Timely Payment Of Claims

An insured in Weatherford, Mineral Wells, Aledo, Hudson Oaks, Willow Park, Peaster, Azle, Springtown, Millsap, Brock, Cool, Poolville, or anywhere else in Parker County would expect any claim they make to be paid in a timely manner. So what happens if it is not paid in time?
A 1995, Amarillo Court of Appeals case styled, Doris Rusk, Roger Lusk, and Russell D. Daves v. Honorable Cecil G. Puryear, addressed this issue.
Keep in mind that first, an experienced Insurance Law Attorney should be consulted to help in these situations. Next, here is what happened in this case.
This case is a writ of mandamus, seeking to compel Judge Puryear, to vacate his order of severance and abatement. This severance and abatement caused the contract claim for benefits to be separated from the extra-contractual claim due to late payment. The writ was filed by the insurance company in this case, Mid-Century Insurance Company of Texas.
Factually, the Lusks were insured under a policy of insurance issued by Mid-Century, a provision of which contained personal injury protection (PIP) in the amount of $2,500 per person. Doris sustained injuries in an automobile accident and, resultingly, incurred medical expenses through assorted health care providers. Thereafter, she made a claim for PIP benefits, and assigned her right to receive the benefits to health care providers who had treated her. Mid-Century received notice of Doris intention to revoke the assignments. To prevent being subject to adverse and conflicting claims, Mid-Century interpleaded the PIP money into the registry of the court.
The Lusk’s and Daves (their attorney) sued Mid-Century for breach of contract and for violations of the Prompt Payment of Claims Act of the Texas Insurance Code.
In reviewing this case, this appeals court cited Texas Rule of Civil Procedure, Rule 41, which grants a trial court broad discretion to order or not order separate trials when judicial convenience is served and prejudice avoided. But as stated by the Texas Supreme Court, the rule does not contemplate the severance of one cause of action into two or more parts. The Texas Supreme Court said, “A claim is properly severable if (1) the controversy involves more than one cause of action, (2) the severed claim is one that would be the proper subject of a lawsuit if independently asserted, and (3) the severed claim is not so interwoven with the remaining action that they involve the same facts and issues.” But when all the facts and circumstances of the case unquestionably require claims to be tried together, there is no fact or circumstance supporting or tending to support a contrary conclusion, and the legal rights of the parties will not be prejudiced thereby, there is no room for the exercise of discretion and the trial court has a duty to deny a motion to sever.
This court reversed the trial court and ordered that the contractual claim and the extra-contractual claim be tried together.
In justifying its ruling this court pointed out that the Lusks claim was for breach of contract for not paying their claim within 30 days of its being presented. This failure to pay within 30 days was a breach of their insurance contract and a violation of the Prompt Payment of Claims Act thereby entitling her to “the additional sum of 12% of the amount due” and reasonable attorney’s fees.
Mid-Century argued that until they were found to have violated the insurance contract, that it was not proper, in the same proceeding, to be claiming the penalties because the penalties are the result of statute, not the insurance contract.
In making its ruling the court stated, “Although the damages and attorney’s fees provided by the [Prompt Payment of Claims Act] do not arise from the insurance contract, they are recoverable for the insurer’s failure to timely pay any loss for which it may be liable under the contract. Thus, when … Lusk alleged Mid-Century failed to timely pay her claim and pleaded for damages and attorney’s fees provided by [Prompt Payment of Claims Act], the entire liability of Mid-Century, both on the insurance policy and under [Prompt Payment of Claims Act], was put in issue as one cause of action.”
This can be a bit confusing, especially considering other court rulings in these types of cases. What is relevant is realizing that there are various ways of enforcing a person’s rights under a policy of insurance.