In Texas, if a house fire is declared a total loss, the claim is a liquidated demand for the full amount of the insurance policy. The insurer must pay the full amount for the total loss of a home due to fire. This amount is determined by the parties when they take out the insurance policy.
The experienced Houston homeowners insurance claims lawyers at Haun Mena explain total loss fire claims in Texas.
Understanding Total Loss Fire Claims in Texas
Texas fire departments respond to more than 70,000 fires each year. Structure fires, including those in homes, are the most common types of fire accidents. While total loss fires are a relatively small percentage of fires, they are costly and can result in severe injury and death.
When a total loss fire occurs, the property owner needs to know what they can claim through insurance and what to do if the insurance company won’t pay.
What qualifies as a total loss in Texas for house fires?
A total loss for house fires in Texas is when the structure is so destroyed that what remains cannot be used to rebuild the property. The damage is so severe that it makes more sense to completely rebuild than to use what’s left to make repairs.
Total Loss Rule in Texas
The total loss rule in Texas says that a home is a total loss if:
- An owner
- Is reasonably prudent (typical and reasonable judgment)
- Wants the home restored to its condition before the fire
- Would not use existing remnants to rebuild
It is an objective standard based on a reasonably prudent person. It is not from the position of the insurance company representative, who doesn’t want a total loss declared. It is not even a subjective opinion of the homeowner. Rather, it is the standard of a reasonable person, and if they would use what remains to rebuild the structure.
Why It Matters
The house fire total loss rule in Texas can make a significant difference in what an insurance company pays for a house fire.
Texas has a law, Texas Statutes § 862.053, that explains how an insurance company must pay for a total loss.
A fire insurance policy, in case of a total loss by fire of the property insured, shall be held and considered to be a liquidated demand against the company for the full amount of such policy.
This language must be stated exactly in every fire insurance policy issued on real property in Texas.
What It Means
When a home is a total loss due to a fire in Texas, the insurance company must pay the full agreed-upon value. There is no dispute about what the home was worth and what the fair amount of payment is. Rather, the parties determined that up front, when the insurance company issued the policy.
However, when a home is declared only a partial loss, the insurance company can dispute what amount they will pay for losses and repairs. This can lead to disputes, delays, and underpayments.
Having the home declared a total loss typically works in favor of the insured. That’s why insurance companies often fight to have the home declared salvageable, in part.
Why We Have the Law
The Texas total loss fire claims rule exists to prevent insurance companies from artificially raising premiums. Without the rule, insurance companies could initially say that the home was worth more, insisting on higher premiums. Then, when a fire occurs, they could lower their opinion about the value and refuse to pay. The law exists to force the insurance company to pay for what they charge premiums for.
Other Losses
The Texas total loss fire claims rule applies only to the structure. It does not apply to a claim for personal property, extra expense, business losses, or additional living expenses.
Important Cases and Examples
Royal Ins. Co. v. McIntyre (Tex 1896)—One of the issues was whether the house was destroyed by fire. The court said that there is no total loss if there is a remnant standing adapted to restore the building to its pre-injury condition. The question is from the perspective of a insured reasonably prudent owner.
Glens Falls Ins. Co. v. Peters (Tex. 1965)—There was a garage apartment fire. The fire inspector declared the building hazardous. The owner had the building torn down. They then sued the insurance company for total loss. The court said that the declaration by the building instructor was not necessarily conclusive of the loss. The case resulted in coverage for partial loss, which was not disputed. The case illustrates the potential importance of local ordinances, plus the potential benefit of seeking legal counsel early in a case.
Canal Ins. Co. v. Hopkins (Tex. App. 2007)—A tractor-trailer lost control and traveled off the road, striking trees. The court said that whether the trailer was a total loss is a question of fact. Courts review factual findings for legal sufficiency.
Total Home Loss Other Than Fire
Does the Texas total loss fire rule apply to other types of losses, like tornado damage?
Unfortunately, Tex. Stat. § 862.053 says that the total loss rule applies only to house fires. And that’s how the courts have interpreted it. When the loss is due to another reason, such as a tornado, the insurance company can dispute the amount of loss. This seems unfair because the same over-insurance problem can happen with other types of losses. However, that’s the state of the law today, but you can contest the total amount payable under the policy.
Total Loss—Vehicles
A vehicle is a total loss when the cost to repair it is more than its market value before the loss. When a car is a total loss, the insurance company pays the market value minus the deductible. If there is a vehicle loan, they may pay the lender directly.
Bad Faith
Failing to declare a home a total loss may be bad faith on the part of the insurance company. It may make the insurance company liable to pay penalties and fees in addition to the amount owed.
Contact an Attorney
At Haun Mena, we make insurance companies keep their promises. Talk to a lawyer about your total loss fire claim. We handle claims throughout Texas. Contact us now.
