As we start Hurricane season, Texans are hoping to see minimum storm activity. Several areas are still recovering from spring flooding, hail damage and those nasty straight line winds.

We've even had eight tornadoes in Southeast Texas, so far this year.

Storm damage can be costly to fix. Many homeowners buy insurance, some are even required to have a storm policy but concerns are being raised about a new law set to take effect September 1st.

Some say it lets insurance companies off the hook when they pay too little or too late on claims. We've heard arguments on both sides so 12News dug through the legal jargon of house bill 1774 to verify if the rights of property owners are now in jeopardy.

We've already seen a local lawyer oppose the bill and a Southeast Texas representative strongly back the legislation. Plenty of others are weighing in as well.

For our verify sources we go straight to the bill. We also checked for ourselves a highly cited report by the Texas Department of Insurance regarding storm related lawsuits.

We begin with what is being said about House Bill 1774. Some of the claims include:

  1. That the bill discourages lawsuits
  2. That the bill protects property owners
  3. That the bill limits liability for insurance companies
  4. That the bill cuts penalties for insurers
  5. That the bill adds costs to property owners who sue
  6. That the bill encourages abuse and delay by insurers

The first claim: that the bill discourages lawsuits is TRUE.

The bill's author, Greg Bonnen of Friendswood, says the bill is supposed to curb lawsuit abuse after a 1,400% spike in storm damage related lawsuits in Texas from 2012 to 2015.
Those numbers can be found in a report published by the Texas Department of Insurance.
Before 2012, about one in 1,000 claims resulted in a lawsuit. From 2012 to 2015, the lawsuit rate was one in 50 to 60 claims, resulting in that 1,400% increase.

Bonnen says the law is an effort to keep everyone's premiums from skyrocketing.
It must be noted that the bill does not put any mandates on insurance companies regarding premiums.

While discouraging frivolous lawsuits is why Bonnen says the bill was written, 12News took a look at how he tries to accomplish that goal.

First, policyholders have to notify the insurance company 61 days before filing a suit. Supporters claim this allows the company a chance to settle out of court.
Second, there's a chance the attorney fees won't be included in the suit. This could discourage lawsuits if the policyholder doesn't think they can afford to hire legal help.

In order to have attorney fees covered in the lawsuit, the policyholder has to comply with the pre-suit stipulations, like the 61-day filing notice and ask for the appropriate amount of money.
If the lawsuit asks for too much money then attorney's fees are at stake.
Here's why:
If the policyholder wins their suit and the jury awards 80% or more of the damages then the attorney fees are covered in full.
If the jury awards 20% or less then no attorney fees are awarded.
If the jury awards 21%-79% then attorney fees are pro-rated.

MORE | Pro-Rated Fees

The second claim: HB 1774 protects property owners is UNDECIDED.

This assertion can be deemed true or false depending on the personal interpretation of the bill. The biggest factors behind this claim is that by holding insurance companies and lawyers in check, the property owner wins. This is according to the author of the bill. If you think these guidelines live up to that claim, then it's true. If you think that a property owner won't even try to sue due to the guidelines, then it's false.

The third claim: The bill limits liability for insurance companies is TRUE.

Lawsuits can be filed over deceptive trade practices or unfair settlement, not both.
This is spelled out in Section 2 of the bill.

MORE | Texas Insurance Code - Unfair Methods of Competition, Unfair, Deceptive Acts, Practices

Note: This section could be interpreted by a judge and jury differently than that of 12News. We recommend consulting with a lawyer over this either/or stipulation.

The fourth claim: the bill cuts penalties for insurance companies is TRUE.

The interest penalty has gone down by 3%. The number changed several times between drafts of the bill but the final bill shows insurance companies pay 10% interest plus 5% prejudgment interest making 15% total. Research shows the previous interest penalty was 18%. To clarify, this is the amount of interest due on top of the damage claim payment.

The fifth claim: the bill adds costs to property owners who sue is TRUE.

This is not a one-size-fits-all bill. Some policyholders will pay more if they don't win their claim or ask for too much since then those attorney fees are coming out of pocket. If all goes perfectly, there is not a cost to property owners but let's face it, they will not win all the cases.

The sixth claim: the bill encourages abuse and delay by insurers is UNDECIDED.

This claim comes from suspicions that insurance companies will wait it out and are willing to risk it to see if policyholders will even make it to court. Some say the interest rate penalty of 15% is not a deterrent at all for the big insurance companies. With no research in yet, no determination on the validity of this claim can be made.

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