Houston Construction Insurance Claims: Maximizing Recovery After Property Damage

Understanding Construction Insurance Coverage in the Houston Market

Houston's construction industry faces unique insurance challenges due to the region's exposure to severe weather events, including the May 2024 derecho that caused billions of dollars in property damage across Texas. For construction companies and property owners, understanding the intricacies of first-party insurance coverage is essential for protecting substantial investments in projects ranging from energy infrastructure to commercial developments.

Construction insurance operates fundamentally differently from general liability coverage. First-party insurance coverage protects the policyholder against direct losses to their own property, while third-party coverage addresses claims made by others against the insured. This distinction becomes critical during major construction projects where multiple parties—owners, general contractors, subcontractors, and suppliers—may have insurable interests in the same property.

Builder's Risk Insurance: The Foundation of Construction Coverage

Builder's risk insurance serves as a cornerstone of construction property protection, typically providing first-party, no-fault coverage for all project participants during the construction phase. Unlike traditional property insurance, builder's risk policies are specifically designed to address the unique exposures present during construction activities.

Coverage Scope and Application

Builder's risk insurance typically provides coverage based on replacement cost value and protects against various perils including fire, windstorm, theft, and vandalism. The coverage usually extends to:

• Work in progress against casualty losses;

• Materials stored on-site and in transit;

• Temporary structures and equipment; and

• Debris removal after covered losses.

Critical to understanding builder's risk coverage is that it functions as first-party insurance, meaning coverage applies regardless of fault determination. This no-fault structure enables rapid recovery without the need to establish liability, which is particularly valuable in complex construction environments where determining causation can be challenging.

Risk Allocation Considerations

Texas construction law recognizes that in the absence of specific contractual provisions, contractors generally assume the burden of casualty loss risk on construction projects. Builder's risk insurance effectively transfers this substantial exposure to insurance carriers, providing essential protection for all project stakeholders.

The Texas Construction Anti-Indemnity Act, codified in Chapter 151 of the Texas Insurance Code, significantly impacts risk allocation in construction contracts. This statute voids certain indemnification provisions and applies to construction contracts where consolidated insurance programs are provided, affecting how parties structure their insurance obligations.

First-Party Property Insurance Claims Under Texas Law

Statutory Framework and Requirements

Texas has established comprehensive statutory protections for first-party insurance claimants through multiple provisions of the Texas Insurance Code. Chapter 542 of the Texas Insurance Code, known as the Unfair Claim Settlement Practices Act, establishes specific deadlines and procedures that insurers must follow when handling first-party property claims.

The Act requires insurers to:

• Acknowledge receipt of claims within 15 business days (30 days for surplus lines insurers);

• Begin investigation promptly and request all reasonably required documentation;

• Accept or reject claims within 15 business days after receiving all required information; and

• Pay accepted claims within 5 business days of acceptance (20 days for surplus lines insurers).

The Act provides a deadline extension specifically for weather-related property damage claims, including those arising from forces of nature such as hurricanes, hail, wind, and storms.

Under Texas law, insurers violate their statutory duties by engaging in unfair claim settlement practices, including:

• Misrepresenting policy provisions or facts;

• Failing to conduct reasonable investigations;

• Unreasonably delaying claim processing;

• Denying claims without reasonable explanations; and

• Failing to attempt good faith settlement when liability is reasonably clear.

Commercial Property Damage Claims in Houston's Construction Sector

Industry-Specific Challenges

Houston's construction industry faces distinctive challenges in commercial property insurance claims. The region's susceptibility to severe weather events, combined with the complexity of commercial construction projects, creates unique coverage scenarios that require sophisticated legal analysis. And recent litigation trends demonstrate some insurers' increasing reluctance to pay substantial commercial property claims.

Coverage Disputes and Valuation Issues

Commercial construction property claims often involve disputes over:

• Policy limits and aggregate coverage calculations;

• The number of occurrences (for applying occurrence-based policy limits);

• Replacement cost versus actual cash value determinations;

• Business interruption coverage; and

• Coverage for materials in transit and off-site storage.

Maximizing Recovery Through Strategic Claim Management

Documentation and Evidence Preservation

Proper documentation forms the foundation of successful construction insurance claims. Given the complexity of construction projects and the potential for weather-related damage in Houston, maintaining comprehensive records is essential:

• Photographic and video documentation of pre-loss conditions;

• Detailed progress reports and construction schedules;

• Material delivery receipts and storage locations; and

• Weather data and meteorological reports for damage dates.

For a practical checklist for managing construction instruction claims, check out my post here.

Professional Claim Presentation

The presentation of construction insurance claims can require technical expertise and legal sophistication. Commercial construction losses often involve:

• Complex damage assessments requiring engineering analysis;

• Coordination between multiple insurance policies and carriers;

• Evaluation of business interruption and delay damages; and

• Analysis of additional insured and waiver of subrogation provisions.

Conclusion

Houston's construction industry operates in a complex insurance environment where understanding first-party coverage rights is essential for protecting substantial project investments. The interplay between builder's risk insurance, commercial property coverage, and Texas's comprehensive statutory framework creates both opportunities and challenges for construction companies seeking to maximize recovery after property damage.

Success in construction insurance claims requires thorough understanding of policy provisions, meticulous documentation, and strategic presentation of claims within Texas's statutory framework. When insurers fail to meet their obligations under the Texas Insurance Code, construction companies have powerful legal remedies available to ensure fair compensation for their losses.

For additional information or help with construction insurance issues, reach out to Elkhoury Law.