18% Penalty – 7

Under the 18% penalty imposed by Texas Insurance Code, Section 542.060, what is the effect if there is a finding of multiple violations?  Does the result of result of multiple violations result in multiple penalties?

In applying the Texas Prompt Payment of Claims Act and Section 542.060, the 1999, Tyler Court of Appeals opinion, Dunn v. Southern Farm Bureau, the court found four separate violations by the insurer, but did not discuss whether this made a difference in the damages.

Something to keep in mind is that arguably, an insurance company that violates the statute more than once ought to be more liable than an insurance company that violates the statute only once.  This view is consistent with liberal construction of the statute, and furthers the purpose of encouraging prompt payment of claims.

As an example, if an insurance company that fails to timely acknowledge the claim is just as liable as an insurance company that violates every requirement, what incentive does the first insurance company have to get on the right path and begin processing the claim properly?  Arguably, if the penalty is as much for a single violation as for several, insurance companies may have no incentive for compliance with the remaining deadlines, once one violation occurs.  Imposing multiple penalties for multiple violations cures this.  An insurance company that commits one violation has an incentive

Contact Information