On September 1, 2017, in what could not be worse timing for the residents of Texas still reeling from the aftermath of hurricane Harvey, a new law is going into effect that benefits insurers in the state rather than the insured.

In summary, the big changes to the insurance claim laws do two major things:

  • Reduce monetary awards that result after litigation, and
  • De-incentivize attorneys from filing court claims against insurers.

The law accomplishes the first goal by reducing the interest rate for prejudgment interest, which a court can award at the conclusion of a case, from 18 percent to 10 percent. Prejudgment interest can begin to accrue when a lawsuit is filed. For example, if a person files a $10,000 claim, when they win, not only can they be awarded the $10K, but they can also get prejudgment interest on the $10K dating back to when the lawsuit was filed, or at least for the time between the judgment being entered and paid. So, from now on, if an insured sues an insurer over the valuation of a claim, and wins, the prejudgment interest will be approximately half as much as it used to be.

In addition to nearly halving the interest rate, the changes also make it more difficult for attorneys to collect attorney fees and file claims and lawsuits on behalf of clients against insurers.

Avoid Private Insurers Where Possible

Fortunately, this new Texas law only applies to private insurers operating in the state. That means that it will not apply to the residents’ and businesses’ FEMA or federally sponsored flood, or other disaster, insurance, policies.

Additionally, for the Texans who saw the last minute recommendations of Texas lawyers and filed their Harvey-related insurance claims, or notices of intent to file claims, before the new law took effect, their cases are likely to proceed under the old law.

Related Resources:

  • Browse Insurance Lawyers by Location (FindLaw’s Lawyer Directory)
  • Does Your Business Need Flood Insurance? (FindLaw’s Free Enterprise)
  • Natural Disasters and Insurance: Top 6 Questions for Your Small Business (FindLaw’s Free Enterprise)
  • Small Business Insurance Concerns After Florida Hurricane (FindLaw’s Free Enterprise)

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