Insurance Company Denying Claim – What Next

When an insurance company denies a claim they have certain responsibilities under the Texas Insurance Code.  Insurance lawyers know to immediately check and see if the insurance company has properly performed their responsibility.

Texas Insurance Code, Section 542.056(c) states that if the insurer rejects the claim, the notice required under Subsection (a) or (b) must state the reasons for the rejection.  Arguably, an insurance company that fails to comply with this requirement could be held to have waived additional reasons that were not timely raised.  However, this argument was rejected in a United States, 5th Circuit opinion in 2005, styled Ridgelea Estate Condo. Association v. Lexington Insurance Company.  In the case, the court stated that the insurance company could raise an additional defense, where there was no allegation that the initial reason was unreasonable or made in bad faith.

The phrase “rejects the claim” does not specifically address a situation where an insurer pay part, but not all, of a claim.  It also does not specifically state whether a claim is “rejected” when the insurance company refuses to pay, for a reason not related to coverage — as for example, it the claim is closed without payment because of noncooperation by the insured.  Construing the statute liberally to promote its underlying purposes, it is reasonable to construe the term “reject” to mean any decision by the insurance company not to pay the claim or not to pay a part of the claim.  The insurance company should state in writing the reason for any such decision.  If the insurance company pays part of the claim, the insurance company should state in writing the reason it did not pay the rest.

If the insurance company is unable to accept or reject the claim within the period specified, the insurance company must notify the claimant, not later than the date specified.  This notice must give the reasons the insurer needs additional time.  This requirement can be found in Section 542.056(d).

If the insurer requests a 45 day extension, it will then have 15 business days plus 45 calendar days to accept or reject a claim.  This period is greater than the 60 day time period contained in Section 542.058.  This probably is reconciled through the “except as otherwise provided” language contained in Section 542.058.

Trying to navigate the requirements in the Texas Insurance Code is challenging even for experienced lawyers.  The best thing for an insured to do is to try and keep a record of all communication between themselves and the insurance company.  Keeping up with dates, starting with when the loss occurred, when it was reported, the information that the insurance company requested, and copies of all these communications such as, emails, letters, faxes, and text messages go a long way towards helping to get a favorable outcome with the claim.