WHAT ARE YOUR RIGHTS WHEN A INSURANCE COMPANY IN TEXAS DELAYS THE PAYMENT OF YOUR CLAIM?

Insurance Company.jpgWhen an insurance company in Texas delays the payment of your claim it may be subject to certain penalties if it has failed to comply with Chapter 542 of the Texas Insurance Code. Sections 542.051-542.061 of the Texas Insurance Code regulate an insurance company’s duties and obligations with respect to prompt payment of claims.

Chapter 542 applies only to what is known as first-party claims. First-party claims are claims made by a policyholder against their own insurance company. Chapter 542 does not apply to third-party claims which are claims asserted against someone else’s insurance company, usually for personal injuries or property damage. Chapter 542 also does not apply to certain types of insurance companies such as those providing workers’ compensation, title or mortgage guaranty insurance.

Unless the insurer is an eligible surplus lines insurer, Chapter 542 requires that not later than the 15th day after the date an insurer receives notice of a claim, the insurer must: (1) acknowledge receipt of the claim; (2) commence an investigation of the claim; and (3) request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant. An insurer may make additional requests for information, if during the investigation of the claim, the additional requests are necessary. If the acknowledgment of receipt of a claim is not made in writing, the insurer must make a record of the date, manner, and content of the acknowledgment.

The insurer must notify the claimant, in writing, of the acceptance or rejection of a claim not later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer to secure a final proof of loss. However, if the insurer has a reasonable basis to believe that the loss resulted from arson, the insurer must notify the claimant in writing of the acceptance or rejection of the claim not later than (30) thirty days after the date the insurer receives all items, statements, and forms required by the insurer.

If the insurer rejects the claim, its notice of rejection must state the reasons for the rejection. If the insurer is unable to accept or reject the claim within the time period allowed, the insurer, within that same period, must notify the claimant of the reasons that the insurer needs additional time to make a decision with respect to the claim. In such cases, the insurer must then accept or reject the claim not later than (45) forty-five days after the date the insurer notifies the claimant of its need for additional time.

If the insurer notifies the claimant that the insurer will pay a claim or part of a claim, the insurer must pay the claim no later than the 5th business day after the date notice is given. However, one court has held that an insurer can withdraw acceptance of the claim within (5) five business days of giving its notice of acceptance if the facts and circumstances known to the insurer change significantly before the claim is paid. Daugherty v. American Motorists Insurance Co., 974 S.W. 2d. 796 (Tex. App. Houston [14th] 1998). If payment of the claim or part of the claim is conditioned on the performance of an act by the claimant, the insurer must pay the claim not later than the 5th business day after the date the act is performed.

If the insurer, after receiving all items, statements, and forms reasonably requested and required to make a decision concerning the claim delays payment of the claim for a period exceeding more than (60) sixty days, the insurer is liable to pay the policyholder or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of (18) eighteen percent a year as damages, together with reasonable attorney’s fees. If a suit is filed, the attorney’s fees shall be taxed as part of the costs in the case. When the insurer, after receiving all reasonably requested and required information from the claimant, neither accepts nor rejects the claim, the insurer will be liable if the claim is valid and not paid within (60) sixty days.

Unfortunately, Chapter 542 does not establish a statute of limitations period and some courts have applied a (2) two year statue of limitations since a Chapter 542 claim can be considered an extracontractual claim based in tort. Lane v. State Farm Mut. Auto. Ins. Co., 992 S.W. 2d. 545 (Tex. App. – Texarkana 1999). But a cause of action under Chapter 542 does not accrue until the statute has been violated. State Farm Life Ins. Co. v. Martinez, 174 S.W. 3d. 772 (Tex. App.- Waco 2005).

At the Law Office of Stephen O’Rear,P.C. we help people who have not had their insurance claims paid timely.