An insurance deductible is the amount of money a policyholder pays before their insurance company starts compensating them. It’s a way for the policyholder and their insurance company to share risk.
In past years, some disreputable Texas roofers have waived or paid deductibles for policyholders, attracting homeowners’ business under false promises like “free roofing services.” However, the recently passed HB2102 Texas deductible law is cracking down on it.
Here’s a little more about what the new deductibles law is, and what it means for Texas roofers.
What Is the HB2102 Texas Deductibles Law?
HB2102 is the deductibles law that went into effect on September 1, 2019 — just three months after it was signed by Texas’s governor. It wasn’t a completely new law, but rather a clarification and more carefully worded version of the deductibles law that had been around for years prior.
What the HB2102 Deductibles Law Says
The HB2102 Texas deductibles law states the following:
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 boldface 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."
In plain English, the HB2102 Texas deductibles law is a win for reputable roofing contractors. This is because it will punish other contractors who waive or don’t collect insurance deductibles from their clients.
So, when you go to print new contracts, make sure you include this newly required language. If you already have a large stack of contracts printed without this language, you may include this new part as an addendum for your customer to sign.
What the HB2102 Deductibles Law Prohibits
What exactly is prohibited under this law’s new terms? Read here:
(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.
The punishment terms? Under Texas’s laws, a Class B misdemeanor is punishable by up to 180 days in jail, a fine up to $2,000, or both.
What Does the HB2102 Texas Deductibles Law Mean for Roofers?
Put in basic terms, the deductibles law:
- Applies whether you are promising to waive the deductible 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.
It's safe to say that HB2102 is cracking down on Texas roofers who don't collect customer deductibles — making the industry a bit better for those who do.
What Is the Insured’s Responsibility?
For your insured customers, this means they need to 1) pay their deductible, and 2) submit proof of the deductible payment to their insurer. Here’s the exact language written in these policies:
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 holdback 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.
Our Attorneys’ Opinions on the HB2102 Texas Deductibles Law
Since the insurance companies lobbied extremely hard to get this deductibles law passed, we believe that they’ll start asking for proof of deductible payment before releasing recoverable depreciation immediately. Since this is now part of the insurance code, the Texas Department of Insurance (TDI) will be able to investigate any violations. Though they cannot prosecute the roofing contractor, they can investigate and assess fines for any violations. In addition, since they’re a governing body, they do carry a lot of weight with the District Attorney’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 roofers get paid the entire insurance claim and stop less-reputable ones from stealing reputable roofers’ customers.
Our Suggestions for Texas Roofers
From what we’ve learned about this new deductibles law in Texas, our attorneys provide the following suggestions for roofers:
- Have the owner affirmatively represent whether insurance proceeds are being used — and, if so, ask them 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/holdback (owner required to provide proof of deductible).
- Include warning language from the deductibles law in your contract and a place for the customer to initial.
If you have questions regarding the HB2102 Texas deductibles law, The Lane Law firm can help. After years of defending big insurance companies and helping them squash “the little guys’” insurance claims, our founder Chip Lane decided to open his own firm and serve those "little guys": families and small business owners. With his and the rest of our attorneys’ knowledge of insurance company tactics, we’re able to level the playing field and get your claims approved. Contact us online for more information.
