Texas set to impose new insurance restrictions as residents face damage from Hurricane Harvey

As residents and businesses throughout Texas face devastating damage from Hurricane Harvey, many will be relying on their insurance providers to compensate them for their losses — but in a few days, it may be harder to get reimbursed if the insurance company doesn't follow through.

On Sept. 1, a new law will take effect in Texas that aims to cut down on a recent rise in insurance lawsuits regarding weather-related damages. HB 1774, as the bill was known prior to becoming law, imposes a series of new regulations on lawsuits filed against insurance providers for nature-related events, including the flood, hurricane and tornado damage residents are facing in the wake of Hurricane Harvey.

Changes imposed by the new law include a requirement to notify the insurance company 61 days before filing a lawsuit and decreasing the interest penalty paid by insurance providers from 18% to 15%, Texas's 12 News noted. The new law also doesn't ensure policyholders will have their attorney fees covered, only requiring that attorney fees be covered in full if the policyholder wins their case and is awarded at least 80% of the damages.

Though HB 1774 proponents Texans for Lawsuit Reform argue that the new law will protect consumers while curbing "abusive lawsuits that are jeopardizing the affordability and availability of property insurance across the state," others warn that the restrictions will ultimately hurt Texans by de-incentivizing insurance companies from paying on time to avoid a lawsuit.

"Under this new law, many insurance companies will pay property owners as little, as late as possible. Texans can expect only more delays and denials from the for-profit insurance industry," Ware Wendell, executive director of consumer rights group Texas Watch, said in a statement quoted by the Texas Tribune.

The effects of the new law will almost certainly be felt in the wake of Hurricane Harvey, which JPMorgan predicted Monday will be one of the top 10 most costly hurricanes in U.S. history for the insurance industry.

"While flooding is not covered under homeowner's insurance (it is sold by the government), it is covered under commercial insurance and could result in meaningful losses for the commercial reinsurers and insurers," JPMorgan analyst Sarah DeWitt wrote in a letter to clients quoted by CNBC.

With rainfall still continuing through later in the week, the full extent of the damage is still unknown, though officials currently predict that more than 30,000 people will be forced out of their homes in the wake of the devastation. Harvey has since been downgraded to a tropical storm.

"I can tell you I have a very bad feeling and that's about it," Mayor Charles Bujan of Port Aransas, Texas, told ABC News about the town's "massive" damage.

The new law is set to take effect Friday as the rainfall tapers off, meaning many Texans won't be able to survey the damage before the current less-restrictive regulations expire. Those who can, however, may want to file their insurance claims immediately, as the new regulationsonly apply to insurance claims filed after the new law takes effect, even if any potential lawsuits occur after Sept. 1.

Even those filing a claim prior to Sept. 1 that don't file a lawsuit may find their timeliness pays off, as insurance companies will still have to pay the higher 18% interest penalty if payment gets delayed, the Texas Tribune noted.

When filing an insurance claim, Texans should ensure they provide an accurate description of the damage and thoroughly document their damage with photos and videos to avoid delays, the Insurance Information Institute recommends, and keep a claim diary to track the insurance process.

RELATED: Before-and-after images show extent of Hurricane Harvey damage

8 PHOTOS
Before-and-after images show extent of Hurricane Harvey damage
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Before-and-after images show extent of Hurricane Harvey damage
Downtown Houston skyline at sunset / dusk with a blue and orange sky, orange reflection on buildings from the sunset, and a freeway / highway with light trails.
Interstate highway 45 is submerged from the effects of Hurricane Harvey seen during widespread flooding in Houston, Texas, U.S. August 27, 2017. REUTERS/Richard Carson
View of the downtown area of Houston from a Buffalo Bayou park.
The downtown skyline is reflected in the flood water at Buffalo Bayou Park after Hurricane Harvey inundated the Texas Gulf coast with rain causing widespread flooding, in Houston, Texas, U.S. August 27, 2017. REUTERS/Nick Oxford
This is insane. #houstonflood https://t.co/oddenJiGnE
Top overall view of the huge and busy traffic junction of the Katy and Gulf Highway in Houston, Texas.
A charred, abandoned car is seen on Interstate 610 North August 27, 2017 in Houston as the city battles with tropical storm Harvey and resulting floods. / AFP PHOTO / Thomas B. Shea (Photo credit should read THOMAS B. SHEA/AFP/Getty Images)
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