Texas Property Insurance Law in Houston: Mold Damage Guide

Estimated reading time: 14 min read

Introduction: Why Houston Homeowners Must Know Their Rights

Houston’s subtropical climate, frequent flooding, and notorious humidity make mold damage a year-round risk for property owners. After Hurricane Harvey and a string of severe rain events, thousands of Houstonians discovered that mold can spread within 24–48 hours of water intrusion, transforming a manageable repair into a costly reconstruction project. Unfortunately, many homeowners who dutifully pay premiums find their mold claims delayed, underpaid, or flatly denied by insurers citing policy exclusions, cap limits, or questionable causation defenses.

This guide explains the essentials of Texas property insurance law as it applies to mold damage in Houston. You will learn:

• Key provisions of the Texas Insurance Code and Prompt Payment of Claims Act

• What constitutes insurer bad faith in mold claims

• Statutory deadlines and the appraisal process

• Practical, step-by-step actions to maximize claim value

• When and how to enlist a Houston insurance attorney to protect your rights

This article favors policyholders because Texas law expressly protects consumers from unfair claim practices. Still, it provides balanced, evidence-based information sourced from statutes, regulations, and Texas court decisions. Disclaimer: The following is general information, not legal advice. Consult a licensed Texas attorney for guidance on your specific situation.

Understanding Texas Property Insurance Law

The Texas Insurance Code: Your First Line of Defense

The Texas Insurance Code ("TIC") establishes duties insurers owe to policyholders statewide. Several chapters are critical for mold-related property claims:

• Chapter 541 – Unfair Methods of Competition and Unfair or Deceptive Acts or Practices. It prohibits insurers from misrepresenting policy terms, failing to settle claims in good faith, or refusing prompt, fair settlements when liability is reasonably clear.

• Chapter 542 – Prompt Payment of Claims Act (PPCA). Insurers must acknowledge, investigate, and pay or deny claims within strict timelines (detailed below). Violations can trigger 18% statutory interest and attorneys’ fees.

• Chapter 862.053 – Mold Coverage Notice. Requires insurers that do cover mold to outline limits, conditions, and endorsements in policy documents.

Both Chapters 541 and 542 provide for treble damages if the insurer’s conduct is knowing or intentional. Recent Texas Supreme Court cases, such as USAA Tex. Lloyds Co. v. Menchaca, clarify how insureds may recover these extra-contractual damages.

Prompt Payment Deadlines

• 15 business days to acknowledge the claim and request any additional information once the claim is received (TIC §542.055).

• 15 business days after the insurer receives all requested items to accept or reject the claim in writing (§542.056). The deadline can extend to 30 business days if the loss is weather-related and a governmental declaration of disaster exists, as during Hurricane Harvey.

• 5 business days to pay after agreeing to settle (§542.057).

Failure to meet these deadlines exposes the insurer to 18% annual interest plus reasonable attorneys’ fees—substantial leverage for policyholders in dispute.

Bad Faith Standards in Texas

Under Arnold v. Nat’l County Mut. Fire Ins., 725 S.W.2d 165 (Tex. 1987), an insurer acts in bad faith when it denies or underpays a claim without a reasonable basis and knew or should have known it was acting unreasonably. Mold damage often involves hidden moisture, making claims vulnerable to unfair "wear-and-tear" or "maintenance" arguments. If an insurer ignores your expert reports or cherry-picks policy exclusions, you may have a viable bad faith cause of action.

Common Property Insurance Disputes in Texas

Mold Damage: Why It’s Different

Mold growth in Houston can erupt after:

• Roof leaks from the Gulf Coast’s wind-driven rain

• Rising water and flash floods along Buffalo Bayou

• HVAC failures causing condensation

• Pipe bursts during sudden winter freezes like the 2021 Uri storm

Even policies that cover water damage often contain fungi or microbial growth sublimits—sometimes as low as $5,000—which rarely cover full remediation costs. Disagreements can also arise over causation (storm vs. long-term leak), the scope of tear-out, and replacement of porous materials.

Other Frequent Disputes Statewide

• Wind/Hail Roof Claims — insurers dispute whether damage is cosmetic vs. functional.

• Hurricane Losses — overlapping wind and flood policies complicate recovery.

• Fire and Smoke — disagreements over cleaning vs. replacement costs.

• Foundation & Plumbing Leaks — exclusions for "settling" or "earth movement" are common defenses.

Although this guide focuses on mold, most legal protections discussed apply equally to these peril types.

Texas Legal Protections & Regulations

Statutes of Limitation (SOL)

• Breach of Contract: 4 years from the date of breach (Tex. Civ. Prac. & Rem. Code §16.051).

• Chapter 541 Claims: 2 years from the date the unfair act occurred or could reasonably have been discovered, but may be extended 180 days if insurer caused delay (§541.162).

• Prompt Payment (Chapter 542): Generally follows the same 4-year SOL as the underlying contract, but file sooner to leverage penalty interest.

The Appraisal Clause

Most Texas homeowner policies include an appraisal provision allowing either party to demand an independent valuation of loss. Key points:

• Timing: Policies usually require written demand within a "reasonable time"—commonly interpreted as before litigation. Courts, such as in In re Universal Underwriters, 345 S.W.3d 404 (Tex. 2011), uphold appraisal if invoked even years after the loss, unless prejudicial delay exists.

• Process: Each party selects an appraiser; the appraisers pick an umpire. Agreement by any two becomes binding on the amount of loss (not coverage).

• Insurer’s Payment Deadline: 5 business days after the appraisal award is signed (TIC §542.057).

Appraisal can unlock stalemates over pricing or scope, but it typically excludes causation disputes (e.g., whether mold was pre-existing). Review your policy and consult counsel before demanding appraisal.

Recent Court Rulings Affecting Mold Claims

• Alvarez v. State Farm Lloyds, No. H-18-1642 (S.D. Tex. 2020) — Appraisal awarded full roof replacement; court ordered prompt payment interest.

• Ortiz v. State Farm Lloyds, 589 S.W.3d 127 (Tex. 2019) — Supreme Court limited extra-contractual claims post-appraisal but allowed them where insurer’s liability was in question before appraisal.

• Menchaca line of cases — Reinforced that policyholders can recover damages caused by statutory violations even if they cannot also recover policy benefits.

These decisions underscore why strategic timing of appraisal and statutory claims is crucial.

Steps to Take After a Property Insurance Dispute

1. Act Quickly and Document Everything

• Photograph/video all visible water and mold within 24 hours.

• Keep a claim diary noting dates, names, and summaries of every call or email with the insurer.

• Retain invoices for emergency mitigation (dry-out fans, dehumidifiers, HEPA filtration).

2. Mitigate to Prevent Further Damage

Texas policies require "reasonable and necessary" steps to protect property. Hiring an IICRC-certified mold remediator is often essential. Save moisture readings and lab reports; they are persuasive evidence if the insurer alleges "neglect" or "maintenance" defenses.

3. Obtain Independent Estimates

Request line-item estimates from at least two reputable contractors using Xactimate or similar pricing software so your figures align with industry standards. For large losses, consider a licensed public adjuster or industrial hygienist who specializes in mold protocols.

4. Review Policy Language and Endorsements

Look for:

• Sublimits on fungi/mold remediation

• Exclusions for "continuous or repeated seepage"

• Ensuing loss clauses that may restore coverage if a covered peril (e.g., pipe burst) led to mold

5. Follow the PPCA Timeline

If the insurer misses any statutory deadlines, send a TIC §541/542 notice letter demanding cure, interest, and attorneys’ fees. Maintain certified-mail receipts for proof.

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

Should delays persist, file an online complaint with the Texas Department of Insurance. TDI will request a written response from the carrier within 15 business days, often accelerating resolution.

7. Consider Appraisal or Mediation

If the dispute is solely about how much, appraisal may be faster than litigation. For coverage disagreements, carriers sometimes agree to pre-suit mediation. Both options can preserve amicable relationships while resolving valuation issues.

When to Seek Legal Help in Texas

Although some claims settle through persistence, mold damage often results in health concerns, relocation costs, and major reconstruction expenses exceeding sublimits. Engage a Houston insurance attorney when:

• The insurer denies the claim citing "long-term seepage" but you have proof the leak was sudden.

• Payments are far below contractor estimates and the carrier refuses to negotiate.

• You suspect the insurer’s engineer or hygienist delivered a biased report.

• The carrier blows PPCA deadlines or refuses to pay appraisal awards.

Texas attorneys handling first-party property cases typically work on contingency fees plus statutory fee-shifting under Chapters 541 and 542. Ensure counsel is licensed by the State Bar of Texas and experienced in mold litigation.

How Louis Law Group Can Help

Louis Law Group aggressively represents homeowners across Texas. Our lawyers:

• Conduct free policy reviews to uncover hidden coverage

• Draft strong notice letters invoking statutory penalties

• Assemble expert teams—industrial hygienists, estimators, and engineers—to build undeniable evidence

• Negotiate or litigate to recover full repair costs, ALE (additional living expenses), and penalty interest

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

Local Resources & Next Steps

Texas Department of Insurance – Consumer help line: 1-800-252-3439 Harris County District Clerk – File civil lawsuits and access court records Texas Judicial Branch – Statewide appellate opinions and rules Lone Star Legal Aid – Free or low-cost civil legal services

Keep all correspondence, estimates, and remediation invoices in a dedicated claim file. If an insurer’s adjuster visits, ask for a copy of their moisture mapping and photo logs. Finally, diary the 15-day, 15-day, and 5-day PPCA deadlines as soon as you file your claim; missed deadlines strengthen your negotiating position.

Conclusion & Call to Action

Mold damage claims in Houston are uniquely complex due to rapid fungal growth, stringent remediation protocols, and insurer reliance on exclusions and sublimits. Texas law, however, equips homeowners with robust protections: prompt payment requirements, statutory penalties, and bad faith remedies. By documenting thoroughly, meeting mitigation duties, and invoking your rights under Chapters 541 and 542, you can level the playing field.

Don’t let an insurer’s delay or denial jeopardize your family’s health and home investment. Contact Louis Law Group today at 833-657-4812 for a free, no-obligation case evaluation and policy review. We fight for Texas homeowners—so you can focus on rebuilding, not red tape.