Texas Department of Insurance
June 11, 1993
TO: ALL PROPERTY AND CASUALTY
INSURANCE COMPANIES
RE: Replacement of Damaged
Roofs
Texas has recently experienced a
number of severe storms that have
caused extensive damage to property
located throughout the State. The
methods employed by some insurers
in the settlement of claims for roof
damage has come to the attention
of the Texas Department of Insurance,
and those claims settlement practices
may be in direct conflict with policy
provisions and be in violation of
the Insurance Code and the rules
and regulations of the State Board
of Insurance.
The overlay of a shingle roof on
a damaged roof does not satisfy the
Loss Settlement conditions contained
in residential property policies. Claims
settled on an actual cash value basis
must be based on the cost to repair
or replace the damaged property with
proper deduction for depreciation. In
addition, the policies provide for
the expense of the removal of debris
of damaged property with the policy
limits. Claims settled on a
replacement cost basis require the
damaged property to be repaired or
replaced with material of like kind
and quality without deduction for
depreciation with policies also providing
for the expense of the removal of
debris of damaged property with the
policy limits. In both instances,
the removal of damaged roof shingles
falls within the meaning of debris
removal.
Insureds have the right to be treated
fairly in the settlement of a claim
and should be provided complete information
regarding any options for a claim
settlement. An insured my accept
an overly of new roof shingles over
damaged roof shingles; however, that
is at the option of the individual
insured under the policy provisions. An
insurer cannot require an overlay
of roof shingles as the settlement
of the claim. Any such conduct
could subject the insurer to disciplinary
action pursuant to the Unfair Competition
and Unfair Practices Act (Article
21.21, Insurance Code) and the Unfair
Claims Settlement Practices Act (Article
21.21-2, Insurance Code). In
addition, the insurer could be subject
to a cause of action pursuant to
the Deceptive Trade Practices-Consumer
Protection Act (Sec. 17.41 et seq.,
Business and Commerce Code).
The Texas Department of Insurance
will pursue any alleged violation
of the Insurance Code and will take
appropriate disciplinary action,
including the requirement for complete
restitution to insureds. We
urge insurers to review their claims
practices to ensure that claims for
damaged roofs are being settled in
accordance with residential property
policy conditions.
Yours truly,
Lyndon Anderson
Associate Commissioner
Property and
Casualty
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