18% Penalty On Insurance Company For Not Paying Claims On Time

The Texas Insurance Code requires an insurance company to pay a claim within 60 days of receiving all the information it needs to make a determination of whether or not a claim should be paid and the amount to be paid. The requirement is found in the Texas Insurance Code, Section 542.058. In the event of a weather-related catastrophe, as defined by the Texas Commissioner of Insurance, the period is extended to 75 days. This is found in Texas Insurance Code, Section 542.059. The law here applies to all residents of Texas including those in Dallas, Fort Worth, Arlington, Grand Prairie, or even out in Weatherford or Parker County.
Section 542.059 was recently part of a lawsuit in a case decided on December 15, 2009. The case was styled, Philadelphia Indemnity Insurance Company v. C.R.E.S. Management, L.L.C.
In this lawsuit, CRES owned five properties that suffered multiple losses. Philadelphia had paid all claims on three of the properties but still disputed losses on the others. On the two properties that the dispute existed, Philadelphia did not dispute that they owed atleast part of the claim but not all of the claim. On the part not disputed, Philadelphia did not pay until after the applicable 75 day deadline.
CRES sued for the 18% interest due on the late paid amount. Philadelphia argued that they should not have to pay the penalty interest because they acted in “good faith” in trying to adjust the large, complex claims. Philadelphia then went into great detail explaining all they had done to try to settle and pay the claim as soon as possible.
The court ruled for CRES and ordered Philadelphia to pay the penalty and attorney’s fees. The court reasoned that the relevant insurance code provision said what it said, and pointed out that there were excuses written into the code that allowed for extra time if needed and the requirements to be entitled to the extra time. Philadelphia did not argue that it satisfied any of the requirements to get the extra time.
This case is a good case for pointing out to policy holders that the law is on the policy holders side when an insurance does not promptly and properly pay a claim.