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.