Big Freeze - TX'21

Historic Amount of Claims Generated from Texas Winter Storm

Texas storms can create massive damage. Hurricane Harvey currently holds the distinction of the state’s costliest storm. While the February 2021 freeze is already the largest winter storm, it is predicted to become “the largest claim event in state history” according to the Insurance Council of Texas. State Farm Insurance currently reports 30,000 claims for burst pipes a week after the event. Claims include damage to autos, damage to buildings from fallen trees, roof leaks, and interior water damage from burst pipes that are likely to result in claims for mold and business interruption. Liability claims have also been generated, tragically, from a single accident in Fort Worth from a 133 car pile-up on I-35 W when it suddenly turned icy in the early morning of February 11th. 

The claim volume will undoubtedly drive considerable coverage and bad faith litigation. In fact, the plaintiffs’ bar is already preparing, much like with COVID-19 litigation, for coordinated insurance claim litigation, including likely class actions.

We will address Texas law on frequently litigated property damage coverage and bad faith issues including accidental water loss and mold claims, the Prompt Payment and Unfair Settlement Practices provisions of the Texas Insurance Code, bad faith damages, Chapter 542A (the hailstorm tort reform legislation of 2017), appraisal, and legal guidelines on emergency adjusters and more in our webcasts. 

In the decade from 2008-2017, Hurricane Harvey caused $19 billion in insured losses in Houston, Rockport, and Port Aransas, a 2016 hail storm in San Antonio caused $1.4 billion in damage, and Hurricane Ike caused $12 billion in Galveston in 2008. A key distinction with prior storms is the statewide nature of the winter storm. While there are FEMA disaster designations in place currently in 108 counties, Governor Abbott has requested a statewide designation for all 254 counties, and the Texas Division of Emergency Management for the state anticipates that threshold will be reached. 

Projected property claim losses from the arctic blast are currently $18 billion. As with Hurricane Harvey, carriers are expected to respond to the Texas Department of Insurance data calls to report damage and claims data. In addition, the Commissioner of Insurance has issued three “Property and Casualty” bulletins that  include the use of nonresident and emergency adjusters, enforcement of vacancy provisions, grace periods for premium payments, and contractor and repair guidance. The fourth bulletin covers the “Division of Workers’ Compensation.”  

Big Freeze - TX'21

The snow and ice that blanketed Texas from February 11 through February 19 caused massive amounts of property damage and took a human toll, resulting in deaths from hypothermia and car accidents on icy roads. The Big Freeze is also set to surpass the worst storms in state history in both economic impact and impact to the insurance industry.

Projected Losses

Insured losses from Hurricane Harvey in 2017 totaled approximately $19B over a year later. Less than a week after the storm, estimates of insured losses from the Big Freeze were already $18B. Projected costs (including insured losses and other economic losses) are as much as $200B.

Largest Claim Event in Texas’ History

One carrier alone reported 20,000 claims for burst pipes from the weeklong event—compared to 75 total claims for frozen pipes in all of 2020. Several hundred auto claims were reported from car wrecks early on in the storm. Hundreds of thousands of claims are expected under residential and commercial property policies for damage to buildings from fallen trees, roof leaks, interior water damage from burst pipes, mold, and business interruption. 

Is another Wave of Class Action Litigation Looming?

The claim volume will undoubtedly drive considerable coverage and bad faith litigation. In fact, the plaintiffs’ bar is already preparing, much like with COVID-19 litigation, for coordinated insurance claim litigation, including likely class actions.

Texas Law is Changing

We stay current on all aspects of Texas coverage and bad faith law from the latest judicial pronouncements to pending and enacted legislation. The Big Freeze is playing out against a new legal landscape with Texas Insurance Code Chapter 542A, new developments in appraisal law, and, of course, the “Five Rules” of the landmark Menchaca bad faith decision.  See USAA Texas Lloyd’s Company v. Menchaca, 545 S.W.3d 479, 498 (Tex. 2018). 

Updated Guidance from the Texas Department of Insurance

The Texas Department of Insurance has issued several bulletins on property damage claims that address the use of nonresident and emergency adjusters, enforcement of vacancy provisions, grace periods for premium payments, and contractor and repair guidance. The fourth bulletin covers the “Division of Workers’ Compensation.”  TDI has also issued a data call to carriers for claims data to track the Big Freeze’s impact.

See more here:
https://www.tdi.texas.gov/bulletins/index.html


Webcasts

Big Freeze = Big Litigation (Think Class Actions and MDL!)

Presented by: Laura Grabouski and Steve Holden

Freezing OUT Bad Faith After the Big Freeze TX’21!

Presented by: Kristen Lawhorn, Laura Grabouski, and Steve Holden

Big Freeze - TX'21

Presented by: Kristen Lawhorn, Laura Grabouski, and Steve Holden


Big Freeze - TX'21 Blog

Taking a Proactive Approach to Appraisal after Texas Supreme Court Limits Appraisal Defenses
Reasonable Payment Prior to Appraisal Not a Defense to Prompt Pay Penalties:
“Freezing OUT Bad Faith after the Big Freeze’21!
Big Freeze - TX'21 Blog Post

Additional Resources

https://www.tdi.texas.gov/bulletins/index.html


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