The Texas Windstorm Insurance Association ("TWIA"), which was established by the Texas legislature in 1971 in response to regional market conditions following Hurricane Celia in August 1970, has issued a statement highlighting an important change to the windstorm and hail insurance it provides for the Texas seacoast.
The TWIA explained that, under current law, the type of loss settlement – replacement cost value ("RCV") versus actual cash value ("ACV") – is determined at the time a claim is made.
Under the new law, which will apply to all new and renewal residential policies issued on or after January 1, 2020, the type of loss settlement, RCV or ACV, will be determined at the time the policy is issued.
The TWIA pointed out that Texas law requires TWIA policies to be insured at 80 percent or more of the RCV of the property to qualify for replacement cost coverage. Most policyholders meet this threshold but sometimes a policy is insured right at the 80 percent threshold when first issued and, over time, dips below for a variety of reasons. This meant that, after a claim, the loss was settled for the ACV, which was a significantly lower claim payment than the replacement cost. The TWIA said that the new law prevents this scenario from happening.
The TWIA added that its new default policy form will be an ACV policy, and a replacement cost endorsement will automatically be applied to the risk item if its percentage of insurance-to-value is 80 percent or higher. The two new RCV endorsements are:
- TWIA 802 Endorsement: provides RCV coverage A (dwelling)
- TWIA 804 Endorsement: provides RCV coverage A (dwelling) with ACV coverage for roof coverings if ACV roof is selected or applied by underwriting. In other words, TWIA 804 provides RCV coverage for the structure but not the roof.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].