Texas law easing insurer penalties takes effect amid Harvey

September 1, 2017
In this aerial photo, homes sit in floodwaters caused Tropical Storm Harvey in Port Arthur, Texas, Friday, Sept. 1, 2017. Port Arthur's major roads were swamped by rising waters brought by Harvey(AP Photo/LM Otero)

AUSTIN, Texas (AP) — A new Texas law pushed by the insurance industry kicked in Friday, a week after Harvey made landfall, softening the financial penalty companies could face if they are sued for dragging out homeowner damage claims.

Republican Gov. Greg Abbott signed the changes in May, but they didn’t take effect until now, along with most other new laws passed this year in Texas. The destruction wrought by Harvey ignited calls to delay the start date, but Abbott has dismissed the backlash as overhyped.

The record-breaking storm flooded thousands of homes in the Houston area and along the southeastern Texas coast, where Harvey made landfall on Aug. 25 as a Category 4 hurricane.

State officials say few Harvey victims are likely to be affected by the insurance law changes, because they doesn’t apply to flood claims or coastal residents covered by the state’s insurer-of-last-resort.

Insurers sued for dragging out claims previously had to pay 18 percent interest if a court ruled against them. Now that penalty is around 10 percent, which lawyers and consumer advocates say won’t incentivize insurers to act as quickly.

“The timing is obviously horrible,” said Mark Lawless, an Austin-based attorney who clients are mostly businesses. “Nobody anticipated having a major event four days before the effect date. I don’t think people focused on what that meant.”

The latest figures released Friday by state officials show that more than 50,000 homes have suffered major damage or were destroyed entirely by Harvey. More than 200,000 others homes were affected or sustained minor damage.

Abbott this week criticized lawyers who urged Harvey victims to rush to file claims before the law took effect, or risk losing out.

“Any claims along those lines are absolutely bogus,” Abbott said.

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