What Kinds Of Companies Are Under The Prompt Pay Statute

Fort Worth insurance law attorneys need to know what insurance companies fall under the Prompt Pay statutes of the Texas Insurance Code.
The Prompt Payment of Claims Act applies to all insurance companies, except those specifically exempted. The statute provides the following exemptions:
1) a stock life, health, or accident insurance company;
2) a mutual life, health, or accident insurance company;
3) a stock fire or casualty insurance company;
4) a mutual fire or casualty insurance company;
5) a Mexican casualty insurance company;
6) a Lloyd’s plan;
7) a reciprocal or interinsurance exchange;
8) a fraternal benefit society;
9) a stipulated premium company;
10) a nonprofit legal services company;
11) a statewide mutual assessment company;
12) a local mutual aid association;
13) an association exempt under Section 887.102;
14) a local mutual burial association;
15) a nonprofit hospital, medical, or dental service corporation, including a corporation subject to Chapter 842;
16) a county mutual insurance company;
17) a farm mutual insurance company;
18) a risk retention group;
19) a purchasing group;
20) an eligible surplus lines insurer; and 21) except as provided by Section 542.053(b), a guaranty association operating under Article 21.28-C or 21.28D.
All the above can be found in the Texas Insurance Code,Section 542.052. The statute encompasses almost all insurance companies and covers almost every type of insurance policy.
A 1997, Texarkana Court of Appeals case, Bekins Moving & Storage Co. v. Williams, says the statute also applies to to transit insurance. In Bekins, the Court reasoned that the moving company called the coverage insurance, its representative called it insurance, the coverage was paid for as insurance, and both parties believed the mover was providing insurance. Thus, the coverage came within the scope of the statute.
Exemptions to the Prompt Payment of Claims Act are found in Section 542.053, and include:
1) workers compensation insurance;
2) mortgage guaranty insurance;
3) title insurance;
4) fidelity, surety, or guaranty bonds;
5) marine insurance other than inland marine insurance governed by Article 5.53; or 6) a guaranty association created and operating under Chapter 2602.
There are others – but not many. A few to be mindful of are those related to Health Insurance and those that are ERISA plans.