Texas law easing insurer penalties takes effect amid Hurricane Harvey

AUSTIN, Texas (AP) — A new Texas law pushed by the insurance industry kicked in Friday, a week after Harvey made landfall, softening the financial penalty companies could face if they are sued for dragging out homeowner damage claims.

Republican Gov. Greg Abbott signed the changes in May, but they didn’t take effect until now, along with most other new laws passed this year in Texas. The destruction wrought by Harvey ignited calls to delay the start date, but Abbott has dismissed the backlash as overhyped.

The record-breaking storm flooded thousands of homes in the Houston area and along the southeastern Texas coast, where Harvey made landfall on Aug. 25 as a Category 4 hurricane.

State officials say few Harvey victims are likely to be affected by the insurance law changes, because they doesn’t apply to flood claims or coastal residents covered by the state’s insurer-of-last-resort.

Insurers sued for dragging out claims previously had to pay 18 percent interest if a court ruled against them. Now that penalty is around 10 percent, which lawyers and consumer advocates say won’t incentivize insurers to act as quickly.