Many states, including Texas, have laws on the books that create a specific schedule for insurance providers to follow after insured parties make claims. Unfortunately, some insurance companies fail to act in accordance with this timeline for covered claims. Prompt Pay statues exist to ensure the insurance provider does not unfairly delay its investigation or payment of claims. The failure to pay within the designated window violates these prompt pay statues, triggering liability for additional damages beyond policy benefits already owed.
A Closer Look at Prompt Pay in Texas
The Texas Legislature enacted Texas Insurance Code Sec. 542, which requires that when an insurance provider receives written notice of a claim from an insured party, the claim must be acknowledged and the insurer must begin its investigation into the claim.
Texas Insurance Code Sec. 542 also requires that after the claim is acknowledged by the insurer, it must request all items, statement and forms form that it reasonably believes will be required. In most situations, such items must be requested within 15 days of the insurance company receiving word of the claim. This 15-day window can be extended to 45 days in certain circumstances.
The Timeline of Communication
Sec. 542 of the Texas Insurance Code also mandates insurance companies communicate with the policy holder regarding the acceptance or rejection of the claim. If the insurance provider rejects the customer’s claim, the reasons must be detailed in the notice. In some cases, insurance companies are unable to reject or accept a customer claim within the designated time frame. If this is the case, the insurer must explain to the insured party why more time is necessary. It is certainly possible an extension to a 45-day deadline will be granted. If this is the case, the insurance provider can reject or accept the claim within this period of time.
If the insurance company accepts the claim, the company is required to pay the claimant in a prompt manner. In the context of Sec. 542 of the Texas Insurance Code, prompt typically means within the next five business days. However, there is the potential for specific insurance providers to be provided with additional time.
Delving Deeper Into Sec. 542 of the Texas Insurance Code
One of the most important parts of Sec. 542 of the Texas Insurance Code mandates the insurance provider pay a covered claim within 60 days after receiving items requested from the customer. The failure to pay the claim within 60 days makes the insurance provider responsible to pay not only the benefits owed in accordance with the policy, but also a percentage or even the entirety of the policyholder’s attorneys’ fees, and an additional 18% of the benefits owed under the policy for punishment.
It is important to note that the lone star state’s insurance law as well as the laws of the majority of other states restrict prompt pay protection to covered claims. If there is any question as to whether you claim is covered, do not take the insurance company’s word! Meet with our Texas insurance attorneys for a thorough review of your claim. We will analyze your unique claim, determine if there is the potential for it to be covered based on the insurance policy terms and fiercely represent you in and out of court.