Under Texas House Bill 2102, which was approved in the most recent legislative session, roofing contractors who offer to waive a homeowner’s deductible on their property insurance policy could face jail time.
The practice of waiving deductibles had become commonplace for roofers in North Texas, Zelle law firm attorney Steven Badger said.
“It became an expectation in North Texas that if you had hail damage, the contractor would waive your deductible, and you would get a free roof,” Badger said.
Though frequent, the practice has been illegal in Texas since 1989. But the “poorly written” law resulted in little enforcement, Badger said.
HB 2102 requires roofers to include boldfaced language in their contracts stating that homeowners must pay the deductible under their property insurance policy. The law makes it a criminal offense for a roofing contractor to pay for, waive, absorb, rebate or offset an insurance deductible. An insured policyholder also violates the law if they knowingly submit or allow a claim with a waived or reduced deductible.
The law will be positive, said Coy Greathouse, senior restoration specialist for Renown Construction in McKinney. Greathouse said the bill brings more attention to roofers who illegally offer people a “free roof.”
“This results in an improper roofing system that normally includes not replacing the felt, drip edge and other important parts of the roof in an effort to cut corners to make that money back,” Greathouse said in an email.
“This will, every time, result in a ‘new roof’ that has zero warranty from the shingle manufacturer, as it was installed improperly.”
Before HB 2102
In some instances, lack of enforcement of fully paying deductibles resulted in homeowners being implicated in insurance fraud, Badger said.
In other instances, homeowners received inferior roof replacements—whether a half-done job or one completed with cheap materials—and some contractors disappeared after waiving deductibles, Badger said.
Additionally, Badger said roofing contractors who were trying to comply with the law sometimes lost business to “shady” contractors promising free roofs.
The issue stemmed from contractors not understanding, or choosing to ignore, that a swap of goods is acceptable, such as trading advertising for work, Greathouse said. However, there are legal limitations.
To do a swap of goods, there had to be a standardized credit, he explained. However, every homeowner’s deductible is different. Contractors would give homeowners a $1,000 credit on some deductibles and $8,000 on others, Greathouse said.
“Prior to HB 2102, that pretty well went unnoticed. That will not likely be the case anymore,” he said in his email.
Adjusting to the bill
North Texas homeowners will have to adjust to the new normal, Greathouse said. The new law will affect not just roofers, but also homeowners who agree to an illegal deal.
“When I purchased my insurance policy, I agree to the terms, which includes paying my deductible in the case of a loss,” he said in the email. “There are many homeowners who, again, don’t know or don’t care, but it puts them in a very precarious position, which can certainly include jail time and fines for the contractor, but also fines and insurance repercussions for the homeowner.”
In the case of a weather-related loss, homeowners will need to do their research, Greathouse said. He suggested they find reputable general contractors who have a proven track record. Finding someone with a physical brick-and-mortar location helps, too, he said. Greathouse also advised against homeowners allowing someone on their roof at the first meeting.
A provision of the law states that an insurer may refuse to pay a claim for withheld replacement costs until they receive “reasonable proof” of payment of the deductible by the policyholder. This can include canceled checks, money order receipts or credit card statements.
For those who are less able to afford their deductible, Badger said a copy of an executed installment plan contract or financing agreement for payment over time will work as well.
“We were mindful of that issue in drafting the legislation,” Badger said.
Ralph Harris, president of Town and Country Roofing in Frisco, suggested homeowners contact their insurance providers and bargain for a lower deductible. Going from 2% to 1% or asking for a $1,000 or $2,000 deductible can make a big difference, he said.
“When we do have storms, people will be [better] able to afford a $1,000 or $2,000 deductible,” Harris said.
Karen Vermaire Fox, executive director of the North Texas Roofing Contractors Association, said homeowners need to know what they are responsible for.
“Homeowners are going to have to be a little more particular,” Vermaire Fox said.
Additional reporting by Miranda Jaimes.