Houston Mold Damage & Texas Property Insurance Law Guide

Estimated read time: 13 min read

Introduction: Why Houston Homeowners Need to Know Their Rights

Houston’s humid subtropical climate, frequent flooding, and hurricane-grade storms make mold growth a constant threat. When unchecked, mold can damage drywall, flooring, HVAC systems, and even a home’s structural integrity. Because remediation is costly and insurers often contest whether the mold resulted from a covered event (such as a sudden pipe burst) or long-term neglect, mold claims generate some of the most heated property insurance disputes in Texas. Understanding your rights under Texas property insurance law is essential to securing fair payment, especially if your carrier delays, underpays, or flat-out denies your claim.

This guide—written for policyholders in Houston—explains how Texas statutes, regulations, and recent court decisions protect homeowners. You will learn:

• Key provisions of the Texas Insurance Code that force prompt payments and penalize bad-faith insurers.

• Statutory deadlines every policyholder must meet to preserve a claim.

• How to demand appraisal, document damages, and leverage independent experts in mold disputes.

• When to escalate a dispute to the Texas Department of Insurance (TDI) or hire an experienced Houston insurance attorney.

Legal disclaimer: This article is for informational purposes only and does not create an attorney-client relationship. Consult a licensed Texas attorney regarding your specific situation.

Understanding Texas Property Insurance Law

1. Prompt Payment of Claims – Texas Insurance Code Chapter 542

Texas law requires insurers to follow strict timing rules once you notify them of a loss:

• 15 days (30 days for a surplus lines insurer) to acknowledge receipt of the claim, commence investigation, and request any additional information.

• 15 business days after receiving requested information to accept or reject the claim in writing.

• 5 business days after accepting the claim to pay it.

Failure to meet these deadlines exposes the carrier to statutory interest (currently 18% per annum) and attorney’s fees under Tex. Ins. Code § 542.060. For weather-related disasters such as 2017’s Hurricane Harvey, Chapter 542A shortens some deadlines but still penalizes late payments.

2. Bad-Faith Protections – Texas Insurance Code Chapter 541

Under Chapter 541, an insurer may not misrepresent a policy provision, deny coverage without reasonable investigation, or refuse to pay a claim without a reasonable basis. Bad-faith violations allow homeowners to seek:

• Actual damages (unpaid benefits, remediation costs, and additional living expenses).

• Up to three times economic damages if the carrier acted knowingly.

• Court costs and reasonable attorney’s fees.

Key Texas Supreme Court cases—Arnold v. National County Mutual (1984) and Universe Life v. Giles (1998)—confirmed that insurers owe a duty of good faith and fair dealing independent of the policy contract.

3. Appraisal Provision

Most Texas homeowner policies include an appraisal clause allowing either party to demand a neutral assessment of the loss. While appraisal resolves only amount of loss (not coverage), recent rulings like State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009) favor letting appraisal proceed before litigation. Once invoked, each side appoints an appraiser within the time listed in the policy (commonly 20 days), and the two appraisers select an umpire. A written award signed by any two of the three becomes binding absent fraud or procedural irregularity.

Common Property Insurance Disputes in Texas

Mold Damage

Mold claims are often denied on the grounds that:

• The mold stemmed from long-term leaks or humidity (an excluded peril).

• The homeowner failed to mitigate damages.

• The policy’s mold sub-limit (sometimes as low as $5,000) applies.

Texas regulations allow limited mold exclusions but require clear policy language. If mold results from a covered water event—such as a sudden burst pipe—any resulting mold remediation may be covered up to policy limits or the specific mold sub-limit, depending on the policy form.

Wind and Hail

Gulf Coast storms drive thousands of wind and hail claims. Disputes commonly involve cosmetic versus functional damage, roof life expectancy, and matching of materials across elevations.

Water Damage (Non-Mold)

Slab leaks, overflow from appliances, and sewage back-ups are routine in Houston’s aging housing stock. The key issue is usually whether the water loss was “sudden and accidental.”

Hurricane and Flood Claims

Private homeowner policies exclude flood, requiring a separate National Flood Insurance Program (NFIP) policy. After Harvey, overlap between wind-driven rain and flood waters caused coverage disputes that are still litigated today.

Fire and Smoke

Insurers sometimes depreciate labor instead of only materials, leading to underpayment contrary to Texas Department of Insurance bulletins that labor is not a physical item subject to depreciation (unless policy language expressly allows it).

Texas Legal Protections & Regulations

Statute of Limitations

Texas generally allows four years to sue for breach of the insurance contract (Tex. Civ. Prac. & Rem. Code § 16.004). However, many policies shorten this to two years and one day, a limitation upheld by Texas courts if clearly stated. Claims for bad faith or deceptive trade practices must be filed within two years of discovery.

Notice of Claim and Proof-of-Loss Deadlines

Most homeowner policies require “prompt” notice—often defined as no later than 60 days. Failure can forfeit coverage unless the insurer is not prejudiced by the delay (Tex. Ins. Code § 542A.007).

Appraisal Timelines

• Either party can demand appraisal in writing.

• Each side usually has 20 days to select its appraiser.

• The appraisers select an umpire within 15 days. If they fail, either party may ask a Harris County district court to appoint one.

Bad-Faith Penalties

Besides treble damages under Chapter 541, the Prompt Payment of Claims Act adds 18% annual interest on overdue amounts plus attorney’s fees.

Recent Court Rulings Affecting Mold Claims

• Menchaca v. USAA Texas Lloyds, 545 S.W.3d 479 (Tex. 2018): reaffirmed that policyholders may recover for bad faith even when policy benefits are later paid, if statutory violations caused additional damages.

• Lynd v. FedNat (Fifth Cir. 2021): upheld appraisal awards absent evidence of fraud.

Steps to Take After a Property Insurance Dispute

1. Act Immediately and Document Everything

• Mitigate further damage. Remove standing water, run de-humidifiers, and, if safe, cut out saturated drywall to reduce mold growth. Keep receipts.

• Photograph and video every affected area. Capture pre-remediation conditions before demolition. Include close-ups of mold colonies, water stains, warped flooring, and damaged personal property.

• Notify your insurer in writing. Send notice via email and certified mail with return receipt. Include policy number, date of loss, and a brief description.

2. Obtain Independent Estimates

Texas courts respect objective, third-party evidence. Obtain at least two estimates from:

• Licensed mold assessment consultants (MACs) per Tex. Occupations Code Chapter 1958.

• General contractors experienced with IICRC S520 mold remediation standards.

3. Request the Complete Claims File

Under Tex. Ins. Code § 542.158, policyholders may demand in writing all claim-related documents. This often reveals lowball internal estimates or improper depreciation of labor.

4. Consider Invoking Appraisal

If the dispute is solely about amount, a timely appraisal demand can force the carrier to resolve valuation disputes outside of court, potentially saving months of litigation.

5. File a Complaint with the Texas Department of Insurance

If your carrier ignores deadlines or refuses to explain its denial, submit a complaint online with the Texas Department of Insurance. TDI investigates and may pressure the insurer to comply.

6. Keep an Eye on the Clock

• Mark your calendar for two critical dates: the contractual limitations deadline and the statutory limitations period.

• Send a Notice of Claim letter (Tex. Bus. & Com. Code § 17.505) at least 60 days before filing suit to preserve attorney fee recovery under the Deceptive Trade Practices Act.

When to Seek Legal Help in Texas

While minor discrepancies may resolve through appraisal, you should promptly contact a qualified Houston insurance attorney if:

• Your mold claim is denied based on alleged long-term seepage you dispute.

• The carrier’s payment is far below independent estimates and they refuse to negotiate.

• An adjuster threatens to void coverage for late notice despite no showing of prejudice.

• You receive complicated requests for recorded statements or Examination Under Oath (EUO).

Louis Law Group aggressively represents policyholders across Texas. Our attorneys are licensed in all Texas state courts and the U.S. District Courts for the Southern and Eastern Districts of Texas. We front the costs of independent mold experts and only collect fees if we recover for you.

Local Resources & Next Steps

Government and Non-Profit Assistance

Texas Department of Insurance (TDI) – File complaints and review consumer guides. Harris County District Clerk – Obtain court forms and track lawsuit filings. Houston Volunteer Lawyers – Free legal aid for qualifying homeowners. State Bar of Texas Lawyer Referral – Verify an attorney’s license and disciplinary history.

Preparing for Your Consultation

Gather the following:

• Complete policy (Declarations, Endorsements, Conditions, Exclusions).

• All correspondence with the insurer and adjusters.

• Independent estimates, lab reports, and invoices.

• Photographs and videos on a USB drive or cloud link.

Take Action Today

If your property insurance claim has been delayed, underpaid, or denied, call 833-657-4812 for a free case evaluation and policy review. Louis Law Group’s experienced team is ready to fight for the full mold remediation benefits you paid for.