Greetings from ACT Contractor Forms…
The Texas governor signed into law HB 2102 which goes into effect September 1, 2019. This law requires that a notice be given with every contract for property restorations paid all or in part from insurance proceeds. This applies to both homeowner’s insurance as well as commercial property insurance.
Basically, this bill is designed to make sure the property owner actually PAYS THE INSURANCE DEDUCTIBLE. This law makes it illegal for the contractor to “rebate” the insurance deductible to the property owner by absorbing the deductible amount in the funds the contractor receives from the insurance company for the actual work (RCV or Replacement Cost Value). As all Texas insurance restoration contractors know, a common sales tactic for Texas contractors and their salesforce is to use the deductible as a selling tool to get the property owner to sign with their company. This new law should help the bottom line for all restoration contractors in Texas since this law has some real consequences for disobeying it! There are fines and even jail time as possible penalties, but the real consequence is the requirement that the insured prove they paid the deductible.
If the insured cannot “prove” they actually paid the deductible, the insurance company has the legal right to deny the claim on that basis! So, if the contractor is waiting on a check from the insurance company, and the insurance company asks for proof of the deductible payment by the insured, and the insured cannot supply valid proof… the insurance company can deny the claim and potentially, the contractor might not be paid for work already completed! if the deductible has been “rebated”, both the insured AND the Contractor have broken this law so the Contractor would not even be able to legally demand payment for completed work from the customer! To paraphrase this new law, “Reasonable proof of payment includes a canceled check, money order receipt, credit card statement, or copy of an executed installment plan contract or other financing arrangement that requires full payment of the deductible over time.
The last part is the most interesting… “or copy of an executed installment plan contract or other financing arrangement that requires full payment of the deductible over time.” This means that instead of using rebating the deductible, as a selling tool, financing the deductible over time is a great substitution and the contractor doesn’t have to “eat” the deductible within the insurance proceeds! I had one restoration salesperson tell me..."hey, we'll have them sign the promissory note for the deductible and when the first payment is due, we'll tell them to forget it that we will not hold them to the payments".... I have it on good authority that the insurance company can demand proof the financing agreement is REAL by demanding receipts of payments on the loan... so my advice is to "keep it real", bite the bullet and be sure to collect the deductible in a verifiable way to avoid lawsuits from insurance carriers that ask for all the proceeds back from a claim you worked!
As always we have you covered... if you are a purchaser of ACT Contractors Forms Software for Texas, and you also received the insurance restoration add-on with that software, you are entitled to a free addendum to give with your commercial and residential restoration contracts, that makes you compliant with this new law... HB 2102! If you have not already been contacted by us, just send us an message from our contact page in this website. Be sure to include your company name and a current email where we can email the "fix" for HB 2102!