HB2102 is the new deductible law that went into effect September 1st, 2019, only 3 months after it was signed by the governor. It is not a completely new law, but rather a clarification and more carefully-worded version of the deductibles law that has been around for years.
It is a win for reputable contractors as it will punish contractors who waive or otherwise don't collect insurance deductibles from their clients.
What the law says:
Sec. 27.02. GOODS OR SERVICES PAID FOR BY INSURANCE PROCEEDS: PAYMENT OF DEDUCTIBLE REQUIRED [CERTAIN INSURANCE CLAIMS FOR EXCESSIVE CHARGES].
(A) In this section, "property insurance policy" has the meaning assigned by Section 707.001, Insurance Code.
(B) A contract to provide a good or service that is reasonably expected to be paid wholly or partly from the proceeds of a claim under a property insurance policy and that has a contract price of $1,000 or more must contain the following notice in at least 12-point boldfaced type: "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 Texas law for a seller of goods or services who reasonably expects to be paid wholly or partly from the 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."
If you have a lot of contracts already printed without this new language, you may include this part of the law on an addendum for your customer to sign. When you do print new contracts, make sure you include this newly required language.
What you cannot do:
(C) A person who sells goods or services commits an offense if the person:
(1) Advertises or promises to provide a good or service to an insured under a property insurance policy in a transaction in which:
(A) The good or service will be paid for by the insured from the proceeds of a property insurance claim; and
(B) The person selling the good or service will, without the insurer's consent:
(i) Pay, waive, absorb, or otherwise decline to charge or collect the amount of the insured's deductible;
(ii) Provide a rebate or credit in connection with the sale of the good or service that will offset all or part of the amount paid by the insured as a deductible; or
(iii) In any other manner assist the insured in avoiding monetary payment of the required insurance deductible; or
(2) Provides a good or service to an insured under a property insurance policy 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:
(A) Pays, waives, absorbs, or otherwise declines to charge or collect the amount of the insured's deductible;
(B) Provides a rebate or credit in connection with the sale of the good or service that offsets all or part of the amount paid by the insured as a deductible; or
(C) In any other manner assists the insured in avoiding monetary payment of the required insurance deductible.
(D) An offense under this section is a Class B misdemeanor.
Under Texas's laws, a Class B misdemeanor is punishable by up to 180 days in jail, a fine of as much as $2,000, or both. For example, possession of up to two ounces of marijuana is a Class B misdemeanor. (Tex. Penal Code Ann. § 12.22 (2019).)
What does this mean to you?
- Applies whether you are promising to waive or if you are actually waving.
- Prohibits paying, waving, absorbing or in any way declining to charge or collect the deductible.
- Prohibits rebates or credits that will offset all or part of the deductible.
- Prohibits in any manner assisting the insured in avoiding payment of their deductible.
What is the insured's responsibility?
Sec. 707.002. PAYMENT OF DEDUCTIBLE REQUIRED. A person insured under a property insurance policy shall pay any deductible applicable to a first-party claim made under the policy.
Sec. 707.004. REASONABLE PROOF OF PAYMENT. An insurer that issues a property insurance policy with replacement cost coverage may refuse to pay a claim for withheld recoverable depreciation or a replacement cost hold back under the policy until the insurer receives reasonable proof of payment by the policyholder of any deductible applicable to the claim. Reasonable proof of payment includes a canceled check, money order 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.
It is the insured’s responsibility to submit proof of a separate deductible payment. Deductible payment must be a separate payment and be the first payment collected.
Since the insurance companies lobbied extremely hard to get this law passed, we believe that they will start asking for proof of deductible payment before releasing recoverable depreciation immediately. Since this is now part of the insurance code, TDI will be able to investigate any violations. Though they cannot prosecute the contractor, they can investigate and assess fines for any violations. In addition, since they are a governing body, they do carry a lot of weight with the DA’s office and could suggest charges be filed for violators.
Fortunately, the courts are so overloaded it may be unlikely in larger counties, but we wouldn’t be surprised if it happened in some smaller counties. Hopefully, this law will help legitimate contractors get paid the entire insurance claim and stop the less reputable contractors from stealing reputable Roofer’s customers.
- Have owner affirmatively represent whether insurance proceeds are being used and, if so, what is the amount of their deductible.
- Provide a section on your contract for your customer to check a box that indicates whether or not they are paying with insurance proceeds; a blank line for them to write in the amount of the deductible, and a place for them to initial that section.
- Have language in your contract that requires the customer to assist with collection of depreciation/hold back (owner required to provide proof of deductible).
- Have warning language from law in your contract and a place for customer to initial.
If you have questions regarding the HB2102 "Deductibles Law," The Lane Law Firm can help. After years of defending big insurance companies and helping them squash the “little guy’s” insurance claims, Chip Lane decided to open his own firm to serve families and business owners needing help with insurance claims. With his years of experience and extensive knowledge of the insurance company’s tactics, he’s able to level the playing field and get claims approved.