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When renewing an insurance policy, insurers must inform policyholders in advance of "significant changes" | Real estate insurance coverage law blog



Recently, the Houston Merlin team has encountered several cases that activate policyholders' notifications, or rather the absence of such, when an insurer makes "significant changes" to a renewal insurance policy. A hypothetical example of this situation may be if a policyholder has a homeowner policy that does not exclude cosmetic damage to the policyholder's roof and next year the renewal policy includes, without the policyholder's knowledge, a cosmetic damage exclusion. Believing that the "renewal" policy was the same as the previous insurance, with the exception of the coverage date, the policyholder accepts it and pays his premium. Along comes the typical Texas hail / windstorm, and the policyholder's metal roof suffers from hundreds of ugly damages. The policyholder submits an application to his insurance company only to find out that his current renewal policy has a new approval that excludes what the insurance industry describes as "cosmetic" damage to his roof. His insurance company denies the claim based on the "new" exclusion of cosmetic damage in his renewal policy. The policyholder contacts Merlin Law Group for assistance. Given these facts, the information below about Texas law and renewal policies may be helpful to this hypothetical policyholder, and now the Merlin client, and his case.

What is a renewal policy?

A renewal policy, as the name suggests, may be one that does not differ from the previous insurance with the same terms and for the same amount as stated in the previous insurance except with different coverage dates. 1

It is a general rule in the insurance industry that "a renewal of a policy constitutes a separate and distinct contract for the period of time covered by the renewal." 2 A court describes renewal policies as including "new contracts that begin again, resume, resume, re-establish, restore and replace a previous insurance without the insurance expiring. " 3 In fact, under Texas law, an insured / policyholder may accept a renewal policy" without having read it and subject to the assumption that there are still no restrictions or conditions that are not in the original policy. . . . 4 Although there is a presumption that renewals are on the same terms as the original policy, the parties may agree to renew on different terms. 5 “Simply put, a renewal policy is assumed to have the same terms as the original policy, but different terms do not necessarily constitute renewal. ” 6

Statutory Authority for Insurers Mandatory Notice to Policyholders on Significant Changes to a Policy Renewal:

Texas Insurance Code was amended late by Senate Bill (" SB ") SB417 to reflect new notice provisions when insurers make significant changes to a renewal policy. 7 Before the changes, insurers who wanted to give the existing policyholder less coverage were obliged to terminate or not renew the insurance and give the policyholder a completely new offer. Insurers can now make "significant changes" and avoid terminating or renewing the insurance simply by giving policyholders a written notice of a "significant change" to: 8

  • reduce coverage,
  • change the terms of insurance ; or
  • change the obligations of the insured upon renewal. 9

These three statutory amendments to the Code constitute the definition of "material change." Furthermore, the notice of a "material change" : (1) must appear in a conspicuous place in the notice of renewal, (2) clearly indicate any significant change of the policy made upon renewal , (3) be written in plain text and (4) be submitted to the policyholder at least 30 days before the renewal date . 10 These four statutory requirements are mandatory for insurers in a notice of material change in a policy renewal situation. The required notice of a material change may be given to a policyholder in a notice of renewal as long as the notice of renewal is given in time – at least 30 days before the date of renewal. 11

Similarly, the insurer must notify its agents of the insurer's choice to use a recommendation to make a material change to an insurance and notice of a material change of an insurance policy. 12 Since insurers are required to comply with the insurance statutes and regulations, a further step in incorporating the statutory language into approvals and / or new forms of insurance, in fact, makes compliance requirements enforceable contractual rights. Thus, when an insurance company or its agent fails to comply and properly notifies of a material change in a renewable insurance policy or in a form of insurance, one can bring an action for breach of contract or for breach of the Texas Insurance Code. [19659015] So far, there are only a few reported cases regarding these Texas Insurance Code changes of "significant changes" of policy renewals, and they are summary judgments with different facts and results. If you are in a situation like the hypothetical policyholder above, do not hesitate to call Merlin Law Group who are always ready to help policyholders.
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1 See International Motorists Assn. v. Aguilar 402 S.W.2d 516, 519-20 (Tex. Civ. App. Austin 1966), written dism & # 39; d, (October 5, 1966).
2 Great Am. Indem. Co. v. State 229 S.W.2d 850, 853 (Tex. App. – Austin 1950, script ref & # 39; d).
3 Berry v. Tex. Farm Bureau Mutual Ins. Co. 782 S.W.2d 246, 249 (Tex. App. – Waco 1989, no pet).
4 See Indiana & O. Live Stock Ins. Co. v. Keiningham, 161 SW384 (Tex. Civ. App. Dallas 1913), refusal of writing, (March 25, 1914).
5 See, e.g. Materials Evaluation and Tech Corp. v. Mid-Continent Cas. Co. 519 F. App’x 228, 232 (5th Cir. 2013) (holds subsequent policy with different terms as a renewal); American Cent. Ins. Co. v. Robinson 219 S.W. 277 (Tex. Civ. App. Dallas 1920), writing dism & # 39; d w. O. J., (December 22, 1920) (various terms and speed).
6 Material Evaluations 519 F. App & # 39; x at 231.
7 To implement SB417, Texas Commissioner of Insurance adopted new 28 TAC §§5.9750-5.9752 (2017) .
8 See TEX. INS. CODE §551.1055 (b).
9 See TEX. INS. CODE §§ 551.056, 551.1055, 2002.001 and 2002.102.
10 See TEX. INS. KOD §§ 551.1055 (c), 2002.102 (c).
11 See TEX. INS. CODE §2002.001 (c).
12 See TEX. INS. CODE §2002.001 (d), §§551.1055 (d), 2002.001 (d), 2002.102 (d); see also Texas Department of Insurance Commissioner's Bulletin # B-0022-20 (April 21, 2020).


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