Why Your Deductible Can’t be Waived

Insurance
Insurance Papers on table with calculator and pen

For many years, home owners have been made to believe by different contractors that they were able to get a new roof through an insurance claim without paying a deductible. Unfortunately, this would fall under one of those “if it sounds too good to be true, then it probably isn’t” moments. Because this has been such a statewide issue, starting September 1, 2019, a new policy will set forth clear, new requirements for policyholders and contractors that will not allow anyone to waive their insurance deductible on claims.

How Have People Gotten Out of Paying their Deductible in the Past?

To be clear, it has always been illegal to not pay the deductible on an insurance claim and then still receive services paid for by that insurance company. However, a poorly worded bill in 1989 started an unfortunate trend in businesses taking advantage of insurance companies and policyholders alike. Contractors have found different ways to offer “free roof replacements” to clients, but this typically results in the policyholder committing a form of insurance fraud. The contractor will often offer to pay the deductible for the policyholder, earning them the name “deductible eaters”. In most cases, the insurance companies never receive the deductible, you get your new roof, the contractor gets paid from the claim, and your “waived deductible” is now the result of fraud.

What Does the New Bill Require?

The new bill by Governor Greg Abbott will be enforced on September 1, 2019, and it will not only require documentation of payment, but it is very specific in its wording in order to minimize people’s ability to find a way around it. The new law explains plainly that a contractor is not allowed to absorb, pay for, rebate, or in any other form assist with payment of the deductible of a claim for a policyholder in any way. This new bill supports insurers in their ability to withhold coverage costs until they receive reasonable proof for the payment of the deductible for that claim. Forms of proof include bank statements, cancelled checks, receipt for a money order, or copy of payment plan agreement.

What is the Punishment for Disregarding the New Bill?

As stated before, this new bill is only reinforcing a law that has been in place for a long time, and it is now and has been a crime to disregard it. The new bill states that it is now a Class B misdemeanor offense, punishable with 180 in county jail and a fine up to $2,000 if you are in violation of this law. This punishment can be handed down to both the contractor and the policyholder. The bill also requires all contractors that provide services to be paid through an insurance policy for a claim more than a $1,000 to include this statement in their contract in a 12 pt. font.

Texas law requires a person insured under a property insurance policy to pay any deductible applicable to a claim made under the policy. It is a violation of this Texas law for a person or business paid wholly or partly from proceeds of a property insurance claim to knowingly allow the insured person to fail to pay. Or assist the insured person’s failure to pay, the applicable insurance deductible. See SECTION 2. Business & Commerce Code, is amended to read as follows: Section 27.02. “Goods or Services Paid for by Insurance Proceeds: Payment of Deductible Required”

So, if you are approached by a contractor with a deal for a “free roof” or “free service”, be aware that you are likely dealing with a scammer and might be toying with insurance fraud if you pursue. With these new provisions, it would be very difficult for a contractor or policyholder to prove that you were not well informed of the law, and the consequences for not paying that deductible might be more costly than it is worth.

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