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No fiscal implication to the State is anticipated.
HB 3787 would amend Chapter 2301 (Policy Forms) of the Insurance Code by adding a new section. This new section would allow a property insurer to include a contractual limitations period for filing a claim. However, this required contractual limitations period could not end before two years from the date the insurer accepts or rejects the claim. Likewise, the contractual limitations period could not end before three years from the date of the property damage.
Lastly, this legislation would allow an insurer to have a policy that requires a policyholder to file a claim within one year following the date of property damage.
Currently, property insurance in Texas is relatively high due in part to litigation on claims made many years after the property damage occurred. When claims are made years after the date a loss occurs on a property it becomes increasingly difficult to prove whether a loss is attributed to the purposes of the claim or some other unrelated cause.
To remedy this issue, the legislature passed a bill that allowed the Texas Windstorm Insurance Association (TWIA) to set limitations on the length of time that a claim must be filed and it set limitations on the contractual limitations that TWIA has to a policyholder. Unfortunately, this remedy was not provided to all property insurers throughout Texas.
This legislation would allow all property insurers to establish filing and contractual limitations with a policyholder. We support HB 3787 because it has struck a good balance by protecting the property rights of both the insurer and insured. The one year period for filing a claim gives the policyholder a reasonable amount of time to file a claim for damages; likewise the two to three year contractual limitations required of the insurer protects the insurer from having to litigate on claims that were filed many years after a property loss. This provision alone should have a positive effect on the free market in terms of lower property insurance rates because the costs for litigating those types of claims could decrease since they would lie outside the statute of limitations established by this bill.