As if victims of Hurricane Harvey didn’t have enough to deal with, a Texas law that takes effect Sept. 1 may make it harder for them to sue insurers for payment of claims.

Texas House Bill 1774, passed earlier this year, was designed to curb lawsuits against insurers after natural disasters. Politicians and industry groups said litigation is sometimes driven by “storm-chasing” lawyers who team up with roofers and public adjusters to seek big payouts. The law could mean that insurers face fewer suits after catastrophes such as Harvey, according to Stephen Pate, a lawyer at Cozen O’Connor who works with carriers and has handled storm-related cases.

(See related story: Law’s Ambiguity a Source of Mixed Messages Over Texas Cat Claims Statute)

“There was a cottage industry of certain policyholder attorneys that were filing hailstorm claims” in previous storms that were bogus, Pate said. “These policyholder attorneys were preying on people.”

Consumer advocates say the law could add more delays to the already-tedious claims process and may discourage lawyers from taking on legitimate cases, according to the Consumer Federation of America’s Bob Hunter. He said victims of Harvey may have a harder time because of the law.

“These people are getting really whacked; to have a second whack because they can’t find a lawyer when they really need one, would be very sad,” Hunter, director of insurance at the CFA and a former Texas insurance commissioner, said in a phone interview. “The wise thing for the Legislature to do is to quickly pass a four-month extension of this bill, not impose something new in the middle of all this.”

Houston, the nation’s fourth-largest city, is largely under water after Harvey pummeled it with about 49 inches (124 centimeters) of rain, which broke the state tropical cyclone record set in 1978. At least seven people are dead and tens of thousands are displaced. The storm could cost the area about $42 billion, up from an earlier estimate of $24 billion Sunday, according to Chuck Watson, a disaster modeler with Enki Research. Only about a quarter of that is likely to be covered by insurers, according to Watson.

U.S. Representative Joaquin Castro, a Democrat from Texas, has called for the state Legislature to convene a special session and delay the bill’s implementation. And he tweeted that residents affected by the storm should file claims before the start of September.

The new state law will limit the amount of interest an insurer will owe policyholders if it’s found to have delayed payments, and potentially reduce attorney fees the consumer can recover, according to Michael Duffy, a managing partner of law firm Duffy & Duffy. That could discourage lawsuits, Pate said.

Likely Impact

Any claims or lawsuits filed before Sept. 1 will be subject to the old rules including the higher interest rate. Because lawsuits follow a denial of a claim, Harvey is unlikely to spur litigation before the law takes effect, according to Joe Woods, vice president of state government relations for the Property Casualty Insurers Association of America. The new rule doesn’t cover policies held under the National Flood Insurance Program or the Texas Windstorm Insurance Association, according to Greg Bonnen, who helped write the bill.

Policyholder-owned State Farm Mutual Automobile Insurance Co., which had the largest share in the market for home and auto coverage in Texas last year, said it had about 5,000 claims tied to those policies through Sunday because of the hurricane. Allstate Corp., the second-largest auto and home insurer in that region, dropped 1.5 percent in New York trading Monday as the storm hit. The company was little changed Tuesday.

Insurance companies profit, in part, by taking in more in premiums and paying out less in claims. By creating delays, they can cut their payouts, according to Duffy.

“What they’ve done is created a further disincentive to treat policy owners reasonably and fairly,” he said Tuesday in a phone interview. “There is nothing good for the homeowner at all.”

Pate and Hunter agree on one thing: It’s probably impossible to assess the full damage of Hurricane Harvey before the law takes effect on Sept. 1.

“It’s not safe to go back to my house,” said Pate, who works in Houston and evacuated Friday. “It’s not safe for millions and millions of people to go back to their property.”