HB2102 – It’s the Law! HB2102, the new deductibles law, goes into effect September 1 st. It is a modification and expansion of the deductibles law that’s been around for many years that required owners to pay their insurance deductible and “punished” contractors who waived – or ate – deductibles. While there were lots of complaints about how vague the law was, it wasn’t vague so much as rife with loopholes. The new law is much broader and will be much harder to maneuver around……….. which is good for property owners and contractors alike.
Transcript
HB2102 – It’s the Law!HB2102, the new deductibles law, goes into effect September 1st. It is a modification and expansion of the deductibles law that’s been around for many years that required owners to pay their insurance deductible and “punished” contractors who waived – or ate – deductibles. While there were lots of complaints about how vague the law was, it wasn’t vague so much as rife with loopholes.
The new law is much broader and will be much harder to maneuver around……….. which is good for property owners and contractors alike.
Disclaimer
My opinions on this bill are my own, they do not necessarily represent the opinions of the NTRCA board or anyone else for that matter. I am not giving anyone legal advice – unless you are my client – and even then much of how this law would be applied is case specific.
You should consult with your own attorney to ensure that your practices comply with the new law.
Owner’s Obligations
The Easy Part of Complying
Owner’s Obligations, cont.
Initial Analysis
Contract for a good/service
Reasonablyexpected to
be partly/wholly
paid from
Proceeds of property insurance
policy
Contract over $1,000
The Scary Part
In Simple Terms………– Applies whether you are
– Promising to waive
– Actually waiving
– Prohibits – Paying, waiving, absorbing or otherwise declining to charge or collect the deductible
– Rebates or credits that will offset all or part of the deductible
– In any other manner assist the insured in avoiding payment of the deductible
– But …. – Requires knowledge that the insured will pay for the work from insurance proceeds
– Applies only if the insurance co has not consented
The Penalty
• Drop from an “A” to a “B”• Up to 180 days in jail and a $2,000 fine
• Extremely unlikely that anyone will be criminally prosecuted• The criminal justice system is already overworked
• Much more likely to get a TDI fine and Cease and Desist• Another contractor can report you but has no power to see you prosecuted
Service Only Contracts
You are not required to include the warning language, but it can’t hurt and could avoid a claim that you failed to disclose that obligation when you first signed them up
Retail Contracts
– Reasonable belief standard
– Best practice is to have owner affirmatively represent whether insurance proceeds are being used and if so, how much their deductible is
– We are not the “deductible police”
Hardship Cases
– There’s no waiver in the statute for treating a hardship case any differently than any other, i.e. no right to waive deductible
– Can offer financing
– Owner can request insurance co waive requirement
Relationship with 4102?
– Nothing in this new law changes any of the rules and restrictions in the PIA law
– Resist the temptation to become a “policy cop”
– Unlike 4102, nothing in 2102, the deductibles law, authorizes a court to void a contract
– Both are governed by TDI so TDI has the right to issue a cease and desist
QuestionsDoes failing to include the required warning make the contract void? No
What if the contract has the required language but the contractor waives? Still not void
Can an owner sue a contractor for failing to honor the new law Likely yes, but must show harm
What if owner initially agrees to pay deductible but then later refuses some portion of the payment?
You are not required to sue, but beware of optics of collusion to assist owner to avoid paying deductible
ACV only policies/scenarios Owner still has to pay deductible
Must contractors now review policies to confirm required deductible No
Penal Code 35.02: Insurance Fraud Requires intent to defraud/deceive
Friends and family discounts You are not required to charge full price but whatever you charge, a deductible will be applied to it
Upgrades for paying deductible Not a violation
Sign allowances Likely permissible if not tied to deductible and reasonably priced
Practice tips
– Warning language on front page of contract with space for initials
– Provide a place on your contract for owner to check a box that says insurance or no insurance, with a space for the amount of the deductible, which the OWNER should fill in
– Language requiring Owner to assist with collection of depreciation/hold back (owner required to provide proof deductible has been paid)
– As always, the business is responsible for the actions of its employees and agents, including 1099 sales people
Karen Ensley is a board-certified construction law attorney focused on representation of small and largecommercial and specialty contractors throughout Texas. Karen is well versed in collecting for unpaid work,lien and bond claim law, and defending against claims of improper workmanship. Karen also regularly drafts,reviews and negotiates construction contracts, including contracts specially created for stormrestoration/disaster mitigation contractors, and provides counsel to her clients on employer/employee issues,statutory compliance, and implementation of general best business practices.
Karen is a member of several contractor associations including NAWIC Fort Worth, National Women inRoofing, Association of Professional Women in Construction, RCAT, and is a member of and associationcounsel for NTRCA. Karen is also a member of the APA, and the Dallas and Collin County Bar Associations.Karen is a regular speaker providing education, counseling and advocacy of the firm’s clients and thecontracting industry in the areas of contract review, lien and bond law, employment issues, best practices,and related legal topics.
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.
