Property Insurance Claims Act

Summary

This Act is intended to address issues that exist in residential and commercial insurance claims involving alleged damage to property and ensure fairness to all involved parties during the claims process.

Property Insurance Claims Act

Model Policy

Section 1. {Title, enacting clause, etc.}

This Act shall be known as the Property Insurance Claims Act.

Section 2. {Applicability.}

This Act applies to any Claim under or related to a Property Insurance Policy that provides insurance coverage against damage to or loss of real property or tangible personal property and all associated coverages. To the extent any language in the Act conflicts with the language found within the Insured’s Property Insurance Policy, the language of the Property Insurance Policy shall take precedence and control.

Section 3. {Definitions.}

(A) “Claim” means a request for payment under a Property Insurance Policy for damage to or loss of real property or tangible personal property and all associated coverages alleged to be covered by the policy.

(B) “Property Insurance Policy” means a policy of insurance providing property insurance in this state, inclusive of both commercial and residential insurance policies.

(C) “Insurer” means any authorized Insurer writing a Property Insurance Policy in this State, including a policy issued by an insurance company, reciprocal or inter-insurance exchange, mutual insurance company, capital stock insurance company, county mutual insurance company, Lloyd ’s plan, or other legal entity authorized to write property insurance in this state.

(D) “Insured” means a person or entity who is a named or an additional insured under a Property Insurance Policy and who makes a Claim under this Act.

Section 4. {Filing of Claim.}

An Insured must file a Claim under a Property Insurance Policy no later than the first anniversary of the date on which the damage to property that is the basis of the Claim occurs. The failure to file a claim within this time frame bars the Insured from making a claim under the Property Insurance Policy and from bringing any legal action against an Insurer relating to the property damage that is the basis of the Claim.

Section 5. {Appraisal.}

(A) If appraisal is demanded under a Property Insurance Policy:

(1) Except as provided in Section 2. Applicability, the appraisal must be conducted as set forth below:

(a) Unless agreed to in writing by the Insurer and Insured, appraisal shall be limited to resolving a dispute as to the cost to repair or replace an agreed amount of loss or damage. Disputes as to the existence of loss or damage, extent or scope of loss or damage, and all other issues are coverage and/or causation questions beyond the scope of appraisal provision;

(b) If the appraisers selected by the Insured and Insurer are unable to agree upon the selection of an umpire, the Insurer and Insured are to submit a joint request for the appointment of an umpire to a court in the county in which the property that is the subject of the Claim is located;

(c) The appraisers and the umpire must be qualified and disinterested. This includes having no other role and/or proprietary interest in the handling of the claim or the repair work being performed pursuant to the claim. The appraisers and the umpire can also have no financial interest in the outcome of the claim and shall be paid for their work only at a reasonable hourly rate;

(d) The appraisers retained by the Insured and the Insurer and the umpire shall provide to the parties an itemization of damages as part of the appraisal decision.

(e) If the appraisers for the Insured and the Insurer and the umpire are unable to reach an appraisal decision on the cost to repair or replace, the appraisers for the Insured and the Insurer and the umpire shall each provide a determination of cost to repair or replace.

(f) The appraisers for the Insured and the Insurer and the umpire shall determine the actual cash value (ACV) and replacement cost amounts for all items damaged that are made the basis of the Claim.

(g) An Insured or Insurer may, not later than the second anniversary of the date of the appraisal decision, file an action in a [insert appropriate trial court]in the county in which the loss that is the subject of the appraisal occurred to vacate the appraisal decision if:

(i) the appraisal decision was obtained by fraud, accident or mistake;

(ii) the rights of the Insured or Insurer were prejudiced by:

1. evident partiality by an appraisal umpire;

2. fraud by an appraiser or umpire;

3. misconduct or willful misbehavior of an appraiser or umpire; or

4. any appraiser or umpire who participates in a determination under Section 5 having a financial interest in the outcome of the appraisal decision.

Section 6. {Limitations Period.}

Notwithstanding any other law, an Insured who brings a lawsuit against an Insurer relating to or arising out of a Claim, must bring the lawsuit not later than the second anniversary of the date of either (i) the date on which the Insurer’s first payment was issued, or (ii) the date on which the Insured’s claim was denied in full or in part, whichever is later.

Section 7. {Attorney’s Fees.}

This section will be applicable to any statute, contract or equitable basis for the recovery of attorneys’ fees in a matter involving a Claim under a Property Insurance Policy. Notwithstanding any other law, the recovery of attorneys’ fees involving a Claim under a Property Insurance Policy is limited to a reasonable and necessary attorney’s fee up to but in no event exceeding 40% of the additional amount of damages awarded above what the insurer agreed to pay prior to the filing of suit.  There shall be no award of attorneys’ fees under this section unless the additional damages awarded are no less than 80% of the Offer of Settlement amount pursuant to Section 9(A)(1) below.

Section 8. {Statutory Penalties and Interest.}

This section will be applicable to any statute, contract or equitable basis for the recovery of interest in a matter involving a Claim under a Property Insurance Policy. Any interest or statutory penalties in the form of interest awarded to an Insured in a matter involving a claim under a Property Insurance Policy shall be limited solely to pre-judgment interest and post-judgment interest available to all prevailing parties under section ___ of the Finance Code. No additional interest or statutory penalties in the form of interest shall be awarded.

Section 9 {Offer of Settlement.}

(A) No less than sixty days prior to the inception of any lawsuit[1] arising from a Claim under a Property Insurance Policy, an Insured must provide the Insurer with an offer of settlement stating an amount certain to resolve the Claim. The offer of settlement must include

(1) an amount certain to resolve the disputed Claim; and

(2) attorneys’ fees up to and not to exceed 20% of the amount set forth in section 9 (A)

(1) above.

(B) A lawsuit filed without providing such an offer of settlement can be abated to allow for the submission of the offer of settlement and time to respond.

Section 10 {Affidavit of Damages.}

Concurrent with the filing of any lawsuit1 arising from a Claim under a Property Insurance Policy where an Offer of Settlement pursuant to Section 9(A)(1) states a specified amount in excess of $100,000 and where the dispute involves a question as to the existence or scope of damage, as opposed to a dispute solely as to the cost to repair/replace an agreed amount of damage, an Insured must include a sworn statement in support of the stated existence or scope of damage bearing the seal of an architect or engineer licensed in this State, where relevant and applicable to the type of property in dispute.

Section 11. {Effective Date.}

This Act applies only to a Claim under or related to an insurance policy delivered, issued for delivery, or renewed on or after ____________, but shall provide the exclusive remedy for Claims under Property Insurance Policies delivered, issued for delivery, or renewed thereafter. A Claim under or related to an insurance policy delivered, issued for delivery, or renewed before ______________, is governed by the law applicable to the Claim immediately before the effective date of this Act, and that law is continued in effect for that purpose. This Act takes effect ___________.

Section 12 {Severability}

If any provision of this subchapter or the application thereof to any person or circumstance is held invalid for any reason, the invalidity shall not affect the other provisions or any other application of said sections which can be given effect without the invalid provisions or application. To this end, all provisions of this subchapter are declared to be severable.

[1] “Where open courts or other state constitutional provisions have imposed obstacles to burdening plaintiffs with pre-complaint or at-complaint filings, “concurrent with” can be changed to “within 30 days of”.

 Approved by the ALEC Board of Directors January 9, 2015.

Approved by the ALEC Board of Directors September 3, 2019.