The New Insurance Deductible Law and What it Means for Homeowners and Roofers in Texas

Understanding new laws this year can make all the difference for TX Roofers in DFW and homeowners across TX state. For the uninitiated, let us first begin with what exactly is insurance deductible in common parlance. 

To undertake a repair or replacement of roof involves substantial work. If it is an emergency, such as a roof damaged in a storm, the situation becomes far more complicated. Needless to say, the homeowner stands to incur high expenses when it comes to any major roof-related work.

This is where an insurance policy and subsequent deductibles arrive at the scene.

What are Deductibles?

Deductibles include a specific amount that house owners have to bear from out of their pockets, pursuant to their insurance claim cost. Once this deductible is paid, the rest of this expenditure is to be paid by said insurance company. 

Consider this, cost of a new roof comes out to be $9,500, and deductible amounts to $2000. The onus of covering the remaining outlay of $7500 is on the insurer. 

Seems good, no? 

So, what is the problem? 

Why was the new insurance deductible law brought into effect in Texas and how have DFW Roofing Contractors and TX contractors been affected? 

Fraudulent conduct by roofers and contractors was the impetus for the existing law to be modified. After a natural calamity strikes, or maybe lesser, when a massive storm is over, roofers collude with homeowners to waive off their insurance deductible and render their service at less charge. More often than not, homeowners are unwitting participants of this illegal activity.

Modus operandi of contractors is to sign a “free repair” contract and waive or absorb the deductible to be paid by the homeowner. This way, roofers end up making high profits by cutting corners. They are known to use sub-par quality materials in roof work and inflate the bills to be sent to the insurance company, with impunity.

This rampant corruption continuing for quite some time called for amendment in the prevailing law.

Payment of Insurance Deductible – New Law in Texas

Before we proceed with the new law, please note that the deductible policy had been operational in Texas since 1989 under the Texas Insurance Code Section 707.002. The drafting of the legislation, however, led to an ambiguity that allowed contractors to use it to their advantage. 

The latest amendment in September 2019 lays down the following:

• Creation of Class B misdemeanor offense and penal provisions for contractors as well as colluding homeowners.
• Under Section 707.004, an insurer is empowered to reject claim payment and withhold recoverable depreciation till “reasonable proof” is furnished by the policyholder of deductible payment. “Proof” includes money order receipt, canceled check, credit card statement etc. 
• Texas Business and Commerce Code is amended where specific parameters would be taken into consideration to recognize the proceeds of a claim.
• Under Section 707.003 Texas Insurance Commission is entrusted with the responsibility of initiating consumer awareness on the new law.

What is the Obligation of Texas Roofers Under this New Deductible Law?

Compliant contractors need not worry; it is only the rogue ones who are going to feel the heat under this new law!

Here is how the law impacts the duty of contractors towards their clients, i.e., homeowners –

• The penal provision will be applicable in both the instances of making a promise to waive and the actual act of waiving. 
• Absolute restriction on payment, waiver, absorbing or adoption of any other method that goes on to negate the charge or collection of deductible. 
• Absolute restriction on extending any credit or rebate that would effectively offset any component of deductible.
• Absolute restriction on providing any kind of assistance to homeowners to avoid deductible payment.

The rigor present in this new law does not adversely impact legitimate business considerations of contractors or roofers. Few necessary yet simple measures can be adopted by contractors to remain safe from potential allegations –

• Have the homeowner state on record that insurance proceeds have been duly paid, and state the deductible amount. 
• Include a specific section in the contract where the owner states these details.
• Require annexure to be attached as proof. 
• Include a section of disclaimer and warning in the contract. 

What Does it Mean for Texas Homeowners?

A section of homeowners had been taking advantage of “free roof” for a long time now. Ambiguity in law had led to tardy enforcement. Also, the weather pattern of Texas is such, that hail, sleet, tornadoes, hurricanes are not infrequent. 

It was, in fact, a common practice by contractors in North Texas to waive off the deductible if the roof of a house is damaged by hail, leading a homeowner to get a “free roof”.

This new law puts a stop to these practices that were taken advantage of by homeowners for long. 

There is, however, no need for homeowners to panic. Just a few pointers have to be borne in mind.

• Adjust to this new regulation and follow up about the exact deductible to be paid. You can contact your insurance provider and negotiate for a lower deductible. 
• In case you are experiencing difficulty on paying a high deductible, have a financing agreement for payment in place.
• Be more aware of the changes in the law, and what your rights are, vis-à-vis the insurer.

What this recent amendment means is that if a homeowner enters into any such dubious agreement with contractors in doing away with the deductible, one has to pay out of his/her own pocket. Moreover, the replacement cost recoverable on depreciation would necessarily be withheld. 

This is, apart from, the punitive action to be taken against violators. It may include $2000 fine or imprisonment up to 6 months or both.

This new law categorically outlaws roofers or contractors to waive insurance deductible. The only advice to you is to pay your deductible without fail!