1 00:00:00,120 --> 00:00:03,440 Speaker 1: The numbers on the cost of Hurricane Harvey keep rising 2 00:00:03,560 --> 00:00:06,640 Speaker 1: as the floodwaters recede. It's now estimated to be the 3 00:00:06,720 --> 00:00:11,039 Speaker 1: costliest natural disaster in US history. Here's more of Hurricane 4 00:00:11,039 --> 00:00:14,400 Speaker 1: Harvey by the numbers. The potential damage is now estimated 5 00:00:14,440 --> 00:00:18,480 Speaker 1: at one nine billion dollars. Nearly ninety four thousand homes 6 00:00:18,480 --> 00:00:21,560 Speaker 1: are estimated to be damaged or destroyed. According to the 7 00:00:21,600 --> 00:00:25,840 Speaker 1: Texas Division of Emergency Management, Texas Governor Greg Abbott's at 8 00:00:25,840 --> 00:00:28,840 Speaker 1: his state will need federal relief money far in excess 9 00:00:28,920 --> 00:00:34,199 Speaker 1: of one billion dollars. Three thousand people have registered for 10 00:00:34,240 --> 00:00:38,400 Speaker 1: assistance with the Federal Emergency Management Agency. Eight percent of 11 00:00:38,400 --> 00:00:42,440 Speaker 1: Texans don't have flood insurance. President Trump has promised rapid 12 00:00:42,440 --> 00:00:46,680 Speaker 1: action from Congress on funding, and yesterday Vice President Pence 13 00:00:46,760 --> 00:00:52,600 Speaker 1: reiterated that we just urged people to take every opportunity 14 00:00:52,640 --> 00:00:56,560 Speaker 1: that they have, whether it's by telephone or online, to 15 00:00:56,640 --> 00:00:59,760 Speaker 1: apply for that federal assistance and know that help is 16 00:00:59,800 --> 00:01:04,280 Speaker 1: on what But how fast will that help come. It's 17 00:01:04,360 --> 00:01:07,440 Speaker 1: usually slow to arrive in a large scale disaster. And 18 00:01:07,480 --> 00:01:11,000 Speaker 1: how much will insurance or federal aid cover. Joining me 19 00:01:11,040 --> 00:01:15,080 Speaker 1: are Stephen Pate, a member of coson O'Connor and Brian Lawton, 20 00:01:15,120 --> 00:01:19,000 Speaker 1: a partner at Deans and Lions. Steve, let's talk about 21 00:01:19,000 --> 00:01:24,039 Speaker 1: the kind of insurance homeowners need. Is regular home insurance enough? 22 00:01:25,800 --> 00:01:29,160 Speaker 1: Probably not in this situation. And I'll tell you why. 23 00:01:29,680 --> 00:01:34,680 Speaker 1: National Flood Insurance offers flood insurance for the flood event 24 00:01:35,160 --> 00:01:39,240 Speaker 1: in Houston, and it's estimated that only one six of 25 00:01:39,280 --> 00:01:46,920 Speaker 1: Houstonians had flood insurance. Now, where wind are rain caused 26 00:01:47,000 --> 00:01:52,400 Speaker 1: damage that would be covered by Texas Windstorm Association policies 27 00:01:52,880 --> 00:01:59,720 Speaker 1: are in most cases by your regular homeowners. But mostly 28 00:02:00,800 --> 00:02:06,560 Speaker 1: most Houstonians did not have flood insurance. And that's going 29 00:02:06,600 --> 00:02:10,480 Speaker 1: to be a terrible shame. That's where you have to 30 00:02:10,560 --> 00:02:16,240 Speaker 1: go to FEMA for assistance. That's just awful. But that's 31 00:02:16,280 --> 00:02:18,640 Speaker 1: the way it is. Let's talk a little bit more 32 00:02:18,760 --> 00:02:23,720 Speaker 1: about the National Flood Insurance program, Brian. It's been criticized 33 00:02:23,760 --> 00:02:27,400 Speaker 1: for years and it's now about billion dollars in debt 34 00:02:27,480 --> 00:02:32,280 Speaker 1: and set to expire on September. Will it pay for 35 00:02:32,440 --> 00:02:36,240 Speaker 1: all claims filed in relation to Hurricane Harvey even if 36 00:02:36,280 --> 00:02:41,600 Speaker 1: it's not renewed. Well, that's a good question. You correctly 37 00:02:41,760 --> 00:02:46,280 Speaker 1: point out that on September the bill is going to expire, 38 00:02:46,400 --> 00:02:49,560 Speaker 1: and what that's really going to impact, or places like 39 00:02:49,639 --> 00:02:52,959 Speaker 1: Dolphin Island, Alabama, where I grew up that repeatedly get 40 00:02:53,040 --> 00:02:56,079 Speaker 1: hit by floods and which is one of the smallest 41 00:02:56,240 --> 00:02:59,760 Speaker 1: livers in the country that is covered by that flood 42 00:02:59,760 --> 00:03:04,559 Speaker 1: pro program. So what Congress ultimately does in late September 43 00:03:04,680 --> 00:03:08,040 Speaker 1: and extending the program is really a big question mark. 44 00:03:08,480 --> 00:03:12,000 Speaker 1: But there are strong policy issues on both sides. On 45 00:03:12,040 --> 00:03:15,480 Speaker 1: the one hand, if you take away the program, places 46 00:03:15,520 --> 00:03:18,520 Speaker 1: like Dauphin Island UH down in Alabama where I grew 47 00:03:18,560 --> 00:03:20,959 Speaker 1: up fishing, there won't be any homes there. People will 48 00:03:21,000 --> 00:03:25,080 Speaker 1: not develop in risk uh in risk areas. But on 49 00:03:25,120 --> 00:03:28,160 Speaker 1: the other hand, the argument is, well, we shouldn't have 50 00:03:28,280 --> 00:03:32,080 Speaker 1: to make uh really poor people pay for insurance so 51 00:03:32,160 --> 00:03:35,720 Speaker 1: people that are very, very wealthy can have vacation homes 52 00:03:35,760 --> 00:03:38,880 Speaker 1: and flood prone areas. I get the debate on both sides, 53 00:03:39,400 --> 00:03:41,440 Speaker 1: but the bigger picture is this, and I want to 54 00:03:41,440 --> 00:03:43,880 Speaker 1: make sure this is really clear because there's a lot 55 00:03:43,920 --> 00:03:48,680 Speaker 1: of misinformation out there. Albeit Steve's right, the flooding issue 56 00:03:48,760 --> 00:03:52,760 Speaker 1: is a big deal, and flood is excluded under these policies, 57 00:03:52,760 --> 00:03:56,360 Speaker 1: and the flood program you're talking about is not covered 58 00:03:56,560 --> 00:03:59,920 Speaker 1: by the Texas law that everybody is up in arms about. 59 00:04:00,520 --> 00:04:04,280 Speaker 1: But I don't want policy holders that are listening to 60 00:04:04,400 --> 00:04:08,040 Speaker 1: get discouraged and think that their homeowners policy is not 61 00:04:08,120 --> 00:04:11,920 Speaker 1: going to get them somewhere, because if Steve correctly points out, 62 00:04:12,400 --> 00:04:15,960 Speaker 1: there's a big difference between flooding that seats up through 63 00:04:16,000 --> 00:04:20,600 Speaker 1: the ground, which is excluded under most homeowners policies, especially 64 00:04:20,600 --> 00:04:23,599 Speaker 1: in Texas, and when driven rain and you when a 65 00:04:23,640 --> 00:04:26,919 Speaker 1: tree falls on your house and then floods because the 66 00:04:26,960 --> 00:04:29,960 Speaker 1: water came through the hole in the roof, that's not excluded. 67 00:04:30,480 --> 00:04:34,440 Speaker 1: That should be a covered claim, and absolutely a claim 68 00:04:34,480 --> 00:04:36,960 Speaker 1: should be made on the homeowners policies, and if the 69 00:04:36,960 --> 00:04:42,000 Speaker 1: insurance company denies that claim, don't stop. Hire a competent 70 00:04:42,080 --> 00:04:45,160 Speaker 1: coverage lawyer to make sure that the claim has been 71 00:04:45,200 --> 00:04:48,760 Speaker 1: fairly evaluated. So there's a lot of misinformation, and I 72 00:04:48,760 --> 00:04:51,960 Speaker 1: want to make sure it's really clear that albeit flood 73 00:04:52,080 --> 00:04:56,000 Speaker 1: is excluded under most homeowners policies, simply because your house 74 00:04:56,040 --> 00:05:00,400 Speaker 1: flooded doesn't mean that your homeowners carrier can necessary deny 75 00:05:00,480 --> 00:05:03,080 Speaker 1: your claim. If the if the rain, if the wind 76 00:05:03,160 --> 00:05:06,040 Speaker 1: driven rain put it there. That is a huge issue 77 00:05:06,080 --> 00:05:08,320 Speaker 1: on whether there's coverage out of the policy. I hope 78 00:05:08,320 --> 00:05:12,880 Speaker 1: that makes sense, Steve. Let's go to this Texas law 79 00:05:13,000 --> 00:05:15,760 Speaker 1: that there has been a lot of confusion about. It 80 00:05:15,800 --> 00:05:19,400 Speaker 1: goes into effect today, and there's been confusion because there 81 00:05:19,440 --> 00:05:21,560 Speaker 1: were there were a lot of tweets out that you 82 00:05:21,640 --> 00:05:25,800 Speaker 1: had to file by a certain time, by by today, 83 00:05:25,960 --> 00:05:29,279 Speaker 1: or you wouldn't be able to to get your insurance claims. 84 00:05:30,040 --> 00:05:32,760 Speaker 1: And that was straightened out as much as it can 85 00:05:32,800 --> 00:05:36,839 Speaker 1: be expected by the Texas Lauer's Association. Tell us about 86 00:05:36,920 --> 00:05:39,600 Speaker 1: that law and what it does. Well, you know what, 87 00:05:40,160 --> 00:05:42,919 Speaker 1: there were so many there's so much smithsinformation about that 88 00:05:43,040 --> 00:05:46,520 Speaker 1: that it hits snops dot com which, as many people know, 89 00:05:47,440 --> 00:05:53,480 Speaker 1: is the website that corrects urban miss and snows dot 90 00:05:53,520 --> 00:05:58,239 Speaker 1: com correctly pointed out it doesn't prevent you from filing 91 00:05:58,279 --> 00:06:03,000 Speaker 1: a claim, and in fact, what it does is it 92 00:06:04,120 --> 00:06:08,839 Speaker 1: correct some abuses in the system. It was designed to 93 00:06:10,200 --> 00:06:14,240 Speaker 1: tamp down on some what I call storm chasing lawyers, 94 00:06:14,400 --> 00:06:18,240 Speaker 1: some public adjusters who were abusing the system. What you 95 00:06:18,320 --> 00:06:22,240 Speaker 1: had to do by September one was file a claim 96 00:06:22,360 --> 00:06:26,520 Speaker 1: to take advantage of getting a higher interest rate if 97 00:06:26,560 --> 00:06:32,479 Speaker 1: you filed a lawsuit later on and you recovered in 98 00:06:32,520 --> 00:06:37,120 Speaker 1: that lawsuit. It has nothing to do with filing a 99 00:06:37,200 --> 00:06:41,559 Speaker 1: claim and recovering. There has been so much misinformation there, 100 00:06:42,080 --> 00:06:46,320 Speaker 1: and I hope to goodness nobody put themselves in harm's 101 00:06:46,360 --> 00:06:51,040 Speaker 1: way by going back to their property and being unsafe 102 00:06:51,040 --> 00:06:53,400 Speaker 1: and feeling like they had to file a claim by 103 00:06:53,480 --> 00:06:58,240 Speaker 1: September one. I'm worried about that. Brian. In the Brian 104 00:06:58,320 --> 00:07:01,120 Speaker 1: in the instance that you were talking about, where you 105 00:07:01,160 --> 00:07:04,440 Speaker 1: know your insurance company, you don't have flood insurance, and 106 00:07:04,480 --> 00:07:07,200 Speaker 1: your insurance company may say we're not covering this and 107 00:07:07,240 --> 00:07:10,240 Speaker 1: you may have to hire a lawyer. Does this law 108 00:07:11,040 --> 00:07:14,840 Speaker 1: affect you at that point? Well, let me, first of all, 109 00:07:14,880 --> 00:07:18,920 Speaker 1: respectfully disagree with Steve because I have a completely different 110 00:07:18,920 --> 00:07:23,320 Speaker 1: opinional nous. Uh. First of all, it dramatically impacts the 111 00:07:23,360 --> 00:07:26,000 Speaker 1: claims process, and let me tell you the three ways 112 00:07:26,040 --> 00:07:28,640 Speaker 1: that does that. But let me preface by saying this 113 00:07:28,840 --> 00:07:32,040 Speaker 1: what he did say, which is that it doesn't prevent 114 00:07:32,160 --> 00:07:36,760 Speaker 1: someone from filing a claim. That's true, That is absolutely true. 115 00:07:36,840 --> 00:07:39,640 Speaker 1: The other thing that people need to know is it 116 00:07:39,680 --> 00:07:43,200 Speaker 1: does not prevent the insurance company for from doing the 117 00:07:43,320 --> 00:07:46,520 Speaker 1: right thing and fully paying what it should pay under 118 00:07:46,520 --> 00:07:50,640 Speaker 1: the policy. Now here's the problem. The problem is the 119 00:07:50,680 --> 00:07:54,960 Speaker 1: situation where someone makes a claim and the carrier either 120 00:07:55,080 --> 00:08:00,600 Speaker 1: slow place the claim, delays the resolution, underpay the claim, 121 00:08:00,760 --> 00:08:05,360 Speaker 1: or wrongfully denies the claim. Now, in that situation, the 122 00:08:05,560 --> 00:08:08,680 Speaker 1: the insured has a couple of options. It can take 123 00:08:08,720 --> 00:08:11,680 Speaker 1: the low ball rate and going down the road. But 124 00:08:11,720 --> 00:08:14,640 Speaker 1: if it wants to do something about it, you have 125 00:08:14,760 --> 00:08:17,680 Speaker 1: to provide notice now, and the notice has got all 126 00:08:17,800 --> 00:08:22,320 Speaker 1: kinds of legal ease it requires. When the actual omission occurred, 127 00:08:22,680 --> 00:08:25,000 Speaker 1: you have to quantify the loss. You have to do 128 00:08:25,080 --> 00:08:28,200 Speaker 1: all of these things before you go to court. You 129 00:08:28,240 --> 00:08:31,600 Speaker 1: can't just file a claim. That's point number one. Point 130 00:08:31,720 --> 00:08:36,120 Speaker 1: number two is slashing the penalty rate is a huge deal. 131 00:08:36,240 --> 00:08:39,880 Speaker 1: And this is why if my claim is slow played 132 00:08:40,160 --> 00:08:45,400 Speaker 1: or delayed, or underpaid or wrongfully denied, what keeps the 133 00:08:45,480 --> 00:08:49,800 Speaker 1: insurance carrier honest is the penalty. Now, Steve said something 134 00:08:49,800 --> 00:08:55,640 Speaker 1: that is respectfully incorrect. This does not regulate frivolous claims. 135 00:08:55,679 --> 00:09:00,080 Speaker 1: This applies to valid claims. Penalties only kick in and 136 00:09:00,160 --> 00:09:03,720 Speaker 1: when the insurance company is liable. If you read the Act, 137 00:09:03,840 --> 00:09:07,280 Speaker 1: the first sentence of the Act that past says this 138 00:09:07,360 --> 00:09:11,840 Speaker 1: applies to liability for a carrier okay. So if my 139 00:09:11,960 --> 00:09:17,440 Speaker 1: insurance company knows that if it underpays me, it's penalty 140 00:09:17,559 --> 00:09:19,880 Speaker 1: is cut in half. I'm gonna have to hire a 141 00:09:20,000 --> 00:09:22,960 Speaker 1: lawyer to put them on notice and meet the notice 142 00:09:23,000 --> 00:09:25,560 Speaker 1: provisions before I can go to court. Oh and by 143 00:09:25,600 --> 00:09:28,440 Speaker 1: the way, if I do find a lawyer and I prevail, 144 00:09:29,080 --> 00:09:32,360 Speaker 1: there's an eight twenty sliding scale on attorney's fees, so 145 00:09:32,400 --> 00:09:34,760 Speaker 1: the penalty is cut in half. I can't get the 146 00:09:34,800 --> 00:09:37,520 Speaker 1: full measure of my attorney's fees. I have to put 147 00:09:37,559 --> 00:09:40,920 Speaker 1: the carrier on notice and wait sixty days for them 148 00:09:40,920 --> 00:09:43,400 Speaker 1: to do something. If you have to jump through all 149 00:09:43,440 --> 00:09:47,280 Speaker 1: of those hoops, they're incentivized in the claim process not 150 00:09:47,360 --> 00:09:50,440 Speaker 1: to pay the full value of the claim. So, yes, 151 00:09:50,480 --> 00:09:54,040 Speaker 1: there is misinformation, and albeit it is correct, and it 152 00:09:54,080 --> 00:09:57,520 Speaker 1: only applies to lawsuits. But how the lawsuits develop. They 153 00:09:57,559 --> 00:10:00,800 Speaker 1: develop when the carrier doesn't do the right thing. And 154 00:10:00,880 --> 00:10:05,720 Speaker 1: this law only applies to valid claims. A frivolous claim 155 00:10:05,760 --> 00:10:09,160 Speaker 1: is not covered by this act. The insurance carrier has 156 00:10:09,200 --> 00:10:12,280 Speaker 1: to be liable before it can pay attorneys fees. Those 157 00:10:12,280 --> 00:10:15,760 Speaker 1: are cut. We only have a few moments. I want 158 00:10:15,760 --> 00:10:21,319 Speaker 1: to give Steve a chance to respond. Brian, I respectfully disagree. 159 00:10:21,480 --> 00:10:23,360 Speaker 1: You and I are on different sides of the aisle. 160 00:10:23,800 --> 00:10:26,319 Speaker 1: Let me just point out that there is a great 161 00:10:26,360 --> 00:10:31,120 Speaker 1: thing in that bill and that Act that says that 162 00:10:31,760 --> 00:10:36,400 Speaker 1: the insurance companies give the right to reinspect. Now stormtroopers 163 00:10:36,559 --> 00:10:41,400 Speaker 1: are doing these claims right now. Sometimes they miss valid damages, 164 00:10:41,720 --> 00:10:46,679 Speaker 1: sometimes they are latent damages. That bill gives them, gives 165 00:10:46,720 --> 00:10:49,920 Speaker 1: carriers the right to reinspect where those damages can be 166 00:10:50,040 --> 00:10:56,240 Speaker 1: picked up, where latent damages can be uh now picked 167 00:10:56,320 --> 00:10:58,120 Speaker 1: up by the carriers and they can pay on them. 168 00:10:58,440 --> 00:11:02,120 Speaker 1: That hurts you that it's me. It's bad for both sides, 169 00:11:02,480 --> 00:11:05,760 Speaker 1: but you know what, it's great for the consumer. That's 170 00:11:05,800 --> 00:11:08,880 Speaker 1: great for the consumer, and that's a wonderful thing of 171 00:11:08,920 --> 00:11:13,000 Speaker 1: that bill. I disagree about probably everything else you said, 172 00:11:13,240 --> 00:11:17,360 Speaker 1: but let's talk about politics being adjourned. I'm so sorry 173 00:11:17,400 --> 00:11:19,760 Speaker 1: but we will not have time to talk about this 174 00:11:19,840 --> 00:11:23,760 Speaker 1: anymore today. But obviously two sides to this issue, as 175 00:11:23,800 --> 00:11:27,640 Speaker 1: there usually is when insurance is concerned. Thank you both 176 00:11:27,679 --> 00:11:31,360 Speaker 1: for being on Bloomberg Law. That's Stephen paid, a member 177 00:11:31,400 --> 00:11:35,240 Speaker 1: of Cozin O'Connor, and Brian Lowton, a partner at Dean's 178 00:11:35,320 --> 00:11:38,920 Speaker 1: and Lions Coming up on Bloomberg law. President Trump's lawyers 179 00:11:38,920 --> 00:11:42,199 Speaker 1: have been meeting with Special Counsel Robert Mueller in recent months. 180 00:11:42,200 --> 00:11:45,520 Speaker 1: According to the Washington Post, what effect, if any, will 181 00:11:45,559 --> 00:11:48,520 Speaker 1: that have on the investigation and what will the Justice 182 00:11:48,559 --> 00:11:52,280 Speaker 1: Departments grow will be I'm June Grosso. This is Bloomberg