Contrary to their snappy jingles and marketing slogans, many insurance companies have amassed huge profits simply by denying the claims of the people they insure. These practices are not simply confined to auto insurance companies, but rather exist in many other industries where insurance is necessary. For example: homeowners’ insurance.
The State of Texas recently experienced winter weather that had not been seen for generations. Temperatures dipped as low as -2 degrees in some parts of the Lone Star State. These conditions, combined with power outages across the state, left many Texans struggling to stay warm. The combination of severe weather and electrical outages also damaged many homes and caused water pipes to burst.
Texans will undoubtedly recover from this storm, but the property damage issues will remain. Fortunately, most homeowners have insurance, right?
Not so fast.
If history is any indicator of the future, many insurance companies will deny claims, delay processing, and underpay claims, just as they did following Hurricane Harvey.
Fortunately, the legal system provides remedies for homeowners dealing with unscrupulous insurance companies. This article discusses the legal remedies available to Texas homeowners and recommendations for Texans dealing with a potentially greedy insurance company.
What does homeowners insurance cover?
Relief may quickly turn to surprise, frustration, and uncertainty for people all over Texas regaining power and heat for the first time in days when frozen, burst pipes begin to thaw and gush water inside walls and ceilings. Power regulators reported as many as 4 million homes out of the approximately 12 million homes in Texas were without power the week of February 15, 2021. Many of those millions are asking the same question: will insurance cover this?
Whether insurance covers burst pipes depends on the language of the homeowner’s insurance policy. The only way to be sure is to request a copy of the policy from the homeowner’s insurance company or agent and review it with a licensed attorney.
Luckily, in Texas, many homeowners policies are similar. Before 2003, all insurers in Texas were required to use one of the specific policy forms approved by the Texas Department of Insurance. Many Texas policies still use similar language as a result.
Homeowners Insurance in Texas
There are two primary forms for homeowners insurance in Texas and each one treats burst pipes differently:
- “Named Peril” (sometimes called ISO HO-1 or Texas Form HO-A); or,
- “All Risk” (ISO HO-3 or Texas Form HO-B) – which is the most common type.
There are plenty of places you might get unreliable information about your coverage. Most burst pipe claims, before this past week, did not involve a statewide power outage, and that might make a difference.
That means insurance companies’ usual practices, and many articles written about burst pipe claims, may not arrive at the right answer for you. Your coverage depends on what your own policy says and your individual facts.
So, what your adjuster says may not be accurate for you.
Below are the most common questions and answers regarding Texas homeowners insurance coverage for frozen burst pipes.
Homeowners Insurance Claims in Texas - FAQs
Can the insurance company deny my claim?
The “All Risk” policy has exclusions. It does not insure for loss “caused by: (1) freezing of a plumbing… system or by discharge, leakage or overflow from within the system or appliance caused by freezing” unless the insured “used reasonable care to: (a) maintain heat in the building; or (b) shut off the water supply and drain all systems and appliances of water.”
An insurance company trying to deny a claim might ask whether the heat was on in the building or whether the homeowner had drained the water lines in the house. If the answer to both questions is “no,” insurance company could try to use those answers to deny the claim.
But the key question is whether the insured “used reasonable care” to keep the heat on or drain the lines. What is reasonable is usually a question for a jury to answer, and an attorney for the insured could argue that reasonable care was taken to maintain heat based on the actions of the insured, even if the heat was off because of a statewide power outage, which is not in the control of the insured.
How is coverage from a frozen pipe different from other burst pipes?
The “All Risk” policy excludes “wear and tear,” “deterioration,” and “mechanical breakdown.” However, there is an exception for “accidental discharge or overflow of water or steam from within” a plumbing system, though that exception does not “cover the loss to the system… from which the water or steam escaped.”
In short, if the loss is caused by a failure of the plumbing system not related to a freeze, the insurance company may not approve payment for the repair of the damaged plumbing if the insured does not fight back with evidence they used reasonable care to keep the heat on.
Does a Named Peril policy cover burst frozen pipes?
A “Named Peril” policy differs from an “All Risk” policy because it specifies what it covers instead of what it does not cover. Specifically, the Texas Form HO-A “Named Peril” policy covers physical loss caused by “Explosion.”
A Texas appeals court case in 1978 held that a jury should decide “whether or not a bursted water line was the result of an ‘explosion.’” Ormsby v. Travelers Indem. Co. of Rhode Island, 573 S.W.2d 281, 285 (Tex. Civ. App.—Waco 1978, no writ).
As a result, anyone in Texas who has a “Named Peril” policy may need an attorney to present the issue to a jury to determine whether burst pipes are covered.
What other reasons would cause an insurance company to deny my claim?
In addition to the issues and questions already discussed, there are other questions that may impact the payment an insured receives for a bust pipe:
- What is the reasonable or necessary cost of repair?
- What portion of the damages were caused by a covered cause and what portion were due to “wear and tear,” “deterioration,” or “breakdown?”
- Did the insured properly mitigate damages?
- To what degree are damages caused by mold or mildew?
- Is any of the policy language ambiguous, or subject to more than one reasonable interpretation?
What should I do to get the most out of my damage claim?
Following a few basic rules will help the insured get started on the right foot:
- Report the claim to insurance as soon as practicable. Power and phone interruptions and surviving the crisis may cause in delays, but the insurance company should be notified as soon as there is an opportunity.
- Mitigate damages. Do not let the damages get worse. For example, if a pipe has burst, turn off the flow of water, and do what you can to help the damaged property dry out.
- Document everything. Take videos or photos of everything damaged. Keep records of every penny spent mitigating damages, making repairs, or replacing damaged property.
- Contact an attorney as soon as something doesn’t feel right. Many insurance attorneys charge no fee for consultations and get paid only when the insured makes a recovery.
When to hire an insurance attorney
If you need to hire an attorney because an insurer engaged in a prohibited practice, Texas Insurance Code Chapter 541 allows recovery of “actual damages, plus court costs and reasonable attorney’s fees” and if the insurer acted “knowingly”, an award of up to “three times the amount of actual damages.”
In addition, under Texas Insurance Code Chapter 542, up to 18 percent interest per year is available on the amount of the claim.
If you’re unsure of whether or not your situation warrants filing a claim against your homeowners insurance company, use the quick questionnaire below. If you do qualify, you can get a free case evaluation from an attorney who specializes in Texas homeowners insurance claim denials.
DISCLAIMER: Nothing in this article is intended for residents of states other than Texas. Contact an attorney licensed in your state for information about the laws of that state. This article is intended for educational purposes. Nothing in this article is legal advice, and reading this article does not create an attorney-client relationship.
ABOUT THE AUTHORS
Attorney Paul Ready is the Managing Attorney of Ready Law Firm (1300 McGowen St. Ste. 120, Houston, TX 77004), PLLC and practices general civil litigation, including insurance disputes. Paul Ready was first admitted to the Missouri Bar in 2011, the Kansas Bar in 2012, and the Texas Bar in 2013. He can be reached by email or by phone.
Attorney Andrew Cobos is the principal attorney at the Cobos Law Firm (1300 McGowen St., Ste. 140, Houston, TX 77004) and represents plaintiffs in civil litigation, including insurance disputes. He offers free consultations and can be reached by phone. Attorneys of the Cobos Law Firm are licensed in the State of Texas.