Texas lawmakers are now on the fast track to restrict policyholders’ rights when their insurance companies fail to pay property insurance claims arising out of weather events, such as storms involving heavy winds and hail. Now that the Texas Senate has approved House Bill 1774, Governor Abbott is almost sure to sign it. Unfortunately, this will unleash unexpected and unpleasant surprises for Texas businesses and other insurance policyholders.
Most significantly, this harmful piece of legislation is designed to cut back on penalties that are intended to deter bad faith conduct by insurance companies, as well as to empower policyholders to fight back when their claims are denied, delayed or handled in inappropriate ways. The new legislation seeks to diminish these substantial penalties that previous Texas legislatures created for the purpose of deterring such bad faith conduct by insurance companies. Interest that can be awarded by Texas courts for certain property insurance claims would drop from 18 percent to 10 percent. This is a dramatic reduction in the damages that can be awarded against insurers, and the impact must be understood as encouraging abuse and delay by insurers.