BILL ANALYSIS

C.S.H.B. 854

By: Garcia Hernandez, Cassandra

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that property insurance policies typically require a policyholder facing lost or damaged property to pay for a portion of the costs for repair or replacement before receiving reimbursement costs from the insurance provider and that this results in the burden resting on the claimant to wait for funds from their insurance provider, delaying repairs. The bill author has further informed the committee that this delay can cause homes to become further damaged, and the delay also inadvertently punishes lower-income homeowners who cannot afford the upfront cost of these repairs and replacements. C.S.H.B. 854 seeks to address this issue by providing that an initial payment from a homeowner's, renter's, or condominium owner's insurer must not reduce the initial payment by an amount greater than 20 percent of the insurer's estimated cost of repair to the dwelling or property, minus the applicable deductible.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 854 amends the Insurance Code to require a homeowner's, renter's, or condominium owner's insurance policy that includes replacement cost coverage to provide that in a valid claim for loss of or damage to insured property, the insurer must not reduce an initial payment by an amount greater than 20 percent of the insurer's estimated cost to repair or replace the lost or damaged dwelling or personal property minus the applicable deductible. The bill requires the insurer, on documentation provided to the insurer that repair or replacement is completed and on payment of the applicable deductible, to make the remaining payment due after the initial payment. The bill establishes that an insurer is not required to pay more than the total cost to replace the lost or damaged dwelling or personal property with property of a like kind and quality. The bill applies to each insurer authorized to engage in the business of residential property insurance in Texas, including a county mutual insurance company, Lloyd's plan, and reciprocal or interinsurance exchange, and applies only to an insurance policy delivered, issued for delivery, or renewed on or after January 1, 2026.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 854 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Whereas the introduced version required an insurer to make an initial payment of not less than 80 percent of the estimated cost to repair or replace the lost or damaged dwelling or personal property minus the applicable deductible in a valid claim for loss of or damage to insured property, the substitute establishes that the insurer must not reduce an initial payment by an amount greater than 20 percent of the insurer's estimated cost for those purposes.