Houston Homeowner Guide: Texas Property Insurance Law

Estimated reading time: 12 min read

Introduction: Why Houston Homeowners Must Understand Texas Property Insurance Law

Whether you live in a historic Heights bungalow or a new construction in Katy, protecting your largest investment—your home—means making sure your property insurance carrier treats you fairly. Houston’s subtropical climate brings hurricanes, tropical storms, and sudden downpours that can cause water intrusion and mold damage. Add in hail, tornado-strength winds, and even the occasional freeze, and it is easy to see why Texas policyholders file more property claims than almost any other state. Unfortunately, insurers do not always pay what is owed. Homeowners routinely face claim delays, lowball settlement offers, or outright denials. Understanding your rights under Texas Insurance Code Chapters 541 (unfair settlement practices) and 542 (prompt payment of claims) is critical to leveling the playing field.

This comprehensive legal guide—written specifically for Houston, Texas policyholders—explains the laws, deadlines, and practical steps to protect your claim. While we address all types of property damage, we place special emphasis on mold claims, which present unique coverage and evidentiary challenges in the Lone Star State. If, after reading, you still have questions or need help pressuring the carrier to do the right thing, call Louis Law Group at 833-657-4812 for a free case evaluation and policy review.

1. Understanding Texas Property Insurance Law

1.1 Key Statutes Every Houston Homeowner Should Know

• Texas Insurance Code § 542 (Prompt Payment of Claims Act) – Requires insurers to acknowledge, investigate, and pay or deny claims within strict deadlines. Failure can result in 18% interest plus attorneys’ fees.

• Texas Insurance Code § 541 – Prohibits unfair settlement practices (bad faith), including misrepresenting policy terms or failing to attempt a fair settlement when liability is reasonably clear.

• Texas Property Code § 5.008 – Disclosures for certain residential property transactions that may affect later coverage disputes.

• Texas Civil Practice & Remedies Code § 16.004 – Four-year statute of limitations for breach of contract actions, including most property insurance lawsuits.

• Texas Administrative Code Title 28 – Department of Insurance regulations governing policy forms and endorsements, including mold coverage limitations.

1.2 The Prompt Payment Timeline in Plain English

• Day 0–15: The carrier must acknowledge receipt of your written notice of loss and request any needed documentation.

• Day 15–30: After receiving all requested items, the insurer must accept or deny the claim—or explain why more time is needed.

• Day 45: If additional time was requested, a final decision is due within 45 days.

• Five business days after approval: Payment must be issued.

Missed deadlines trigger statutory interest (currently 18% per year) plus reasonable attorneys’ fees. For Houston homeowners juggling temporary housing costs after a hurricane or mold remediation bills, these penalties can be powerful negotiation tools.

1.3 Bad Faith: Beyond Breach of Contract

Texas recognizes both first-party bad faith (under Stoker and Arnold v. National County Mutual) and statutory unfair practices. If an insurer’s liability is reasonably clear yet it unreasonably delays payment or offers pennies on the dollar, you may recover extracontractual damages, mental anguish, and punitive damages. Notably, in USAA Texas Lloyds Co. v. Menchaca (2018), the Texas Supreme Court clarified when insureds can recover both policy and bad-faith damages.

2. Common Property Insurance Disputes in Texas

2.1 Wind and Hail Damage

Texas leads the nation in hail events. Roof and siding disputes often revolve around matching materials, code upgrades, and whether damage is cosmetic or functional. Insurers may rely on internal guidelines that minimize payouts, but you have the right to full, code-compliant repairs.

2.2 Water and Mold Claims

Mold damage is particularly contentious. Most Texas HO-3 policies include a mold exclusion with a limited buy-back endorsement (often capped at $5,000–$10,000). However, if the mold results from a covered peril such as a burst pipe or sudden roof leak, broader coverage may apply. Houston’s humidity speeds growth, so prompt remediation and detailed moisture mapping are vital.

2.3 Hurricane and Tropical Storm Losses

From Hurricane Harvey’s catastrophic flooding to Tropical Storm Imelda’s torrential rains, coastal Texans know water can be as destructive as wind. While flood is excluded under standard homeowners policies, wind-driven rain and roof damage may be covered. Disputes often surface over anti-concurrent causation clauses and percentage deductibles.

2.4 Fire and Smoke Damage

Electrical fires linked to overloaded AC units spike during Houston summers. Insurers sometimes argue improper maintenance or arson defenses. Independent origin-and-cause experts can neutralize those allegations.

2.5 Scope and Pricing Disagreements

Even when coverage is accepted, disagreements remain over the scope (what must be repaired) and pricing (Xactimate line-item costs). The Texas appraisal clause offers a dispute-resolution mechanism but has strict notice requirements.

3. Texas Legal Protections & Regulations

3.1 The Appraisal Process

Most policies allow either party to invoke appraisal—a binding process on the amount of loss, not coverage. Key points:

• Deadline: Policies typically require demand within a ‘reasonable time.’ Texas courts often view delays over one year skeptically, but timeliness is fact-specific.

• Panel: Each side picks an independent appraiser; the two appraisers select an umpire. A signed award by any two of the three is final on value.

• Cost: Each party pays its appraiser and splits the umpire’s fee. Strategic cooperation on umpire selection can save thousands.

3.2 Statutory Notice Before Filing Suit

Under Texas Insurance Code § 542A.003, homeowners must send a detailed pre-suit notice at least 61 days before filing a lawsuit, specifying the amount owed and attorneys’ fees incurred. Failure can limit fee recovery. A qualified Houston insurance attorney will handle this step to protect your case.

3.3 Statute of Limitations

The default four-year clock under Tex. Civ. Prac. & Rem. Code § 16.004 applies to breach of contract. Many policies contain a contractual limitations period of two years and one day—a clause upheld by Texas courts when clearly stated. Do not assume you have four years; check your declarations page.

3.4 Recent Court Rulings Affecting Policyholders

• Barbara Technologies Corp. v. State Farm Lloyds (Texas 2019) – An insurer’s payment of an appraisal award does not, by itself, absolve prompt-payment penalties.

• Ortiz v. State Farm Lloyds (Texas 2019) – Clarifies that insureds can still pursue statutory and bad-faith claims even after appraisal, provided separate damages are alleged.

4. Steps to Take After a Property Insurance Dispute

4.1 Immediate Action Checklist

• Document Everything: Photograph and video all damage, including hidden areas where mold may grow. Retain moisture meter readings.

• Mitigate Further Loss: Texas policies require ‘reasonable steps.’ Hire licensed remediation contractors, but keep receipts.

• Request a Certified Copy of Your Policy: The declarations page alone is not enough. Coverage and exclusions for mold will appear in endorsements.

• Keep a Claim Diary: Note every call, email, and adjuster visit. Under the Prompt Payment Act, a written record creates enforceable timelines.

4.2 Independent Estimates

Obtain at least two detailed, room-by-room estimates from reputable Houston contractors. Make sure they include:

• Line-item pricing (labor, materials, overhead & profit)

• Code upgrade allowances (IRC/IBC 2021)

• Mold remediation protocols under Texas Mold Assessment and Remediation Rules (TMARR)

4.3 Filing a Complaint with TDI

If the carrier remains unresponsive, file a complaint with the Texas Department of Insurance (TDI). While TDI cannot adjudicate money disputes, it can pressure carriers to comply with statutory deadlines. Have your claim number, policy number, and denial letter ready.

4.4 Preserve Remediation Samples

For mold claims, insist the remediation company retain spore trap samples and moisture logs. If litigation ensues, this evidence counters the insurer’s ‘pre-existing condition’ defense.

5. When to Seek Legal Help in Texas

You may navigate small claims alone, but certain red flags signal the need for counsel:

• Offer is less than 70% of independent estimates.

• Insurer blames ‘wear and tear,’ ‘pre-existing damage,’ or ‘long-term seepage.’

• Adjuster requests a recorded statement focusing on maintenance or prior water leaks.

• Carrier invokes ‘engineer review,’ yet denies your request for the report.

• Deadline pressure—two-year contractual limitation is approaching.

Louis Law Group has recovered millions for Texas homeowners through negotiation, appraisal, and litigation. Our Houston-licensed attorneys handle:

• Mold and water intrusion claims

• Hail and wind disputes

• Bad-faith lawsuits under Chapters 541 & 542

• Appraisal award enforcement

Because we work on contingency, you pay nothing unless we recover. Call 833-657-4812 today for a free case evaluation and policy review.

6. Local Resources & Next Steps

Texas Judicial Branch – Docket lookup for Harris County District Court filings. Houston Bar Association – Pro bono legal aid and referral service. Ready Harris – Disaster preparedness and recovery resources. State Law Library Mold Resources – TMARR rules and licensing information.

Next Step: Review your denial or underpayment letter alongside this guide. If the carrier breached any statutory deadline or misapplied policy language, gather your documentation and reach out.

CTA: If your property insurance claim has been delayed, underpaid, or denied, especially for mold damage, call Louis Law Group at 833-657-4812 for a free case evaluation and policy review.

Disclaimer

This guide is for educational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship. Consult a licensed Texas attorney about your specific situation.