Prompt Payment Act – Duties Of Insurance Company

Texas lawyers handling insurance claims need to know the following.
Once an insurance company receives notice of a claim, four duties are triggered:
(1) Acknowledge the claim. Texas Insurance Code, Section 542.055(a)(1) says the insurer must acknowledge receipt of the claim.
(2) Record the acknowledgment. Section 542.055(c) says if the acknowledgment is not in writing, the insurer shall make a record of the date, means, and content of the acknowledgment.
(3) Commence the investigation. Section 542.055(a)(2) says the insurer must commence any investigation of the claim.
(4) Request information from the claimant. Section 542.055(a)(3) says the insurer must request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant.
Most insurance companies must perform these duties “not later that the 15th day after receipt of notice of a claim.” Eligible surplus lines insurance companies have longer, until “the 30th business day,” according to Section 542.055(a).
An attorney should note the different use of “days” and “business days.” This distinction appears in several points in the statute. “Business day” is defined to exclude weekends and state holidays, pursuant to Section 542.051(1). Because of this distinction, most insurers have about two weeks, but eligible surplus lines insurance companies have six weeks.
In the 2007 opinion, Lamar Homes Inc. v. Mid-Continental Casualty Co., the Texas Supreme Court found that in the context of an insured’s claim for a defense, the insured needs to provide the insurer with the statements or invoices for legal services that the insured receives in order to trigger the statutory deadlines.