New Texas Insurance Code provisions take effect this Friday, restricting policyholders' rights against insurers who mishandle business and personal property claims arising from storms and other natural disasters.

Our June 26 blog post, New Texas Hail Law Restricts Property Policyholder Rights Far Beyond Hail Claims, provides a detailed analysis of the new law, codified at section 542A of the Texas Insurance Code.

Although various aspects of the new law will likely impact Hurricane Harvey claims that end up in litigation after the law's effective date, reduced penalty interest provisions apply to claims made on or after September 1.

On May 26, Gov. Greg Abbott signed into law House Bill 1774, a tort-reform bill that limits a policyholder’s ability to sue its insurer for mishandling property claims arising from natural disasters. Designed to curb the exploitation of storm victims and insurance companies by the plaintiff’s bar, the new law significantly undercuts incentives for insurers to act responsibly, while making it more difficult for policyholders to hold insurers accountable for improper delays and failing to pay claims.

Although popularly referred to as a “hailstorm” bill, the law applies more broadly to any “first-party claim . . . made by an insured” under a property insurance policy that “arises from damage to or loss of covered property caused, wholly or partly, by forces of nature, including an earthquake or earth tremor, a wildfire, a flood, a tornado, lightning, a hurricane, hail, wind, a snowstorm, or a rainstorm.” Tex. Ins. Code § 542A.001(2).

Resolving significant confusion regarding the remedies available for violations of the Texas Insurance Code, on April 7, 2017, the Texas Supreme Court issued its much-awaited decision in USAA Texas Lloyds Co. v. Menchaca. In an opinion welcomed by the policyholder bar, the Supreme Court reconciled the principles articulated in earlier decisions, clearly setting forth “five rules that address the relationship between contract claims under an insurance policy and tort claims under the Insurance Code.”    

As noted in our March 2015 post, “Vail Remains ‘Un-Veiled,’” insurers have long taken the position that an insured must prove an injury separate and apart from injury caused by a breach of an insurance contract in order to recover statutory damages under the Texas Insurance Code.  In the earlier post, we make the case that this position was incorrect and that the independent injury requirement applies only where an insurer’s denial of coverage was not wrongful. Menchaca brought this dispute squarely before the Texas Supreme Court.

The Supreme Court of Texas has issued one of the biggest insurance rulings in years, and our own Amy Elizabeth Stewart sat down for an extensive interview with the national legal publication Law360 to help explain the court’s decision. 

In USAA Texas Lloyd’s v. Menchaca, the Texas high court cleared up years of legal confusion by ruling that policyholders can recover benefits as actual damages if such benefits were lost due to an insurer’s violation of the Texas Insurance Code. The Supreme Court also established five rules that lower courts must observe when deciding cases over policy breaches and Insurance Code violations.

Insurance policyholders should always read their policies, but a recent ruling out of Texas’ 14^th Court of Appeals may provide support to those who rely on insurance agents for information regarding their policies.

Insureds often misunderstand the terms of an insurance policy or argue that they have been misled by an insurer’s or an agent’s statements regarding a policy’s terms or coverage. In these disputes, defendants often raise as a defense the insured’s duty to read its policy. The court’s Oct 18 ruling in ruling in Wyly v. Integrity Insurance Solutions, No. 14-15-0042-CV, reiterated the rule under Texas law that this defense fails where an insured has alleged or shown that an insurance agent has made a specific, affirmative misrepresentation about the policy.