Misinformation Regarding Hurricane Harvey Insurance Claims
There is quite a lot of misleading information roaming around regarding Hurricane Harvey and Insurance claims. Most of this information has been propagated by lawyers who do not understand insurance laws and other law experts who simply don’t know what they’re talking about. Homeowners who come across the information circulate it further, adding to the incorrect information floating around.
People are particularly interested in knowing about what the impact of notice will be on or after September 1, 2017. There is also some confusion regarding the types of policies the new law applies to. Read on to understand how these requirements differ, based on the different types of policies. As someone affected by Hurricane Harvey, you also need to understand the logistics of how to notify your insurance company if you want to file a claim and when is the right time to do that.
The very first thing to understand is that the new Texas insurance law does not apply to flood claims. It only applies to wind claims. The key to understand is that policies that cover wind claims are governed by state law, therefore, the new rules only apply to wind claims. On the other hand, policies that cover flood claims are governed by federal law; therefore, the new Texas rules do not apply to flood claims. Policies governed by federal law are part of the National Flood Insurance Program. Flood claims come under FEMA (Federal Emergency Management Agency), so they will not be affected by the new Texas rules.
The next thing to understand is that the impact of notice on or after Friday September 1, 2017 only affects the interest rate on unlawfully delayed insurance claims. The new law went into effect on September 1, 2017; therefore, it applies to any lawsuit that is filed after that date. Every new lawsuit arising out of Hurricane Harvey will be affected by the new Texas insurance law. However, there is one exception to this rule: that is, if anyone filed an insurance claim before September 1, 2017, then the old interest rate of 18% would apply to any unlawfully delayed claims instead of the new rate of 10% that would apply to any unlawfully delayed claims.
However, the information circulating around suggesting that notice prior to September 1, 2017 can suspend application of the new law is totally wrong. The new law will be applicable to each and every single Hurricane Harvey claim. Notice before September 1, 2017 only affects the interest rate.
Why the 18% interest rate matters?
The old interest rate of 18% on insurance claims filed before September 1, 2017 is a pretty big deal. Moreover, the interest rate matters because hundreds of lawsuits are filed unlawfully as Hurricane like claims. Most insurance companies are run by stockholders who hold massive assets and a couple of unlawful cases do not hurt them. The only thing that matters to them is the interest rate and the math behind it.
If an insurance claim is unlawfully delayed, the value of the claim may increase to 50% of the value of the claim in a period of over two years. After four years, the recalcitrant insurer must pay twice the value of the claim. In case the interest rate is 10%, the insurance company can delay payment for a full ten years before the interest penalty doubles the value of the claim. The new Texas law basically cuts the penalty for insurers who wrongfully delay property damage insurance claims, a windfall which hurts the insurance industry the most.