Articles Posted in Delay in Paying Claim

It is important for Dallas and Fort Worth Attorneys to understand how the Texas Prompt Payment of Claims Act (TPPCA) works.

The deadlines imposed by the TPPCA are presented chronologically in terms of the claims-handling process.

First, §542.055 states the insurer shall acknowledge receipt of the claim, request information the insurer believes it requires, and begin investigation of the claim, within 15 days [or 30 days, for surplus lines insurers] of receiving notice of the claim;

Texas insurance lawyers need to be able to tell their clients the responsibility the insurance company has under the Texas Prompt Pay Act.

To start with, no deadlines are triggered until the insurance company receives all items, statements, and forms reasonably required by the insurance company. Once the insurance company receives this information, seven new duties arise that were not mentioned in the previous post.

(5) Accept or reject the claim. – By the 15th “business day,” the insurer, pursuant to Section 542.056(a), must notify the claimant that it accepts or rejects the claim. This deadline extends to 30 “days” if the insurance company reasonably expects arson. Also, the insurance company can get a 45 day extension of these deadlines.

Insurance lawyers need to be aware of the Prompt Payment of Claims Act found in Texas Insurance Code, Section 542.051. When suing for violation of this Act, an attorney must know that at the same time, he must sue for breach of contract. This is illustrated in the 2005, Waco Court of Appeals opinion styled, United States Fire insurance Company v. Tammy Fugate.

Fugate and her family were injured in a motor vehicle collision with a vehicle operated by William Heintz. After filing suit against Heintz, Fugate settled with him for his remaining policy limits of $15,200.

Fugate had an automobile insurance policy with US Fire, and that policy provided underinsured and uninsured motorist (UIM) coverage for her.

Insurance lawyers in Mansfield and elsewhere should be able to explain to clients when payment is due under a claim. There are many situations and the situation determines when the claim should be paid and if a penalty applies.

The U.S. Western District Court of Texas, Waco Division issued an opinion in Cater v. State Auto Property & Casualty Insurance that needs to be read.

This is a case that was decided on two dueling motions for summary judgment.

Fort Worth insurance lawyers need to read this 5th Circuit opinion. The case is styled, Cox Operating, L.L.C. v. St. Paul Surplus Lines Insurance Co.

In this Katrina pollution clean-up coverage case, the 5th Circuit sheds a bit more light on the proper method for calculating an insurer’s delay penalty under Texas’ Prompt

Payment of Claims Act (the “Act”). Along the way, the court also determines whether a one-year cost-reporting requirement was an absolute, unwaivable condition precedent under a policy, or whether the insurer could, and did, waive it by anticipatorily denying the claim. The principal issue regarding the Act is whether, under a first-party property-damage policy, the 18% penalty begins to accrue multiple times as each new cost invoice is submitted to the insurer, as is probably the case with defense invoices under a liability policy, or whether the insurer’s first violation of a deadline under the Act starts the clock for the total amount of the claim ultimately determined. As discussed below, the insurer lost on all issues.

Most Saginaw insurance lawyers have had a client to call and complain about an insurance company to delay in paying a claim. This is often a violation of the Prompt Payment of Claims Act. The U.S. District Court, Northern District of Texas, Dallas Division issued an opinion in August of 2015, that in part, explains how that Act applies. The opinion is styled, Mainali Corporation v. Covington Specialty Insurance Company, et al. This is a case that was filed in State Court and removed to Federal Court by Covington based on diversity jurisdiction. Mainali was attempting to have the case remanded to the State Court.

This lawsuit arises in connection with a fire that damaged Mainali’s property, a Chevron station and convenience store. According to Mainali’s original petition, Covington insured the Property under a policy that covered fire damage and business interruption losses; Covington assigned Engle Martin and Associates, Inc. as the adjustment company to oversee the claims adjustment process; and Engle Martin assigned Summers as the individual field adjuster. Mainali alleges that Summers failed to conduct a reasonable investigation, denied coverage for damage to the Property and business losses, and underestimated the damage; after underestimating the damage, Summers and Engle Martin reduced the amount payable to Mainali under the Policy; relying on Summers’ inadequate investigation and conclusions regarding the damage, Covington agreed to pay only a portion of the amount due on the claim; and because of Covington’s refusal to pay for repairs and business losses, Mainali was unable to reopen the Chevron station and convenience store, causing Mainali to suffer additional damage in the form of lost business income. Mainali also alleges that Covington, Engle Martin, and Summers failed to conduct a reasonable investigation of Mainali’s claim, thereby violating Texas Insurance Code, Section 541.060(a)(1); failed to attempt to settle the claim in a fair manner, even though they were aware of their liability under the Policy, thereby violating Section 541.060(a)(2)(A); failed to provide prompt and reasonable explanation for the denial of the claim, thereby violating Section 541.060(a)(3); refused to pay the claim without conducting a reasonable investigation of the claim, thereby violating Section 541.060(a)(7); misrepresented the Policy to Mainali by making an untrue statement of material fact, thereby violating Section 541.061(1); misrepresented the Policy to Mainali by failing to state a material fact necessary to make other statements not misleading, thereby violating Section 541.061(2); misrepresented the Policy to Mainali by making a statement that would mislead a reasonably prudent person to a false conclusion of material fact, thereby violating Section 541.061(3); failed to acknowledge receipt of the claim, thereby violating Section 542.055(a)(1); failed to timely commence an investigation of the claim thereby violating Section 542.055(a)(2)-(3); failed to notify Mainali in writing of the acceptance or rejection of the claim not later than the 15th business day after receipt of all items, statements, and forms, thereby violating Section 542.056(a); delayed payment of the claim, thereby violating Section 542.058(a). Plus other causes of action.

As it relates to the last four allegation, violations of the Texas Prompt Payment of Claims Act, the Court stated, “Summers cannot be held liable under any section of Chapter 542. Chapter 542 only applies to specifically listed “insurers,” and Summers, an adjuster, is not an insurer.”

Mansfield insurance lawyers need to read the Houston Court of Appeals [14th Dist.] opinion styled, Daugherty v. American Motorists Insurance Company. It was issued in 1998.

Daugherty filed suit against American for refusing to pay his claim. The trial court ruled in favor of American. Daugherty appealed.

The record reflects that Daugherty purchased a BMW on January 12, 1994.   The sales price of the vehicle was $58,148.88. With the addition of taxes and fees, Daugherty paid a total of $64,678.97 for the automobile. The car was stolen on February 15, 1994. Daugherty promptly reported the theft to American. On February 25, 1994, Daugherty submitted an affidavit of vehicle theft to American in which he claimed a loss of $68,895.42.

Arlington insurance lawyers should read the 1999, Tyler Court of Appeals case styled, Dunn v. Southern Farm Bureau. The opinion discusses an insurance company’e responsibilities under the Texas Prompt Payment of Claims statutes.

Dunn was insured under a standard form automobile liability policy issued by Farm Bureau which contained uninsured/underinsured motorist (“UM”) coverage. She was injured when her vehicle was struck from the rear by an underinsured motorist. In her suit Dunn sought to recover not only UM benefits, but additional damages and attorney fees as the result of Farm Bureau’s alleged violation of the prompt payment requirements of the Texas Insurance Code. After a bench trial, the trial court rendered judgment in favor of Dunn in the amount of $220,000.00 for personal injury damages and $118,251.22 for prejudgment interest. However, the trial court did not award Dunn the requested 18 percent additional damages and attorney fees provided for in the Prompt Pay Statute. In her sole issue presented, Dunn asserts that the trial court erred by refusing to award the 18 percent penalty, attorney’s fees, and prejudgment interest.

At the heart of this case is the interpretation and application of the prompt payment provisions. The relevant provisions of the statute state:

Saginaw insurance lawyers need to be able to discuss with their clients the duties the clients have to the insurance company regarding the Prompt Payment of Claims Act.

It boils down to this, a claimant has two duties to the insurance company.

(1) to give the insurer notice of the claim; and (2) to give the insurance company all the items the insurance company reasonable needs to secure proof of final loss.