Hurricane Ike Insurance Claims

General Rights

Texans have very strong legal rights regarding claims filed against their own insurance companies for Hurricane Ike claims. Insurance companies are liable if they violate your legal rights. Property damage insurance is simple in concept: A property owner pays an insurer to pay for certain damages resulting from the insured risks. In the case of Hurricane Ike, the risks of damage from a hurricane, from a windstorm and/or flood waters is purchased. The owner has a duty to notify the insurance company of damage to the property and to cooperate with the insurer in the investigation. The insurer has the duty to investigate the claim and determine what damage is covered and the value of that damage. Very specific rules apply to how and when the insurance company must do this. Most importantly: The burden is on the insurance company to prove what is not covered! Additionally, the insurance company must act in good faith and deal fairly with you in handling your insurance claim. You are entitled to assume that your insurance company will treat you fairly and follow the law. If the insurance company does not do so, you have the right to recover damages against the insurance company.

Your insurance policy tells you exactly what property and risks are covered by your insurance policy. There are two basic insurance coverages involved in Hurricane Ike claims. The first coverage is known as windstorm coverage and covers wind damage from the hurricane. The second is flood coverage and covers any damage by rising water, whether it is flood, tidal surge, tidal wave, wind driven rising water or any other type of rising water. There are two different types of flood coverages: Private and federally underwritten coverage. Private flood insurance is written directly by an insurance company and the same rules apply to the insurer, which are discussed later in this section. Federally underwritten flood insurance is actually provided through FEMA (the Federal Emergency Management Administration) but may be sold by to a property owner by a private insurance company's agent. If the flood policy is underwritten by FEMA, it will say "federally insured" or "federally underwritten" flood insurance somewhere on the policy. The federal government is protected from any damages other than the actual flood loss under its policies because the policies are generally offered in locations where private flood insurance is so expensive almost no one would be able to afford it. Any federal flood insurance policy claim must be filed in federal court and will be tried before a federal judge or magistrate without a jury and with no possibility of getting any recovery greater than the actual insurance coverage. Flood coverage will not normally be part of typical homeowner's insurance policies. It must almost always be purchased separately.

At the end of every Texas homeowners insurance policy, there should be a section titled "Consumer Bill of Rights for Homeowners, Dwelling & Renters Insurance" that all insurance companies are required to provide to insurance purchasers by the Texas Department of Insurance. This Bill of Rights identifies some (but far from all) of the rights you have under the Texas Insurance Code, including:

• Your insurance company cannot make false, misleading or deceptive statements relating to insurance.
• You have the right to reject any settlement amount, including any unfair valuation, offered by the insurance company.
• You have the right to have your home repaired by the repair person of your choice.
• The insurance company must tell you in writing why your claim or part of your claim was denied.
• You have the right to refuse to provide your insurance company with information that does not relate to your claim.

Texas provides four powerful legal remedies for property owners with hurricane claims against their insurance companies:

• Breach of Contract Claims
• Chapter 542 Late Payment Claims
• Chapter 541 Deceptive Insurance Practices Remedies
• Bad Faith Breaches of the Duty of Good Faith and Fair Dealing Claims

These four remedies are the tools which all good lawyers have as part of their arsenal to handle Hurricane Ike claims. Bush Lewis lawyers know how to use these different laws to help those with property damage from Hurricane Ike to recover appropriately for their losses.

Breach of Insurance Contract Claims

Almost all states allow property owners to sue their insurers for breach of contract if the insurer fails to meet the conditions of its contract. Texas also recognizes this simple doctrine that provides if a policyholder timely pays his or her insurance premium and the insurer fails to fulfill its promises when a covered event occurs, the policyholder can sue to recover the promised benefits under the contract. If it is necessary to hire a lawyer to recover contract benefits, the insurer can also be held liable for attorney's fees and court costs, as well a prejudgment and post judgment interest.

Texas Insurance Code Chapter 542 Late Payment Claims

The first communication between a property owner and the insurer after Hurricane Ike hit during which the insurer learned of potential property damage from the hurricane triggered much more specific duties and timelines under the Texas Insurance Code. In general, the insurer was required to perform a full investigation and make the full payment required by the terms of the insurance policy. Different sections of the Texas Insurance Code provide the details of when and how this must occur.

Section 542.055 gives an insurance company only 15 calendar days to acknowledge in writing that it has received the claim, begin its investigation, and request any additional information or needed documents. While our courts have not clearly defined exactly what documents might be considered reasonable for the insurer to request, any requests must be related to the investigation to establish final loss.

Section 542.056 provides that once the insurer receives the requested items from the property owner the insurer has 15 business days to notify the property owner in writing that the insurer accepts or rejects the claim or to ask for more time to decide the claim. Section 542.057 requires the insurer to make full payment of the claim or any undisputed portion of the claim within 5 business days of agreeing to the claim. If the insurer rejects the claim, it must provide the reasons for rejection in the notice of rejection. If the insurer is timely in its notice to the property owner, it gets an automatic 45 calendar day extension to decide the claim. In disasters like hurricanes, the Texas Insurance Commissioner usually extends the claims handling deadlines an additional 15 calendar days under Section 542.059.

Section 542.058 provides that if an insurer fails to meet the required claims processing and payment deadlines after 60 days from receiving all documents reasonably requested from the insured property owner, the property owner has the right to collect 18% annual interest and attorney's fees and court costs in addition to the fair claim amount. Section 542.060 provides this same penalty against the insurer for any other violations of the sections discussed. (The law probably does not allow recovery of this penalty more than once just because there are multiple violations.)

Texas Insurance Code Chapter 541 Deceptive Insurance Practices Claims

Any person or other entity injured by another's deceptive acts or practices in the business of insurance has a claim under the Texas Insurance Code. The following deceptive practices are specifically prohibited by the:Texas Insurance Code:

• Making, issuing or causing to be made any statement misrepresenting the terms of any policy (Section 541.051(1)(A)) .
• Making an untrue statement of material fact about an insurance policy (Section 541.061(1)).
• Not disclosing any matter required by law to be disclosed (Section 541.060(a)(1)).
• Misrepresenting to a claimant a material fact or policy provision relating to the coverage at issue (Section 541.060(a)(1)).
• Not attempting in good faith to bring about a prompt, fair, and equitable settlement of a claim once the insurer's liability becomes reasonably clear (Section 541.060(a)(2)(A)).
• Attempting to pressure the claimant to settle a claim under one portion of the coverage by refusing to bring about a prompt, fair, and equitable settlement under a second portion of the coverage, once the insurer's liability on the second portion becomes reasonably clear (Section 541.060(a)(2)(B)). [This prohibition prevents an insurer from refusing to settle under one type of coverage provision unless a property owner also agrees to settle a claim under another coverage provision.]
• Not promptly giving a policyholder a reasonable explanation, based on the policy as it relates to the facts or applicable law, for the insurer's denial of a claim or for the offer of a compromise settlement of a claim. (Section 541.060(a)(3)).
• Not affirming or denying coverage of a claim to a policyholder within a reasonable time (Section 541.060(a)(4)(A)).
• Refusing, failing to make, or unreasonably delaying an offer of settlement under coverage on the basis that other coverage may be available or that third parties are responsible for the damages suffered, except as specifically provided in the policy. (Section 541.060(a)(5)).
• Attempting to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim (Section 541.060(a)(6)).
• Refusing to pay a claim without conducting a reasonable investigation (Section 541.060(a)(7)).
• Requiring a claimant, as a condition of settling a claim, to produce federal income tax records for examination or investigation unless so ordered by a court or the claim involves a claim for lost profits or income (Section 541.060(a)(9)).

Persons injured by such deceptive acts or practices can recover obtain actual damages caused by such prohibited conduct (even if the damages were not necessarily foreseeable). Recoverable actual damages include lost profits, lost income, damaged credit reputation, and the policy proceeds. If there is a finding that the insurer acted knowingly (with actual awareness of the falsity, unfairness, or deceptiveness of the act or practice on which the claim is based), the policyholder may recover for any proven mental anguish suffered. (Sections 541.152(b) and 541.002(1)). If it is found that the insurer acted knowingly, additional damages may be recovered for up to twice the total amount of actual damages (Section 541.152(b)). A successful claimant is also entitled to attorney's fees, court costs, and prejudgment and post judgment interest.

Bad Faith Denial or Delay of Payment of Claim or Cancellation of Insurance Coverage

Texas law provides a duty of good faith and fair dealing as part of all insurance contracts. An insurer breaches this duty whenever it denies or delays payment when liability is reasonably clear or cancels an insurance policy without a reasonable basis. Liability becomes reasonably clear whenever an insurer has actual knowledge of an occurrence of a condition giving rise to coverage under the policy or an insurer should have known that coverage was reasonably clear under the policy if it had fulfilled its duty to investigate. The reasonableness of an investigation depends on whether it was thorough and performed in good faith. Instigating an investigation as a pretext for denying a claim will not shield an insurer from bad faith liability. This means that an insurer cannot conduct an investigation just to disprove a claim. It is a pretext for an insurer to rely upon engineering reports that were not objectively prepared as the basis for denying a claim. A policyholder can recover direct and foreseeable damages caused by an insurers bad faith. Such damages can include mental anguish where the denial or delay has seriously disrupted the insured's life, economic damages in the form of lost credit reputation and increased business costs, and the policy benefits to the extent due. Exemplary damages can be recovered in cases where actual damages are recovered and the insurer's conduct is found to be fraudulent, malicious, intentional, or grossly negligent. Prejudgment and post judgment interest and court costs are recoverable but attorney's fees cannot be recovered for the bad faith claim (but may still be available under some other theory).

Insurance Company Tactics and Blunders

The preliminary periods for investigating and resolving most Hurricane Ike claims have now passed. Properly requested extensions will soon be passing. No Texas storm has ever generated the number of damage claims already filed as a result of Hurricane Ike. As a result, insurance companies are facing unprecedented payouts in Texas. Many inexperienced adjusters have been hired to help handle the claims. Unintentional mistakes are being made on claims. Indecision has been frequent. The temptation to try to save money clearly exists. Qualified and unqualified experts have been hired to assess damage, causes of damage, property values, and costs of repairs. Costs of materials and labor for repairs have escalated. Flood insurers say the damage is from wind and wind insurers claim the flood waters caused the damage. Texas law puts the burden of proof on the insurance company to prove that the damage was not covered by the insurance policy. The insurance company does not get to shift that burden to you and ask you to show that the damage was covered. The insurer has the duty to show what damage is not covered.

Insurance Policies and Insurer Legal Rights Are Not Self-Enforcing

Your insurance polices are written by insurance companies and your claims are investigated by the same insurance companies. To offset this imbalance, Texas has strong laws to help property owners in their claims against insurance companies. Neither your insurance policy nor these consumer laws are self-enforcing. Your insurance company may or may not provide you what your policy and the law say you are owed for the premiums your have paid. If you feel your insurance company had not handled your Hurricane Ike insurance claim properly, or has not acted in good faith, by inappropriately denying, delaying, underpaying, or investigating your claim, you may need to contact qualified trial lawyers to make the insurance company keep its part of the bargain for which you paid your premium dollars.

Ken Lewis of Bush Lewis, PLLC, and Scott Renick of the Law Offices of Scott Renick have successfully handled over 100 Hurricane Rita claims. Good hurricane lawyers know how to use all the legal tools available to properly resolve hurricane insurance claims. Ken Lewis and Scott Renick are handling hurricane claims in Orange, Jefferson, Chambers, Liberty, Hardin and Galveston counties and parts of Harris County. We have already personally visited sites in communities in these counties. Call or email us today to find out your legal rights and options.

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595 Orleans, Ste. 500
Beaumont, Texas 77701
409.835.3521
800.308.9802