TDI Files Proposal to Limit Denials Based on Past Water Damage Claims

As anticipated, the Texas Department of Insurance has filed a proposed rule that would limit insurer’s ability to deny homeowners insurance coverage based solely on a history of water damage claims.

Texas Insurance Commissioner Jose Montemayor described the new rule to state legislators at a hearing before the Senate Insurance Committee a few days before the proposal was filed.

According to TDI, Proposed Subchapter J. Prohibited Trade Practices 28 TAC §21.1007, is designed to eliminate unfair competition and unfair discrimination and to promote the availability and affordability of residential property insurance. It prohibits an insurer from using water damage claim history as an underwriting guideline or to rate a new policy if an inspection has not been conducted by the insurer to determine the condition of the property.

TDI said it has found that certain insurance companies are rating and declining to write residential property insurance policies based on the existence of a prior water damage claims in order to offset losses resulting from and to avoid future claims for mold damage. The department asserted, however, that whether or not prior water damage has been repaired can only be determined by an inspection of the property.

The department will consider the adoption of new §21.1007 in a public hearing under Docket Number 2532, scheduled for 9:30 a.m. on Oct. 22.