Although hurricanes, tropical storms and other windstorms now account for the highest cause of loss for businesses, few expected such an intense wind event prior to hurricane season. The damages from the May 16, 2024 windstorm event in Houston with over 100+ MPH winds are currently predicted to be $5-$7 billion. The Houston storm was ruled to be a derecho, a widespread, long-lived windstorm that is associated with a band of rapidly moving showers or thunderstorms that produces wind damage along a path length of at least 240 miles. The recorded damages were remarkably similar to the impact from Hurricane Ike in 2008, according to AccuWeather.
It is no secret that windstorms like the rare Houston derecho cause extensive damage to building structures. High winds cause differential pressure inside and outside of buildings, compromising roofs, walls, windows, and doors. Once structural elements in your building envelope are damaged or destroyed, water can get in. Rainwater complicate the damages caused by hurricane winds and debris, bringing with them the strong possibility of mold growth.
Assessing the Damage
For Houston policyholders, understanding the intricacies of insurance claims and assessing whether the damage exceeds the deductible can be a daunting task. After a natural disaster like a windstorm, the first step for policyholders is to assess the damage to their property. This involves conducting a thorough inspection of the premises, documenting all visible damages, and taking photographs or videos as evidence. It's crucial to document all damage, no matter how minor it may seem, as it can significantly impact the insurance claim process.
Understanding Your Insurance Policy
Every insurance policy is different, and understanding the terms, coverage limits, and deductibles is essential for policyholders. Review your insurance policy carefully to determine what is covered under your policy and what is not. Pay close attention to the deductible amount, as this is the portion of the claim that the policyholder is responsible for paying before the insurance coverage kicks in.
Insurance policies often contain limited coverage for items such as debris removal, wind-driven rain, and mold remediation, making it imperative to strategically categorize and present your recovery costs in order to maximize your available insurance coverage. A thorough grasp of the details of your business interruption, extra expense, code & ordinance upgrade, ICC, and other relevant coverages will help put you in the driver’s seat when it comes to navigating your windstorm insurance claim. Understanding the specific language of your commercial property insurance coverages and exclusions is critical to making sure you get everything you’re entitled to under your policy.
Evaluating Whether Damage Exceeds Deductible
For most, one of the most difficult aspects of considering whether to even make an insurance claim is determining whether the damage exceeds the deductible. This requires a careful assessment of the extent of the damage and the cost of repairs or replacement. In some cases, policyholders may find that the cost of repairs is lower than their deductible, not making it financially viable to file a claim.
However, it's essential to consider the long-term implications of not filing a claim, such as being unprepared for future disasters or worse—being legally barred from pursuing your claim at some point. The rationale is simple: when roofs are subject to multiple storm occurrences over a period of time, the legal burden to segregate out which damages were caused by a particular storm falls on the policyholder, NOT the insurance company. Texas law requires that an insured prove which storm caused the damages they are claiming to the exclusion of other storms. So if your commercial property may have been damaged, it is extremely important to have a trusted contractor or other expert inspect to identify damages. We work with some of the best forensic experts in the country, and routinely assist Houston policyholders determine the extent of their covered loss from windstorms.
If damages are found, insureds should file their insurance claim immediately. If a policyholders wait, and another storm hits, this may hinder their ability to obtain coverage due to a potential inability to segregate out damages caused by one storm from another.
Wind deductibles typically range from one to five percent of your total insured value (TIV). Deductibles are the amount you are responsible for before your insurance kicks in. They can vary based on the type of damage. For windstorm and hail damage, deductibles are often a percentage of your Coverage A (Dwelling) or Coverage C (Personal Property) amounts. Named storm deductibles come into play when a storm with an official name (like a hurricane) causes damage. These deductibles are triggered by advisories or warnings from the National Weather Service. They are usually higher than standard deductibles.
Ideally, insurance companies would be understanding of the devastation caused by a storm and would pay out claims in a timely and fair manner over the next few months. Unfortunately, this is often not the way things work in the insurance industry, and commercial property insurance disputes can remain unresolved for months, if not years. Whether it’s a major commercial lines insurer, a surplus lines carrier not directly licensed in a particular state, a Lloyds entity or other insurance group, it’s important to understand the goals, tactics, and methods that the insurance industry employs in the handling of windstorm damage insurance claims. Here in Texas and across the United States, we handle a full range of insurance disputes, including many for large businesses pursuing fair claim resolutions after suffering severe property damage caused by a major windstorm.
Commercial Windstorm Insurance Claims Are Often Focused On:
Whether repair or replacement of the commercial property is appropriate
The cause of the loss and whether it is covered under the insurance policy
The cost of commercial property repairs
The loss of value of the investment or the loss of business income caused by the commercial property damage
The estimated value of business equipment or other insured items destroyed by the storm
The replacement cost of the commercial property if the building was damaged beyond repair
Extent of business interruption due to direct physical loss, and the degree of temporary lost income
Whether any reasonable and necessary expenses were incurred to prevent or minimize a shutdown
What period of restoration applies when the covered damage is, or reasonably could have been, repaired, or when the business resumes operations at a new permanent location
Some insurance companies try to pay out as little as possible, in some cases significantly underestimating the extent of losses or misrepresenting that certain policy exclusions apply to claims. Other times insurers will delay or deny legitimate windstorm damage insurance claims with the hope policyholders will accept the carrier’s decision and eventually give up their fight.
Common Challenges in Commercial Windstorm Insurance Claims
When filing commercial wind insurance claims, Houston business owners may face several obstacles. Understanding these challenges can help you navigate the process more effectively.
Underpayment
One of the most common issues is underpayment. Insurance companies may offer less than what you believe is necessary for repairs. This can happen due to:
Failure to account for local code enforcement: Harris County laws or ordinances which impact the rebuild process.
Outdated price lists: Using old pricing data or information in Xactimate to estimate repair costs can lead to lower payouts.
Roof repairs vs. replacement disputes are common, and insurers often look for exclusions like wear and tear or improper installation.
Damaged windows, siding, and interior moisture intrusion often become a battleground for arguments as ensuing latent damages arise.
To combat underpayment, get detailed repair estimates from reputable contractors (RCAT and other Texas roofers’ associations offer lists of endorsed roofers, for example) or a licensed public adjuster. This documentation can help you argue for a fair settlement.
Excessive Depreciation
Insurers might reduce the payout based on the age and condition of the damaged property. Of course, while there are several ways to calculate depreciation, carriers typically use the straight line method. Importantly in Texas, a carrier likely cannot depreciate labor from the total Replacement Cost Value (RCV). Mitchell v. State Farm is a decision from the Fifth Circuit Court of Appeals holding that under Mississippi law, unless the policy specifically permits depreciating labor, labor cannot be depreciated. While the Court was applying Mississippi law, another federal court recently considered Mitchell in the context of Texas law. Sims v. Allstate found that the law in Texas was identical to the law in Mississippi on that issue, and therefore Mitchell would likely apply. While not binding authority, Mitchell and Sims strongly support that depreciating labor in Texas is improper.
Detailed Estimates
Insurance companies often require detailed estimates for repairs. These estimates must be thorough and accurate. Most insurers use a software program called Xactimate for these estimates. This program helps standardize repair costs and ensures consistency.
Consider hiring a contractor who is certified in Xactimate. Having multiple assessments will be useful when discussing scope of loss with your insurer. Don't get a written estimate until it is comprehensive and complete. The right forensic experts can provide the detailed estimates your insurer will accept.
Exclusions Raised on Older Buildings
Older buildings often face more scrutiny during the claims process. Insurers may argue that damage was due to pre-existing conditions or poor maintenance rather than the windstorm.
To avoid this, maintain your property regularly and document its condition. Keep records of any repairs and updates. This can help prove that any damage was indeed caused by the windstorm. Especially after the May 16th derecho, document any new interior leaks that you observe or your tenants report.
Timing of Claim Decision (Texas’ Prompt Payment of Claims Act — Chapter 542.055-.057)
Depending on the type of insurer, carriers are generally required to:
Acknowledge claim, commence investigation, request information within 15 days after notice of loss. For surplus lines carriers, this deadline is extended to 30 business days after notice of loss.
Notify insured in writing of acceptance or rejection of claim within 15 business days of receive all items to secure final proof of loss before deadline.
If additional time is necessary to investigate the claim, carrier must accept or reject the claim not later than the 45th day after notifying the insured in writing that additional time is necessary.
If claim is accepted, pay claim not later than 5 business days after written notice to insured of acceptance. For surplus lines carriers, this deadline is extended to 30 days after written notice to insured of acceptance.
Common Ways Insurers Act in Bad Faith During Claim Process
There are several ways an insurer could engage with a policyholder that may be considered bad faith actions. Some of the most common misconduct that results in a bad faith claim includes:
The insurer denying a claim that should be covered without proper justification
The insurer making an unreasonably low settlement offer without justification for a covered claim
The insurer refusing to investigate a claim with no justification
The insurer conducting a claims investigation with no real resolution
The insurer refusing to consider any evidence involved in a claim that should be covered and only looking for justification to deny the claim
The insurer refusing to settle a claim when liability is reasonably clear
The insurer misrepresenting a material fact or policy provision relating to coverage
The insurer failing to act in good faith and reach a timely settlement
The insurer failing to affirm or deny coverage with the insured
The insurer failing to respond to claim requests within a reasonable period
The insurer enforcing a full and final release of a claim from a policyholder when only a partial payment has been made
Our experienced attorneys have a strong grasp of Texas insurance law and various types of insurance coverage, enabling us to build strong cases for pre-suit claim negotiations or in litigation, if needed, on behalf of our clients. We have developed a national reputation handling commercial property disputes involving a variety of types of properties, each of which have unique characteristics that need to be evaluated. Our experience includes:
School districts of all sizes throughout Texas
Apartment complexes and other multi-family properties
Office buildings of all sizes
Churches and other houses of worship
Hotel and motel properties
Retail and strip centers
Industrial buildings
Gas stations and convenience stores
Homeowners and Property Owners Associations
We have resolved literally hundreds of disputed commercial windstorm property insurance claims, including those with the following carriers and/or entities:
AIG, AIX, Allstate, American Family, AmRisc, AmWins, ASI Lloyds, Assurant, Catlin Specialty, Chubb, Columbia Lloyds, Continental Western, Farmers, FM Global, Firemans Fund, General Security Indemnity, Germania, Great American, GuideOne, Hanover, Hartford, ICAT, Independent Specialty, Indian Harbor, Insurors Indemnity, Ironshore, Lexington, Liberty Mutual, Lloyd’s of London, MAPFRE, Mesa Underwriters, Multinational, Nationwide, One Alliance, Peleus, Praetorian, Republic Underwriters, Rockhill, QBE, Seneca, Starr, State Farm, Steadfast, Travelers, Triple-S Propiedad, TWIA (Texas Windstorm Insurance Association), Union Standard, United Fire Group, United Specialty, USAA, Velocity Risk, Westchester Surplus Lines, Weston and Zurich.
Unlike most firms, this is all we do—our entire practice is dedicated to helping policyholders get the just compensation they deserve for their properties following storms. We are a nationally recognized bad faith insurance litigation law firm that is familiar with the tactics insurance companies often use to deny or underpay claims. Our attorneys counter with successful strategies, including hiring professional roofing inspectors, forensic experts and engineers to fully inspect the nature of the damage to find clear, physical evidence of property damage covered under the specific terms of your policy. This allows us to have a detailed, comprehensive estimate of the real damage to your property and how much we should seek in claim compensation on your behalf. Our use of professional experts, contractors, and engineers sets us apart from other insurance litigation firms. Of note, the Texas Department of Insurance found that engaging the services of an advocate historically increased an insured’s payment on a property insurance claim by an average of 308%.*
To learn more about the legal assistance we can provide on your windstorm insurance claim, give us a call at (346) 704-5295, or contact us online.
