Texas Legislature Passes Two Important Bills Prohibiting Waiving of Deductibles and Expanding UPPA Prohibition to all Contractors

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The 86th Texas Legislative Session came to an end over the weekend. We are pleased to report that the Texas Legislature passed two very important bills that we have worked on for many months.

HB2102 - Prohibition Against Waiving of Deductibles (available here) -- The waiving of deductibles has been improper in Texas since 1989. Unfortunately, due to a poorly worded statute, many contractors ignored the prohibition and the waiving of deductibles has become common in Texas. Reputable contractors who refused to break the law could not compete with the “deductible eaters”. Homeowners were lured to sign contracts with shady contractors with promises of “A Free Roof!” And homeowners were duped into committing insurance fraud when they failed to advise the insurance company in submitting a request for replacement cost holdback that the deductible portion of the claim had not been incurred. HB2102 fixes all of these problems by making it crystal clear that deductibles must be paid. Plain and simple. A contractor commits a violation of the new law if it pays, waives, absorbs, rebates, credits, or otherwise declines to charge or collect a deductible. Contracts must also contain a disclosure statement that insurance deductibles must be paid. Finally, an insurance company may request “reasonable proof” that the deductible has been paid before making a replacement cost holdback payment. This important legislation will both protect Texas consumers from illegal fraud schemes and ensure that reputable contractors who collect deductibles are on a level playing field in competing for business.
 
HB2103 – Prohibition Against UPPA (available here) -- Section 4102.163 of the Texas Insurance Code enacted in 2013 prohibited the unauthorized practice of public adjusting by “roofing contractors”. Since that time we have seen the UPPA problem spread to other types of contractors as well, particularly in water damage claims and with some so-called “general contractors”. HB2103 simply deletes the word “roofing” from the existing statute to broaden the scope of the UPPA prohibition to all contractors. Also, new language is added to the statute clarifying that a contractor cannot use an assignment of benefits or power of attorney form to avoid this prohibition. This will ensure that Texas never experiences the assignment of benefits crisis that Florida has been dealing with for many years (until passing new legislation this month).
 
Passage of these bills is the result of a lengthy cooperative effort with the Roofing Contractors of Texas (RCAT), the North Texas Roofing Contractors Association (NTRCA), and the Texas Association of Public Insurance Adjusters (TAPIA), along with support from the insurance industry trade groups. These bills represent the positive results that can be achieved when we all work cooperatively together -- for the benefit of our common client Texas homeowners and businesses -- on sensible solutions to problems arising in the Texas insurance claims process. My sincerest thanks to the leadership of RCAT, NTRCA, and TAPIA for their work on these bills. Thank you also to Rep. Capriglione for carrying these bills in the House and to Sen. Zaffirini for carrying them in the Senate. I encourage you to reach out to their offices and thank them as well.
 
Finally, as you have probably all heard by now, our proposed Reroofing Contractor Registration Act failed in the House. It was a disappointing result and an ugly lesson in Texas politics. I’ll write an article soon about what happened and what we need to do in the future. We cannot give up on our efforts to pass this much needed legislation to protect Texas consumers from the crooks and frauds who descend on Texas cities after every major storm event.
 
Please note that the legislation is not quite law yet. We are now waiting on the Governor to sign the legislation (we are working on that today). Assuming he does, the legislation goes into effect on September 1, 2019. The mandatory deductible disclosure language must be in all contracts entered into after September 1st. Insurance companies may begin requesting reasonable proof of payment before making RCV holdback payments effective September 1st.
 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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