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New law will make it harder for Harvey victims to collect insurance

The Texas bill takes effect on Sept. 1, and lawyers urge hurricane victims to file claims ASAP.
Hurricane Harvey Homeowners Insurance
Photo: Getty Images

Lawmakers and lawyers are urging victims of Hurricane Harvey to file homeowner's insurance claims fast — by this Friday, September 1 — because a new law could make it harder for them to collect, the Dallas Morning News reports.

On Friday, a new law takes effect that was passed by the Texas Senate earlier this year, reducing the penalty insurers would have to pay for delayed claims. This was allegedly to limit insurance abuses.

But attorneys and consumer advocates say the law will make it more difficult for homeowners to get prompt payments.

"I know this may seem like the last thing people have on their mind as they are stranded from their families, homes and businesses, but the new law strips people of their rights," said Geoff Henley, of the Henley & Henley firm in Dallas, "and so immediate action is necessary."

The law enables insurance companies to get away with wrongdoing such as taking months or years to pay a claim, underpaying or denying legitimate claims, lawyers say.

“There is nothing about this bill that helps policyholders,” Will Adams, vice president of legislative affairs for the Texas Trial Lawyers Association, told the Morning News. “Everything about this bill makes it harder for policyholders to hold insurance companies accountable.”

The law will cut the insurance companies' penalty from 18 percent to 10 percent interest, if a company is found to have delayed payment by a court, and limits homeowners' ability to recoup attorney's fees if they don't estimate their losses within 80 percent accuracy.

Lucy Nashed, a spokeswoman for Texans for Lawsuit Reform, the lead supporter of the legislation, told the Morning News that the law's opponents are exaggerating its potential impacts. It will not affect most homeowners, she said, because most people do not sue their insurers. "Texas has some of the strongest consumer protections in the nation for policyholders that are denied or underpaid by insurance companies," Nashed said. "That is still the case." 

Those advocating for consumers disagree, saying that individuals are at an automatic disadvantage against corporations. "It's a David vs. Goliath battle from the start," said Dallas lawyer Brian Lauten. "They have basically taken away David's slingshot."