Hurricane Harvey: keeping sight of Texas’ Prompt Payment of Claims Act

As the first major hurricane to make US landfall since 2005 and with a ferocity reminiscent of Katrina, Hurricane Harvey has impacted a wide segment of the property, construction, and energy (re)insurance market located within the coastal areas of southeast Texas, Houston and its surrounding counties, and the Gulf Coast. The early projections anticipate US$40–50 billion in losses, and years of restoration.

In recent days, all associated with the (re)insurance market have closely followed the developments associated with Hurricane Harvey. As the first major hurricane to make US landfall since 2005 and with a ferocity reminiscent of Katrina, it will no doubt remain a focal point for the (re)insurance market in the weeks and months ahead. As the market responds to the devastating damage caused by the hurricane, as well as the subsequent rainfall and flooding, the market should keep sight of the critical provisions of the Texas Insurance Code.

Texas has a “Prompt Payment of Claims Act” establishing specific limited periods of time to acknowledge receipt of a claim, begin the investigation, and request information. The Act also limits the time insurers have to make claim decisions, and issue payments after an insurer determines it will pay the claim.

The Act obligates insurers to effectuate prompt, fair, and equitable settlements, and imposes penalties on insurers who run afoul of these provisions. While a new law going into effect on September 1 moderates some of the penalties and provisions associated with weather-related claims, risks remain.

As the market addresses the exposures covered by the broad scope of implicated policies, it will need to mindfully adhere, and document that adherence, with the proscribed practices to effectively handle the claims and minimize their extra-contractual risk.

Kennedys CMK is here with straightforward and supportive advice to assist the market with its good faith compliance with all applicable laws and implicated policies. Kennedys CMK has offices in Texas, Illinois, New York, New Jersey, Pennsylvania, and Florida. In addition, Kennedys is available around the globe where our clients’ interests or policies may involve exposures arising from Hurricane Harvey.

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