What are the Laws on Commercial Property Damage in Texas?

Whether it is a natural disaster, severe weather, or vandalism, owners of commercial properties are not immune to property damage of any kind. Owners must stay aware of these potential threats, which can disrupt business operations and sometimes lead to closure.

While insurance should act as a safety net in these situations, insurers can still take advantage of policyholders by undermining the claims process through undervaluing, delaying, and even denying valid claims. Many laws dictate the requirements and rights Texas business owners have and should know if their property is damaged, helping ensure their claims are successful.

Commercial Property Damage Laws in Texas

When a commercial property is damaged, the owner’s insurance policy acts as a legally binding contract that can help them obtain financial coverage for the damage. While property damage can result from many causes, in Texas it most often stems from a natural disaster or weather-related event, like a hurricane, hail, or tornado.

Regardless of how the damage occurred, Texas law explicitly prohibits an insurance company from using unfair claim settlement tactics. Under Texas Insurance Code Chapter 542¹, these unfair practices include:

• Knowingly misrepresenting pertinent facts or policy provisions relating to the coverage at issue.
• Failing to acknowledge a claim within a reasonable timeframe.
• Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under the insurer’s policies.
• Not attempting in good faith a prompt, fair, and equitable settlement of a claim in which liability has become reasonably clear.
• Undervaluing a claim by offering substantially less than what the damage is valued.

Fortunately, common legal and statutory protections for policyholders help hold insurance companies accountable and ensure insurers uphold their legally binding obligations under the policy. However, certain time limitations set by the policy and/or Texas law require commercial policyholders to act promptly so they don’t lose the opportunity to take legal action if necessary.

Texas Common Law and Property Damage

Insurance providers owe a wide range of duties to their policyholders. Insurance policies are contracts of adhesion, meaning one party (the insurer) drafts them, and the other party (the policyholder) signs them. Because the insurer has stronger bargaining power, Texas law interprets insurance policies in favor of policyholders and penalizes insurance providers for bad-faith actions. However, both parties are subject to the policy terms and must perform their obligations as delineated. Should the insurance company violate its policy terms, it can be held liable for breach of contract.

Insurance providers must adhere to the contract terms and owe a duty of good faith and fair dealing to their insureds. In other words, under this implied covenant, they must treat policyholders reasonably, fairly, and in good faith. Once a Texas policyholder files a claim, the insurer must follow specific regulations to investigate, process, and handle the claim.

For instance, the insurance company must evaluate the claim fairly to the fullest extent and not deny or delay payment of a valid claim when liability is reasonably clear. If an insurance company breaches the policy or its duties, it may be liable for damages.

Texas Insurance Code

The Texas Insurance Code (TIC), specifically Sections 541² and 542³, provides statutory protections for Texas policyholders that require insurance providers to effectuate a prompt, fair, and equitable settlement of a claim. Further, the TIC penalizes insurance providers for bad-faith activities, such as failing to conduct a reasonable investigation, misrepresenting the policy, and/or making false statements of material fact.

Additionally, TIC §542—the Texas Prompt Payment of Claims Act (TPPCA) triggers time limitations for an insurance company to respond and acknowledge the receipt of a filed claim, request documentation and begin investigating the claim, notify whether a claim has been accepted or denied, and pay an accepted claim. If the claim is denied, the insurance company must provide the insured with a valid reason in writing.

An insurance company’s failure to meet any of these requirements within the time allowed violates the TPPCA, and the insurance company may be responsible for additional damages, penalties such as statutory interest, and attorneys’ fees.

A violation of the TIC may also create a cause of action under the Deceptive Trade Practices Consumer Protection Act (DTPA),⁴ which provides additional protections to consumers who are victims of deceptive, improper, or illegal practices. Insurance companies that violate the TIC and DTPA may be liable for attorneys’ fees, treble damages, and other penalties.

The Texas Statute of Limitations for Property Damage

Texas has a strict statute of limitations⁵ that places a time limit on how long a claimant has to file a lawsuit in court, regardless of whether the case involves real property – such as a business’s physical building – or personal property.

Under Texas law, there is a two-year filing deadline that applies to any lawsuit seeking repair or replacement of damaged or destroyed property. The case must be filed within two years from the day the property was damaged or destroyed.

If the two-year deadline passes before the injured party files suit, the insurer can file a motion asking the court to dismiss the case. If the dismissal is granted, the plaintiff loses the right to any legal remedy against the carrier to recover compensation for the damaged property.

Policies often contain statutes of limitations that may differ from those under Texas law. Because of this, property owners should file suit as soon as possible to avoid a potential case dismissal. In certain situations, Texas policyholders can pause or extend the lawsuit-filing deadline set by the statute of limitations, including:

• If the defendant is absent from the state for any part of the two years, the timing of the statute of limitations is suspended for the length of the absence
• When the property owner is under a legal disability when the property damage occurs. This does not apply to the designated two-year period; however, if a legal disability comes up after the limitations period has already started, it will not suspend the running of the period.

Commercial Insurance Recovery Attorneys

Any instance of commercial property damage can bring a business to a screeching halt and leave owners unsure what to do or what their legal options are.

At Raizner Slania, our attorneys understand Texas property-damage laws and the options available to commercial property owners who need help with a claim.

Sources:

¹ “https://statutes.capitol.texas.gov/?tab=1&code=IN&chapter=IN.542&artSec=542.001

² https://statutes.capitol.texas.gov/Docs/IN/htm/IN.541.htm

³ https://statutes.capitol.texas.gov/Docs/IN/htm/IN.542.htm

⁴ https://statutes.capitol.texas.gov/Docs/BC/htm/BC.17.htm

⁵ https://www.nolo.com/legal-encyclopedia/property-damage-statute-limitations-texas.html