Dallas Guide: Texas Property Insurance Law for Mold Damage

13 min read

Introduction: Why Dallas Homeowners Must Understand Texas Property Insurance Law on Mold Damage

Dallas lies at the confluence of humid Gulf air and sudden North Texas cold fronts, creating ideal conditions for moisture intrusion and—if not remediated quickly—mold growth. When mold colonizes drywall, flooring, or HVAC systems, remediation costs can soar into five figures, and insurers often resist paying. Policyholders in Dallas, Texas routinely face claim delays, underpayments, and outright denials for mold-related property damage. Understanding your rights under Texas Property Insurance Law is therefore essential to protect your home, finances, and health.

This comprehensive guide arms Dallas homeowners with: (1) a clear overview of relevant statutes such as the Texas Insurance Code §542 (Prompt Payment of Claims), (2) the scope of “mold limits” many insurers quietly embed in policies, (3) actionable steps for documenting and disputing improper claim outcomes, and (4) red flags signaling it is time to call an experienced dallas insurance attorney. Whether you are confronting hidden moisture after a spring hailstorm or black mold following a sewage backup, the information below can help shift leverage back to you—the policyholder.

Understanding Texas Property Insurance Law

Key Statutes Every Dallas Homeowner Should Know

• Texas Insurance Code §542 (Prompt Payment of Claims Act)—Insurers must acknowledge, investigate, and pay or deny claims within specific deadlines (15, 15, and 60 business days respectively, with extensions possible after Catastrophe Notices). Failure can trigger 18% annual interest plus attorney’s fees.

• Texas Insurance Code §541 (Unfair Settlement Practices)—Prohibits misrepresentation of policy provisions, failure to effectuate prompt, fair settlements, or compelling policyholders to sue by offering substantially less than amounts ultimately recovered in litigation.

• Texas Property Code §27 (Residential Construction Liability Act)—Relevant when mold results from construction defects; provides notice requirements and potential contractor liability in addition to insurance proceeds.

• Statute of Limitations—Texas generally provides a two-year limitations period for bad-faith and prompt-payment claims (running from the date the insurer’s breach becomes reasonably apparent) and a four-year limitations period for breach-of-contract actions.

Prompt Payment and Bad Faith Protections

The Texas Supreme Court’s decision in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) confirmed that payment after an appraisal award does not automatically absolve an insurer of liability under §542. In other words, even if the carrier eventually pays, it can still owe statutory interest for delays. Dallas policyholders negotiating mold remediation bills—which often increase each week mold remains—should reference this precedent when adjusters stall.

The Mold Exclusion Trap

Following the early-2000s “toxic mold” litigation wave, most Texas homeowners policies impose a mold sub-limit (often $5,000–$10,000) unless the insured purchases an optional endorsement. Yet Texas Insurance Code §554.002 requires insurers to highlight any reduction in coverage on renewal. If your carrier lowered mold limits without proper notice, you may have grounds to challenge the restriction. Always request a certified copy of the policy in force on the date of loss.

Common Property Insurance Disputes in Texas

• Mold Damage After Water Losses—Burst pipes during February freezes or heavy summer storms can cause hidden moisture. Insurers frequently deny on grounds of “maintenance” or “long-term seepage,” arguing mold is excluded. The key is demonstrating the water event was sudden and accidental.

• Wind/Hail Roof Claims—North Texas ranks among the nation’s hail capitals. Disputes arise over matching shingles, code upgrades, and whether subsequent mold inside attic spaces is “consequential” loss covered by the policy.

• Fire and Smoke Residue—Even small kitchen fires can lead to water saturation from firefighting efforts. Mold can follow if drying is inadequate, prompting coverage battles over secondary damage.

• Hurricane & Tropical Storm Claims—Although Dallas sits inland, remnants of Gulf hurricanes drop torrential rain. Disagreements emerge on whether wind-driven water or flooding (excluded under standard policies) caused the mold.

• Scope of Repair & Pricing—Carriers often rely on software estimates that undervalue mold remediation protocols such as HEPA negatives and clearance testing, triggering underpayment disputes.

Texas Legal Protections & Regulations

Important Statutory Deadlines for Dallas Claims

• Notice of Claim: Most policies require “prompt” notice. Texas courts interpret prompt as within a reasonable time, but sooner is always better, especially for mold that spreads quickly.

• Insurer Acknowledgment: 15 business days to acknowledge receipt of claim.

• Carrier Investigation: 15 additional business days to accept or reject; may extend to 45 days with written explanation.

• Payment Deadline: 5 business days after acceptance (or 20 days for surplus lines). Failure triggers §542 interest.

• Appraisal Demand: If the policy includes an appraisal clause (most Texas HO-3 policies do), either side may demand appraisal typically within two years of the dispute arising. Check policy for shorter internal deadlines.

Appraisal Process

Under Texas law, appraisal determines the amount of loss, not coverage. Yet in mold claims, scope and amount overlap because certain remediation steps may be deemed “not covered.” If you go to appraisal, choose an umpire familiar with IICRC S520 standards. Recent cases—Evanston Ins. v. DCM-Pondessa I, L.P., 2019 WL 4492805 (Tex. App.—Houston [14th Dist.])—illustrate courts compelling appraisal even amidst coverage disputes, so initiating this process can accelerate payment.

Bad Faith Penalties

When insurers knowingly misrepresent mold coverage, fail to conduct a reasonable investigation, or unreasonably delay payment, they may face:

• Up to three times actual damages under Texas Insurance Code §541.152(b) for “knowing” violations.

• Attorney’s fees and 18% annual interest under §542.060.

• Potential liability for mental anguish if the conduct is egregious, as recognized in Viles v. Security National Ins. Co., 788 S.W.2d 566 (Tex. 1990).

Steps to Take After a Property Insurance Dispute

1. Preserve the Scene & Document Everything

• Photograph water sources, mold growth, and any demolition work.

• Keep moisture-meter readings and lab tests (spore counts, ERMI) from licensed mold assessors.

• Maintain a claim diary noting dates, adjuster calls, and promises.

2. Obtain Independent Estimates

Texas mold rules (25 TAC §295.303) require licensed remediators for jobs over 25 contiguous square feet. Secure at least two itemized bids adhering to IICRC S520 so the scope is defensible against lowball insurer estimates.

3. Mitigate Further Damage

Policies impose a duty to prevent additional loss. Engage a reputable mitigation company promptly; retain invoices as proof. Failure to mitigate could give the insurer a partial defense.

4. Review Your Policy & Endorsements

Request a certified policy copy from your carrier or agent. Look for mold sub-limits, exclusions tied to “constant or repeated seepage,” and endorsements like HO-161 (Mold Remediation exception). Knowing exact language is critical before disputing coverage.

5. Communicate in Writing

Email or USPS-certified mail is preferable. Quote statutory deadlines when reminding adjusters. For example: “Pursuant to Texas Insurance Code §542.056(b), please provide your written status update by [date].”

6. File a Complaint with the Texas Department of Insurance (TDI)

The TDI can pressure insurers to comply with deadlines. File online via the TDI Consumer Complaint Portal. Attach photos, estimates, and correspondence. Though TDI cannot adjudicate coverage disputes, its involvement often accelerates resolutions.

7. Track Limitations Periods

Calendar two years from the date you knew or should have known of the carrier’s statutory violation. If negotiations are ongoing, consider a tolling agreement or file suit to preserve claims.

When to Seek Legal Help in Texas

Red Flags Signaling You Need a Dallas Insurance Attorney

• Insurer insists mold resulted from “maintenance” without providing engineering support.

• Undisclosed policy sub-limits surface only after you submit a remediation estimate.

• Adjuster or “preferred vendor” downplays containment protocols required by state mold rules.

• Carrier issues a Reservation of Rights letter citing multiple exclusions.

• 60 days pass with no payment despite clear liability.

How Louis Law Group Helps Dallas Homeowners

Louis Law Group’s attorneys are licensed in Texas and focus exclusively on property damage claims. Our team:

• Conducts a free policy review to uncover hidden mold coverage.

• Sends formal demand letters invoking §542 penalties and appraisal provisions.

• Coordinates independent experts (industrial hygienists, estimators, microbiologists) to document causation and costs.

• Litigates in Dallas County District Court or federal court when insurers refuse to honor obligations.

• Works on a contingency-fee basis—no fees unless we recover for you.

If your property insurance claim has been delayed, underpaid, or denied, call 833-657-4812 for a free case evaluation and policy review today.

Local Resources & Next Steps

Texas Department of Insurance: Consumer guides, licensing databases, and complaint filings. Texas Judicial Branch: Access to Dallas County District Court dockets and filing fees. Dallas Bar Association Lawyer Referral Service: 30-minute consultations at reduced rates if you need local counsel. Texas Legal Aid – LawHelp: Income-qualified assistance and self-help forms.

Finally, remember that time is your enemy when dealing with mold. Insurers know prolonged disputes can worsen damage and pressure you to accept low settlements. Do not let that happen. Contact Louis Law Group at 833-657-4812 to protect your rights and restore your home.

Legal Disclaimer

This guide is for educational purposes only and does not constitute legal advice. Reading or relying on this content does not create an attorney-client relationship. Consult a licensed Texas attorney regarding your specific circumstances.