In June 2019, 86th Texas Legislature signed into law House Bill 21.02 Effective September 1, 2019. The introduction of 21.01 was intented to help curb the abuse to insurance systems in place since 1989.
THE PROBLEM:
Waving insurance policy deductibles is insurance fraud and has been common practice in Texas since the introduction of a poorly worded bill in 1989. Homeowners are lured into doing business with shady roofing contractors with the incentive they will get a new roof for free. They are told the deductible would be waved as a gesture of good will. Policy holders are unknowingly deceived into committing insurance fraud. The deductible is “cooked” into the books of the insurance payout or other paperwork and hidden beneath the surface of an illegal operation; only interested in funding their shady agenda.
THE SOLUTION:
House Bill 21.01! The new bill entitled, “Payment of Insurance Deductible” by Governer Abbot is intended to curb abuse to the insurance system in place since 1989. The Bill is located in Chapter 707 of the Texas Insurance Code. The Bill states:
“A person insured under a property insurance policy shall pay any deductible applicable to a first-party claim made under the policy” See Tex. Ins. Code §707.002
However, the new law provides that it is a violation of this law if a contractor:
•Pays for,
•Waives,
•Absorbs,
•Rebates,
•Credits or Offsets
•Otherwise assists the insured in any other manner in avoiding monetary payment of the required insurance deductible or provides a good or service knowing that the insured will pay for the good or service with the proceeds of a claim under the policy and without the insurer’s consent to do so.
Violation of the new law carries a Class B misdemeanor offence. 180 Days in jail and a fine of up to $2000 for, (1) a business who sells goods or services to provide such a good or service in such a prohibited manner (violating contractor), (2) an insured (policyholder) who commits an offense if the person, in connection with a first party claim knowingly submits or allows a claim to be submitted in violation of subsection c, (the violation section directly above) unless the insured person promptly notifies the insurer of the violation.
The new law also amends the Texas Business and Commerce Code. Stating “a contract that is reasonably expected to be paid wholly or partly from the proceeds of a claim made under a property insurance policy to provide a good or service of more than $1000 must contain the following provision in 12 pt. font:”
Texas law requires a person insured under a property insurance policy to pay any deductible applicable to a claim made under the policy. It is a violation of this Texas law for a person or business paid wholly or partly from proceeds of a property insurance claim to knowingly allow the insured person to fail to pay. Or assist the insured person’s failure to pay, the applicable insurance deductible. See SECTION 2. Business & Commerce Code, is amended to read as follows: Section 27.02. “Goods or Services Paid for by Insurance Proceeds: Payment of Deductible Required”
Furthermore, the new bill requires proof of payment of the policy holder deductible.
“Reasonable Proof of Payment, which provides that an insurer may refuse to pay a claim for withheld recoverable depreciation or replacement cost holdback until the insurer receives “reasonable proof” of payment of the deductible by the policyholder. “Reasonable Proof” is set out in the statute as consisting of a: “canceled check, money order under receipt, credit card statement, or copy of an executed installment plan contract or other financing arrangement that requires full payment of the deductible over time.” Tex. Ins. Code §707.004.
