Articles Posted in Delay in Paying Claim

What is the result oi an insurance company pays a claim after an appraisal even if you don’t agree with the appraisal?  This issue is addressed in a Houston Court of Appeals [14th Dist.] opinion.  It is styled, National Security Fire & Casualty Co. v. Hurst.

This is an appeal from a jury trial in favor of Hurst against National.  This appeals court reversed the jury trial results.

Dissatisfied with the initial estimate and payment, Hurst sued National and others for claims arising out of a wind and hail storm damage to his home.  This lawsuit also claimed violations of the Texas Prompt Payment of Claims Act.  National hired adjusters who assessed the damage and paid Hurst $3,524.56 (accounting for the $1,000 policy deductible), which Hurst accepted.  Hurst proceeded to file suit on September 7, 2010.

Does a violation of the Texas Prompt Payment of Claims Act survive an appraisal that is promptly paid?  This issue is addressed in an opinion from the San Antonio Court of Appeals.  The case is styled, Barbara Technologies Corporation v. State Farm Lloyds.

Barbara Technologies had a policy of insurance with State Farm insuring property that was damaged in a hail storm on March 31, 2013.  A claim was made on October 17, 2013 and on October 31, 2013, State Farm inspected the property.  On November 4, State Farm sent a letter stating the property sustained damage of $3,153.57, but did not issue payment because the amount was less that the $5,000.00 deductible.  On February 21, 2014, Barbara Technologies requested a re-inspection which was done and State Farm did not change it’s earlier statement.

Barbara Technologies filed suit for various violations of the Insurance Code including claims for violation of the Prompt Pay Act pursuant to Sections 542.058(a) and 542.060.

Llano County insurance lawyers need to know how the Prompt Payment of Claims Act works in situations where an appraisal clause is invoked.  An example is found in a Western District, Austin Division opinion styled, Thomas Cheski v. Safeco Insurance Company of Indiana.

On April 10, 2016, Cheski experienced severe weather, which damaged his home.  Cheski submitted a claim to Safeco.  On April 13, 2016, Safeco initially assessed the damage at a value less than the deductible.  Cheski requested a re-inspection and following the re-inspection, Safeco reassessed the claim at a value of $10,363.13 and issued payment of June 9, 2016.  Cheski continued to disagree and Safeco invoked appraisal on June 28, 2016.  On November 11, 2016, through the appraisal process, Cheski’s and Safeco’s appraisers agreed the amount of loss was $11,844.13 and Safeco issued payment for the difference on December 9, 2016.

Cheski sued Safeco alleging various violations of the Texas Insurance Code and Texas DTPA in addition to violation of the Prompt Payment of Claims Act and breach of contract.  Safeco contends its payment following the appraisal process precludes Cheski’s causes of action and moved for summary judgment.

The Fort Worth Court of Appeals delivered an opinion in 2006, that is relevant to all insurance lawyers in Texas.  The case has to do with who can assert a claim under the Texas Prompt Payment of Claims Act.  The opinion is styled, American National Fire Insurance Company  v. Hammer Trucking, Inc.

In November 2006, the Fort Worth Court of Appeals held that the Prompt Payment of Claims Act doe not apply to an indemnity claim against an excess carrier for payments made to settle a liability claim.  In so holding, the Court stated that this Act only applies to first party claims between the insurance company and their customer.  However, the Texas Supreme Court recently held, in response to a certified question from the Fifth Federal Circuit on a CGL case, that the Prompt Payment of Claims Act applied to the insurance company’s obligation to pay third party claims.

The prompt-payment statute provides that an insurer, who is “liable for a claim under an insurance policy” and who does  not promptly respond to, or pay, the claim as the statute required, is liable to the policyholder or beneficiary not only for the amount of the claim, but also for interest on the amount of the claim at the rate of eighteen percent a year as damages, together with reasonable attorney’s fees pursuant to Texas Insurance Code, Section 542.060(a).  “Claim” is defined as “a first party claim made by an insured or policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract that must be paid by the insurer directly to the insured or beneficiary.”  This is found in Texas Insurance Code, Section 542.051(2).  The statute does not separately define “a first party claim,” and Texas cases are divided as to its meaning.

Benbrook insurance attorneys can discuss the penalties for delays in paying a claim. These penalties are spelled out in the Texas Prompt Payment of Claims Act (TPPCL) and are found in the Texas Insurance Code.

The amount of an insured’s claim (and/or the amount for which an insurer is liable) is often based on third-party invoices that the insured has not incurred, in amounts the insured cannot necessarily predict, at the time the insured submits its notice of claim to the insurer. Consider duty to defend or environmental clean-up coverage, where the amount of the claim can increase every month.

Naturally, there are questions regarding when the 18% penalty begins to accrue on such claims. The TPPCA language does not provide specific guidance on these calculations, but courts in the Fifth Circuit have recently indicated the methodology is based on the date of the TPPCA violation and not necessarily the date the cost was incurred.

Burleson insurance lawyers know that when an insurance company is slow to pay a claim that there are possible consequences to the insurance company under the Texas Prompt Payment of Claims Act (TPPCA).

Historically, one area of contention in TPPCA disputes has been the calculation of the penalty when an insurer violates an early claims-handling deadline and later denies a covered claim. Insurers have pointed out that §542.058 is the only subsection that references the enforcement provision (§542.060), and thus argue that only a violation of §542.058 triggers the penalty. The Fifth Circuit recently rejected this argument and ruled any violation of §§542.055-542.058 triggers the penalty, while the Texas Supreme Court has not addressed the issue.

Because courts have previously calculated the penalty interest when only a violation of §542.058 is pleaded and proved, there has been a dearth of guidance regarding when the penalty begins to accrue when an insurer violates §§542.055 or 542.056.

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.