18% Penalty – 8

Additional remedies under the Texas Prompt Payment of Claims include attorney fees.  Attorney fees under the statute are governed by the 1997, Texas Supreme Court opinion, Arthur Andersen & Co. v. Perry Equipment Corp.  In that case, the court held that a reasonable fee must be based on eight factors set out by the disciplinary rules.  Fees cannot be awarded simply as a percentage of the recovery, but must be awarded as a dollar amount.  The jury can consider the fact that the plaintiff has agreed to a contingent fee as one factor in deciding what fee is reasonable.  This is discussed in the 1999, Tyler Court of Appeals opinion, Dunn v. Southern Farm Bur. Cas. Ins. Co.

In light of the Arthur Andersen opinion, earlier opinions allowing recovery of a percentage fee under the statute are no longer good law.

If fees an be segregated between the statutory claim and other claims, it is proper to do so, but the defendant needs to object.  Other wise an unsegregated award will be upheld according to the 1998, Waco Court of Appeals opinion, Allstate Insurance Co. v. Lincoln.

Texas Insurance Code, Section 542.061 says that the provisions of the Prompt Pay Statute are not exclusive, and the remedies are in addition to any other remedies and procedures provided by any other law or at common law.

Despite the cumulative remedy language of this provision, several courts have held that the statute does not create a separate cause of action.  One federal court in the Northern District of Texas in 1998, said a claim for statutory remedies under the Prompt Pay Statute for failure to pay a claim under an insurance policy is not a separate cause of action.  Instead, when an insured brings such a claim the insurer’s entire liability – both on the insurance policy and under the Prompt Pay Statute – is put on issue as one cause of action.  The opinion in this case is styled, Hartman v. St. Paul Fire & Marine Ins. Co.