¶ 30). The company may ask you for information related to your claim. You must cooperate with reasonable requests, but you have the right to refuse to provide information that does not relate
to your claim. You may also refuse to provide your federal income tax records unless your insurer gets a court order, or your claim involved lost income or a fire loss (BOR ¶ 33; 28 Tex. Admin. Code 21.203). If you do refuse an insurer’s request, it’s always wise to politely explain your position in writing and give examples of how you’ve cooperated and/or already provided sufficient information to support your claim.
Once the insurer receives written notice of your claim, the company has 15 business days to accept or reject it (Tex. Ins. Code § 542.056). If the company agrees to pay, it must do so within 5 business days (Tex. Ins. Code § 542.057). If the insurance company rejects your claim, it must explain its reasons in writing (Tex. Ins. Code § 542.059).
There are exceptions to the rules above. If an insurer needs more time, it may take 45 days to decide if it sends a notice to you explaining the delay (Tex. Ins. Code § 542.056). Also, if the company suspects arson, it has 30 days after receiving the required paperwork to either accept or reject a claim. Id. In addition, TDI can give insurance companies an extra 15 days after a major natural disaster and surplus line carriers have 20 days to pay your claim after agreeing to do so (Tex. Ins. Code § 542.059).
The company adjuster will prepare an estimate of the cost to repair or replace your home and any personal belongings that got damaged or destroyed. The company will make an offer based on this estimate. In the event of a partial loss, where the insured elects to repair or replace the property, the insurer should not deduct depreciation. Farmers Mutual Protective Association of Texas v. Cmerek, 404 SW.2d 599, 600–601 (Tex. Civ. App. Austin 1966) (no pet.). If the company denies your claim in whole or in part, the company must give you the reasons why in writing (BOR ¶ 29, 28 Tex. Admin. Code § 21.203, and Tex. Ins. Code § 542.056).
If the insurance company takes too long to pay your claim, they may owe you interest at the rate of 10% per year (down from 18% before the passage of SB 10/HB 1774 on September 1, 2017) plus reasonable attorneys’ fees if you sue and win (Tex. Ins. Code § 542.060). In a lawsuit, the insurance company has the burden of proving it was not obligated to pay.
Within 15 days after you report your loss, your insurer may request a signed, notarized proof-of-loss form. Your insurance company will probably ask you to estimate the replacement cost of your household items lost as well as the cost of repairing your home. Check out the free resources in the Property Damage section of UP’s Claim Help Library. You’ll find sample proof of loss forms for both Dwelling and Contents claims, as well as suggestions for shortcuts to help you find prices and document the value of what needs to be repaired and replaced. Remember to include even small items such as kitchen utensils and to include sales tax in your cost estimates. Keep a copy for your records. If your insurer is pressuring you to estimate your losses before you have time to do a thorough job, it’s OK to insert “undetermined” and sign and submit a proof of loss form, then supplement it later.
UNFAIR CLAIM SETTLEMENT PRACTICES AND EQUAL TREATMENT
Your insurer is prohibited from using unfair claim settlement tactics. The legal term is “unfair practices”. The Texas Administration Code defines these by listing prohibited practices (28 Tex. Admin. Code § 21.203). The following are a few examples of tactics considered to be unfair settlement practices in Texas. (See also Tex. Ins. Code. Ch. 541):
Lying - Misrepresenting to claimants pertinent facts or policy revisions relating to coverages at issue
Foot dragging - Not attempting in good faith to achieve prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear
Stringing you along - Failing to affirm or deny coverage of a claim to a policyholder within a reasonable time
Cheating - Refusing to pay claims without conducting a reasonable investigation based upon all available information
Keeping you in the dark - Failing to provide reasonable explanation of denial/settlement offer
Stalling - Failing to promptly provide claim forms, when provided in the policy, if the insurer requires forms for settlement
Generally, an insurance company may not treat you differently from others “of the same class and essentially the same hazard” (BOR ¶ 38). If you lose money as a result of being unfairly discriminated against, you have the right to sue the insurance company (BOR ¶ 38). If you win your suit, you may recover the money you lost, plus court costs and attorney and necessary expert witness fees. If the court finds that the insurance company knowingly violated your rights, it may award up to an additional $25,000 per claimant (BOR ¶ 38).
Disagreements: If you disagree with the adjuster’s estimate, let the company know. You may reject any settlement amount, including any unfair valuation, offered by the company. You have the right to have your home repaired by the repair person of your choice (BOR ¶ 28).
Generally, if the company refuses to adjust the estimate, you can use a process called appraisal. State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009). Most insurance policies contain an appraisal clause. State Farm Lloyds v. Johnson, 290 S.W.3d 886, 889-890 (Tex. 2009). The appraisal process is used to determine the amount the company should pay. It is not used to “construe the policy or decide whether the insurer should pay” (Id. at 890). UP offers a simple explanation of the insurance appraisal process along with suggestions and options for resolving claim disputes in the Claim Dispute Resolution section of www.uphelp.org.
Time limitations: Your policy most likely has time limitations for submitting documentation, claiming benefits and filing a lawsuit. Since September 1, 2017, you are now required to put your insurance company "on notice" that you intend to sue them. Sixty-one days before you file suit, you must list all your damages. The insurer is then permitted to conduct another inspection. Failure to comply with this provision can preclude the recovery of attorneys’ fees. Depending on the wording of your policy, you may need to submit receipts to collect full benefits for the replacement value of items for which your insurer has paid you “actual cash value.”
If you sue an insurance company, you must file your suit on or before the second anniversary of the date you were denied insurance (or treated unfairly) or the date you reasonably should have discovered the unfair denial or treatment. This rule is generally enforced strictly. If you sleep on your rights, you will lose them.
If a court decides that your lawsuit is frivolous/filed without good cause or just to harass the insurance company, you will be required to pay the insurance company’s court costs and attorney fees (BOR ¶ 38).
Venue for hearing: Since September 1, 2017, an out-of-state surplus lines/non-admitted insurance company may assume liability for an in-state adjuster under their employ, which means that cases may be removed from Texas state court to a Federal court. This is significant given the recent growth in surplus lines in Texas.
Payments: After notifying you that your claim is approved (in whole or in part), the company must pay within 5 business days (BOR ¶ 30). If you do not receive your payment within 5 business days, contact the company. If you believe that the company is purposely delaying and ignoring your written requests for payment, contact TDI for help. If the delay goes on for a long time and involves a substantial sum of money, consult with a qualified attorney.
Dealing with property damage claims after a natural disaster can be very stressful and having to fight your insurance company to seek the compensation you are owed can be especially daunting. Knowing and understanding your legal rights can help you navigate these uncertain times and make the claims process a little easier.