The Texas Supreme Court’s Harvey Orders do not Delay the September 1 Effective Date for HB1774 (Section 542A of the Texas Insurance Code)

We have issued several posts and comments regarding misinformation that has been distributed concerning HB1774 and the new Texas Insurance Code provisions that go into effect on September 1st. Unfortunately, more misinformation is starting to surface — the idea that the recent Texas Supreme Court orders extending statutes of limitations and “deadlines and procedures” due to Harvey serve to delay implementation of the new law. They do not. 

A number of new Texas laws go into effect on September 1st, including a law against texting while driving, a law regarding cyber-bullying, and a statute providing immunity to individuals rescuing children left in hot cars.   Similarly, HB1774, commonly referred to as the “Hail Bill” also has a September 1st effective date.  This legislation creates a new section of the Texas Insurance Code - Section 542A - which applies to first-party property insurance claims involving the “forces of nature” including earthquake or earth tremor, wildfire, flood, tornado, lightning, hurricane, hail, wind, snowstorm or rainstorm.

Recent social media posts by plaintiffs’ lawyers and consumer advocate groups opposed to the legislation appear to take the position that two recently-issued Texas Supreme Court orders effectively delay or extend the effective date of HB1774. However, a plain reading of the two recently-enacted emergency orders and review of the Texas Supreme Court’s rulemaking authority confirms that neither order impacts the September 1st effective date.

Tex. Gov’t Code § 22.0035(b) allows the Texas Supreme Court to “modify or suspend procedures for the conduct of any court proceeding.”

Tex. Gov't Code § 22.0035 provides:
Notwithstanding any other statute, the supreme court may modify or suspend procedures for the conduct of any court proceeding affected by a disaster during the pendency of a disaster declared by the governor. An order under this section may not extend for more than 30 days from the date the order was signed unless renewed by the supreme court.
This reference to "procedures" comports with the Court's rulemaking authority, which is limited to procedural matters. Under section 22.004(a) of the Government Code, the court has “full rulemaking power in the practice and procedure in civil actions, except that its rules may not abridge, enlarge, or modify the substantive rights of a litigant.” Tex. Gov’t Code § 22.004(a). 

Pursuant to that authority, on August 28th, the Texas Supreme Court issued an Emergency Order Authorizing Modification and Suspension of Court Procedures in Proceedings Affected By Disaster. The order states that “all courts in Texas should consider disaster-caused delays as good cause for modifying or suspending all deadlines and procedures—whether prescribed by statute, rule, or order— in any case, civil or criminal.”

The next day, on August 29th, the Texas Supreme Court issued an Emergency Order on Statutes of Limitations in Civil Cases which provides:  
Inasmuch as statutes of limitations are not subject to a good-cause exception, the Supreme Court now further orders, again pursuant to Section 22.0035(b), that any applicable statute of limitations is suspended for any civil claim if the claimant shows that the disastrous conditions resulting from Hurricane Harvey prevented the timely filing of the claim despite the party’s and counsel’s diligent efforts. Any such suspension extends only to the date on which it becomes reasonably possible to file the claim despite the disastrous conditions, taking into account the circumstances.
Not long after the August 29, 2017 order was issued, some suggested that the Orders should serve to extend the effective date of the legislature’s recent enactment of HB1774. This suggestion is incorrect. 

Under the new law, for claims filed on or after September 1st, the prompt-payment penalties change from 18% to 5% plus the interest set forth in the Finance Code, currently listed at 5%.  With regard to lawsuits filed on or after September 1st –the other requirements of Section 542A, including pre-suit notice provisions, limitations on attorneys’ fees, and assumption of liability provisions apply. These new legislative enactments neither relate to deadlines and procedures in a civil case nor are they a statute of limitations. 

Because the August 28th emergency order states that it applies to deadlines and procedures in any civil or case, the order should apply only to deadlines and procedures applicable to previously-filed cases. The August 29th order applies to extend applicable statutes of limitations in civil cases.  

Texas courts recognize that “[s]tatutes of limitations afford plaintiffs a period of time that the Legislature deems reasonable to present claims, and such statutes cut off the pursuit of cases in which ‘the search for truth may be seriously impaired by the loss of evidence, whether by death or disappearance of witnesses, fading memories, disappearance of documents or otherwise.’” Little v. Smith, 943 S.W.2d 414, 417 (Tex. 1997).  

None of the provisions of HB1774 qualify as a statute of limitations.  None of the provisions of HB1774 apply to pending litigation.   Instead, HB1774 provides requirements for pre-suit notice, sets a different recoverable interest rate, limits attorneys’ fees in certain circumstances, and provides a mechanism for which an insurer can assume responsibility for agent conduct — but only in civil cases filed after its Sept 1st effective date. The two recently-issued Supreme Court Orders have no effect on HB1774.  Moreover, it would exceed the Texas Supreme Court’s rulemaking authority to delay or suspend the effective date of new legislation (absent a constitutional or other appropriate challenge).  Thus, without a special session of the Texas Legislature and the passage of legislation changing the new law, like the ban on texting while driving, the provisions of HB1774 take effect on September 1st.

Stated simply, HB1774 will apply to every Hurricane Harvey lawsuit filed after September 1st

Posted by Jennifer Gibbs