2003S0026-2 11/18/02
By: Fraser, Jackson S.B. No. 127
A BILL TO BE ENTITLED
AN ACT
relating to procedures by insurers for handling water damage
claims.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter E, Chapter 21, Insurance Code, is
amended by adding Article 21.55A to read as follows:
Art. 21.55A. WATER DAMAGE CLAIMS
Sec. 1. PURPOSE AND APPLICABILITY. The purpose of this
article is to provide for the prompt, efficient, and effective
handling and processing of water damage claims, which may include
ensuing mold losses, filed under residential property insurance
policies and to thereby reduce confusion and inconvenience to
insureds and reduce claims costs and residential property insurance
premiums in the state. This article applies to insurers that handle
water damage claims filed under residential property insurance
policies.
Sec. 2. DEFINITIONS. In this article:
(1) "Claim" means a first-party claim made by an
insured or a policyholder under a residential property insurance
policy or contract that must be paid by the insurer directly to the
insured or policyholder.
(2) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual, capital stock company,
fraternal benefit society, local mutual aid association, farm
mutual insurance company, county mutual insurance company,
association, Lloyd's plan company, or other entity writing
residential property insurance in the state. The term includes a
surplus lines insurer authorized and operating under Chapter 981 of
this code. The term includes an affiliate as described by Section
823.003(a) of this code. The term does not include the Texas
Windstorm Insurance Association created and operated under Article
21.49 of this code.
(3) "Residential property insurance" means insurance
against loss to real or tangible personal property at a fixed
location provided under a homeowners policy, a tenant policy, a
condominium owners policy, or a residential fire and allied lines
policy.
Sec. 3. PROCEDURES FOR HANDLING CLAIMS. (a) Not later
than 24 hours after an insurer or the insured's agent receives
notice of a claim for water damage, the insurer shall:
(1) contact the insured by written, telephonic, or
electronic means of communication;
(2) provide the insured with information and guidance
regarding emergency repairs, mold prevention, and how to protect
the property from further damage, including the handling of active
leaks;
(3) advise the insured to contact a qualified
specialist, if needed, including plumbers and drying companies, who
can address a water damage problem immediately; the insurer may
provide a list of qualified specialists who can address the problem
immediately, but the insurer must advise the insured of the
insured's right to select a specialist not on the insurance
company's list;
(4) provide the insured with a reasonable estimated
timetable for the claims process in order to help the insured
understand the company's standard procedures and what the insured
can reasonably expect;
(5) advise the insured of the insured's
responsibilities under the insurance policy; and
(6) designate one company representative to oversee
the claim and to answer the insured's questions; provide the name
and contact information of that representative to the insured; and
advise the insured that several individuals may be involved with
the investigation and processing of the claim.
(b) Each insurer shall develop and implement its own
procedures for handling water damage claims in a prompt and
effective manner. In accordance with these procedures, each
insurer shall:
(1) have a company representative at the insured's
home within 24 to 72 hours of receipt of notice of the claim;
insurers should consider the severity of the potential claim in
determining when to send the company representative to the
insured's home;
(2) determine whether the claim is covered and provide
an initial estimate of damage in accordance with the time frames and
procedures adopted by rule by the commissioner and inform the
insured that the estimate is subject to change;
(3) provide an explanation of any changes in the
estimate and the reasons for the change;
(4) provide the insured with a written statement
confirming or denying coverage in accordance with the time frames
and procedures adopted by rule by the commissioner;
(5) provide advance payment for additional living
expense in accordance with the time frames established by rule by
the commissioner;
(6) promptly respond to inquiries and concerns from
the insured and keep a record of all communications in the claim
activity record, including the time calls were received, the nature
of the call, and when the call was returned;
(7) identify a range of reasonable costs and standards
for water damage, mold remediation, and repair and periodically
review methods used to assess repair and replacement costs in order
to ensure that they are current and accurate;
(8) when selecting or recommending mold remediation
specialists, select experienced and reputable contractors who have
the necessary safety equipment to do the job properly and safely and
ensure that there are no conflicts of interest involving the
contractors and specialists in providing testing, water
extraction, repair, and any other mold remediation-related
services;
(9) monitor the remediation and repair processes to
ensure that work is progressing and is completed in a timely manner;
(10) develop standard guidelines to follow when
determining whether additional living expense is applicable in
accordance with specific factors adopted by rule by the
commissioner;
(11) determine whether additional living expense
coverage is payable in accordance with the time frames established
by rule by the commissioner;
(12) reimburse covered additional living expense in
accordance with the time frames established by rule by the
commissioner;
(13) inform the insured of what is included in the
additional living expense coverage, how it may be used, and the
limits of coverage available under the policy and keep the insured
informed of the remaining coverage available under the additional
living expense provision;
(14) offer to set up and implement a direct-bill
system with the insured's selected vendors;
(15) identify and cease practices that may
unnecessarily increase the additional living expense coverage
costs; and
(16) return all telephone calls from the insured and
all other calls related to the claim within 24 hours.
(c) An insurer handling a claim under this article is
required to use only adjusters who have the necessary knowledge and
experience to handle water damage claims with ensuing mold losses.
Sec. 4. PAYMENT OF CLAIMS. Section 4, Article 21.55 of this
code, applies to the payment of water damage claims regulated under
this article.
Sec. 5. APPLICABILITY OF OTHER LAW. (a) To the extent that
Article 21.55 of this code addresses matters not covered under this
article, the provisions of Article 21.55 of this code apply to water
damage claims under this article, except as provided by Subsection
(b) of this section.
(b) Section 6, Article 21.55 of this code, shall not apply
for failure to comply with the requirements of this article, except
that that section shall apply for failure to comply with Section 4,
Article 21.55 of this code, for water damage claims regulated under
this article.
Sec. 6. CONFLICT WITH OTHER LAW. To the extent that Article
21.55 of this code addresses matters that are covered under this
article, the provisions of this article prevail unless otherwise
provided in this article. To the extent of any conflict between the
provisions of this article and any other provision of this code, the
provisions of this article prevail.
SECTION 2. Article 21.55, Insurance Code, is amended by
adding Section 9 to read as follows:
Sec. 9. CONFLICT WITH OTHER LAW. To the extent of any
conflict between this article and Article 21.55A of this code in the
handling of water damage claims under residential property
insurance policies, the provisions of Article 21.55A of this code
prevail.
SECTION 3. The commissioner of insurance shall adopt rules
implementing Article 21.55A, Insurance Code, as added by this Act,
not later than the 120th day after the effective date of this Act.
SECTION 4. (a) This Act takes effect June 1, 2003, if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on that
date, this Act takes effect September 1, 2003.
(b) The change in law made by this Act applies only to a
claim an insurer receives notice of on or after the effective date
of this Act, except that Subdivisions (2), (4), (5), (10), (11), and
(12), Subsection (b), Section 3, Article 21.55A, Insurance Code, as
added by this Act, shall apply only to a claim an insurer receives
notice of on or after the 120th day after the effective date of this
Act.