By Jennifer Calfas
August 29, 2017

For thousands of displaced people in southeast Texas, it’s still too early to tell how severely their homes and businesses have been impacted by Hurricane Harvey. Rain continues to pour down on the area, submerging parts of Houston under feet of water. But as residents grapple with the devastating disaster, some lawmakers and lawyers are urging them to file their home owners’ insurance claims quickly — before Friday, that is.

That’s because a controversial new law, which aims to reduce the number of lawsuits made against insurance companies, is set to go into effect on Friday. House Bill 1774, signed by Texas Gov. Greg Abbott on May 27, covers lawsuits that come as a result of weather-related claims, including damage or loss of property due to “forces of nature” like hurricanes, wind, hail, snow or rainstorms. (It does not apply to flood insurance claims.)

For those cases covered by the law, it reduces the penalty interest rate from 18% to 10% of the claim — potentially reducing the amount that insurers could be required to pay to policyholders in the event of a lawsuit over a claim.

The law also mandates that companies must pay for the plaintiff’s attorney fees if homeowners depict the damages done to their homes with at least 80% accuracy, and it requires trial attorneys to warn companies before they are being sued and tell them what they are being sued for.

Some lawyers and lawmakers say residents should file a claim by Friday to ensure they would get higher penalty rates from insurance companies, if they were to file a lawsuit. Attorney Craig Eiland, a member of the Texas Trial Lawyers Association, says that claims filed by property owners before Friday would still generate 18% interest from the insurance company if the claims were eventually subject to a lawsuit.

Texas Congressman Joaquin Castro, a Democrat, tweeted that Texans should “file for Harvey relief” by Sept. 1.


Opponents of the law argue it will allow insurance companies to get away with wrongdoing without being held accountable, and that by reducing the penalty insurers would have to pay for delays, it will make it more difficult for homeowners to get payments on time.

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

But defenders of the law argue it still protects the rights of the homeowner. And it’s not clear whether claims over Harvey’s damage will actually be affected by the new law.

Mark Hanna, of the Insurance Council of Texas, which strongly backed the legislation, told MONEY that claims made before or after Friday would be treated the same way, since the new law does not affect the claims process — only the lawsuits that derive from claims. The new law does not change the filing process for a claim from current law, nor does it address how the insurer must handle that claim.

Additionally, said Joe Woods, vice president of state government relations for the Property Casualty Insurers Association of America, most of these claims will be flood claims, and therefore would not be affected by the law. Of those non-flood claims, he added, an even smaller fraction would eventually end up in a lawsuit.

“The new law will not apply to most claims or lawsuits arising from Harvey, because most of the policyholders’ claims will be for damage caused by flooding,” Texans for Lawsuit Reform, which supports the new law, said in a statement. “These claims will be made under the federal flood insurance program and governed by federal law.”


Yet at least some of the damage from Harvey will likely not be covered by flood insurance. Harvey is expected to result in up to $2 billion of insured property loss unrelated to flooding for homes and business properties, according to CoreLogic, a global property information company.

CoreLogic reports that more than half of the homes in Houston are not in designated flood zones — meaning owners wouldn’t be required to have flood insurance. And those who have home insurance may not have policies that cover flooding, according to the Insurance Council of Texas.

To learn more about how you can help those impacted by Harvey, check out MONEY’s list of charities you can donate to. Additionally, be wary of scammers using Harvey to develop fake charitable organizations and crowdfunding efforts to exploit those impacted by the devastating event.

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