Texas Regulators Offer Guidance to Insurers on Harvey Response

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The Texas Department of Insurance has issued several bulletins offering guidance to insurers related to Hurricane Harvey, which made landfall near Rockport, Texas, late on Aug. 25.

The bulletins are in response to the proclamation by Gov. Greg Abbott declaring a disaster as a result of Harvey. President Donald Trump additionally issued a major disaster declaration for the state and ordered federal aid in the recovery efforts.

The governor’s proclamation “directs that all necessary measures, both public and private, … be implemented to meet that threat,” according to TDI.

Among the guidance offered in various Harvey-related bulletins covering property/casualty insurance issues, TDI stated:

“It is the opinion of the Texas Department of Insurance that it is inappropriate for insurers to re-rate, cancel, nonrenew, or refuse to provide coverage due solely to a policyholder’s status as a victim or evacuee of Hurricane Harvey. Further, it is not reasonable to change a policyholder’s rating classifications or increase their insurance rates solely because they are a victim or evacuee of Hurricane Harvey.
“TDI reminds all persons, including adjusters, building and repair contractors, and insurers, that pursuant to Insurance Code §543.001, an insurer or its representative, or any other person, may not misrepresent the terms and provisions of a policy. Further, as stated in 28 Texas Administrative Code §5.9970(d) and (e), persons insured under a homeowners or dwelling policy are entitled to have their home repaired by the person of their choice.”
“Under Insurance Code §542.003(a), an insurer engaging in business in this state may not engage in an unfair claim settlement practice. Not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear constitutes an unfair claim settlement practice under Insurance Code §542.003(b)(4).”
“With the possible relocation of hurricane victims and other personal hardships sustained by residents of counties covered in the governor’s proclamations, the Texas Department of Insurance reminds carriers of their obligations under §559.103 of the Texas Insurance Code. These obligations apply to the writing of personal insurance in this state, including the writing of personal insurance for Texas residents affected by the hurricane.
“Section 559.103 allows an insurer to grant an exception to an insurer’s rates, rating classifications, or underwriting rules for an applicant for insurance coverage or an insured for an extraordinary event. The section also requires that an insurer provide reasonable exceptions for a consumer whose credit information has been directly influenced by a catastrophic illness or injury; by the death of a spouse, child, or parent; by temporary loss of employment; by divorce; or by identity theft, on written request from an applicant for insurance coverage or an insured. The insurer may consider only credit information not affected by the event or shall assign a neutral credit score.”
“The Texas Department of Insurance urges insurers to avoid placing additional burdens on victims or evacuees of Hurricane Harvey and encourages insurers to accept verbal requests in lieu of written as stated in §559.103. Section 559.103 applies to personal insurance, which includes personal automobile, residential property, residential fire and allied lines insurance policies; or a noncommercial insurance policy covering a boat, personal watercraft, snowmobile, or recreational vehicle.”
Regarding “insurers contemplating changes in classification of commercial auto vehicles from local to intermediate or long haul, cancellation or nonrenewal of policies, or refusal to provide coverage due solely to participation in the relief effort. The Texas Department of Insurance is of the opinion that in instances where insureds or potential insureds are temporary participants in the relief effort of Hurricane Harvey, it is inappropriate for insurers to re-rate, cancel, nonrenew, or refuse to provide coverage due solely to that participation.”
“In the current disaster circumstances, the Texas Department of Insurance reminds carriers that Insurance Code §4101.002(b) and §4101.101 authorize carriers to immediately use nonresident and emergency adjusters to handle claims. These provisions are discussed at: www.tdi.texas.gov/licensing/agent/agemeradj.html.”
“With the relocation of hurricane victims and other personal hardships sustained by residents of counties covered in the governor’s proclamations, TDI encourages carriers to use all available means to provide prompt and immediate relief to those residents and policyholders.”
“Insurance Code §4101.251 prohibits licensed adjusters from adjusting a loss related to roofing damage on behalf of an insurer if the adjuster is a roofing contractor or otherwise provides roofing services or roofing products for compensation, or is a controlling person in a roofing-related business. The section also prohibits a roofing contractor from acting as an adjuster or advertising to adjust claims for any property for which the roofing contractor is providing or may provide roofing services, regardless of whether the contractor holds a license under this chapter.”
“Chapter 4102 of the Insurance Code requires all persons acting as public insurance adjusters to be licensed by the department. The Insurance Code provides for both civil and criminal penalties for violating this license requirement.”
“Insurance Code §4102.151 prohibits public insurance adjusters from soliciting or attempting to solicit clients for employment during the progress of a loss-producing natural disaster occurrence.”
“Insurance Code §4102.158 prohibits public insurance adjusters from participating directly or indirectly in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the license holder or engaging in any other activities that may reasonably be construed as presenting a conflict of interest, including soliciting or accepting any remuneration from, or having a financial interest in, any salvage firm, repair firm, or other firm that obtains business in connection with any claim the licensee has a contract or agreement to adjust.”
“Insurance Code §4102.163 prohibits a roofing contractor from acting as a public adjuster or advertising to adjust claims for any property for which the contractor is providing or may provide roofing services, regardless of whether the contractor holds a license under this chapter.”
“Contractors are not listed among the persons exempt from the licensing requirement in Insurance Code §4102.002. Chapter 4102 does not prohibit contractors from providing estimates or discussing those estimates and other technical information with an insurer or its adjuster.”
“TDI encourages carriers to provide relief to those policyholders in counties covered in the governor’s proclamations, including the suspension of premium payments to allow continuing insurance coverage. In conjunction with this effort and in accordance with the governor’s proclamations, TDI will work with carriers to minimize the regulatory effects of a carrier’s suspension of premium payments, specifically in regard to financial review requirements. The term “suspension” is not intended to mean the forgiveness of the premium. Carriers are encouraged to work with policyholders in the collection of premiums, including payment plans.”
“The normal premium debits from financial institutions may continue in place according to a carrier’s written agreement with a policyholder, unless a problem exists with premium debits, or a policyholder’s specific hardship directs a carrier otherwise. This should be weighed against the potential disruption to a carrier’s business model or the inconvenience caused to the policyholder by multiple payments. It is TDI’s expectation that any problems resulting from this issue will be resolved between the parties without a complaint being filed. This would include a carrier working with a policyholder to minimize the effects of any penalties or charges associated with premium debits.”