Articles Posted in Wind/Hurricane

New Law Limiting Your Rights Under Your Policy Goes Into Effect September 1

The Texas Legislature passed a law, effective September 1, called the “Hailstorm Bill.” This new law severely limits your rights under your commercial property insurance policy. Here are a few of the new changes.

-Statutory Penalties: The current law provides a penalty of 18% for failure of an insurance company to pay a claim timely and fairly. The new law lowers that amount to 5% higher than the Texas Pre-judgment interest rate which is now 5%. So the penalty will effectively drop from 18% to 10%.

One issue I frequently encounter is a commercial property insurance policy that has the wrong named insured. This usually causes a few minutes of sheer panic followed by the relief that Texas jurisprudence does allow for common sense remedies. That’s because even when the “wrong party” is listed as the insured the courts will look beyond that designation if the party listed has an “insurable interest” in the insured property.

An ownership interest is different from an “insurable interest.” Texas courts have long recognized this important distinction and given wide latitude to the term “insurable interest.” The seminal case in this area is Jones v Tex. Pac. Indem. Co., 853 S.W.2d 791 (Tex. App. – Dallas, no writ).

But the most interesting and expansive opinion on the matter is Dana O’Quinn v. General Star Indemnity Co., a case out of the United States District Court for the Eastern District of Texas. That case was about a fire loss which occurred at a nightclub called Alibi’s, the most perfectly named property for an overly suspicious insurance carrier.  Alibi’s  was founded by Brian O’Quinn, who was also President and Director of Cahoots Entertainment, Inc., which owned the business and entered into a lease with the owner of the premises.

In State Farm Lloyds v. Hanson, a Texas appellate court considered State Farm Lloyds’ appeal from a judgment in favor of its insured. The case arose when a woman closed on a house that had a 15-year-old roof. The roof shingles were 30 years old and fastened with staples. During the building inspection, there were no concerns stated about the roof. The woman requested coverage through her State Farm agent, who prepared an underwriting report. In the report, there was nothing reflected about rotting, hail damage, or interior leaks. Nothing was stated as a point of concern.

The homeowners’ policy that was issued by the defendant provided coverage for accidental physical losses to the property. It excluded certain losses arising out of weaknesses in workmanship. In June 2012, there was a huge storm. The next day, a roofing company salesman made adjustor appointments for houses in the woman’s neighborhood. In October, he inspected the woman’s roof, found areas where shingles were not sealed to lower layers, and suggested she file an insurance claim.

She and the salesman both called in a claim for wind damage to the roof. The claims representative came with the roofing salesman to check out the roof. He found there wasn’t enough damage, and no covered loss had been sustained. The woman was unsatisfied and asked for another inspection. This inspector also found no covered loss, and the claim for wind damage was denied.

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The hail storms last spring in Dallas, Fort Worth, Wylie, Richardson, Plano, Rockwall, Garland, Rowlett, Allen, Mesquite and Lewisville have brought to light a little known endorsement in many Texas property insurance policies – the cosmetic endorsement.

The endorsement usually reads: