Claims for Late Payments – Insurance

Insurance claims for late payment are a frequent issue when someone sees an insurance lawyer about the way they have been treated in an insurance claim. This late payment issue is addressed in a 2023 opinion from the Northern District of Texas, Dallas Division.  The opinion is styled, Craig Collins v. State Farm Lloyds.

In this case the insured suffered damages from a tornado.  A claim was made immediately and State Farm sent out an adjuster.  The initial found some damages and paid the damages.  Collins asserted there were more damages and another adjuster investigated the claim and found more damages and paid those damages.  Collins asserted there were still more damages and a third adjuster came out and additional damage was found and the damages were paid.

Collins sued for various causes of action including violations of the “duty of good faith and fair dealing,” Texas Insurance Code damages under Section 541, and finally for damages under Section 542.  A reading of the case shows a discussion of the first two and here is the discussion under the Section 542, Prompt Payment of Claims.

Collins alleges that State Farm violated section 542 of the Texas Insurance Code by failing “to pay for the losses and/or to follow the statutory time guidelines for accepting or denying coverage.” Section 542 requires insurers to provide written notice to claimants “of the acceptance or rejection of a claim” within fifteen business days of “the date the insurer receives all items, statements, and forms required” to prove the amount owed. Then, the insurer must pay the claim within five business days. All deadlines extend by fifteen days if, as here, the insurance commissioner declares a “weatherrelated catastrophe.” Failure to abide by these rules subjects an insurer to interest payments on the claim amount and liability for attorney’s

Collins concedes that State Farm made its initial payment within the statutory window but maintains that its other payments were late. And since Collins believes State Farm still owes him more, he asserts that statutory interest on his claim continues to accrue.  Although one State Farm adjuster testified that State Farm properly notified Collins that it required additional time to make payments, Collins testified that he received no such communication.  And even if State Farm’s initial payment was timely, an insurer’s “partial payment” on a claim within the statutory deadline “does not preclude liability for interest on amounts owed but unpaid when the statutory deadline expires.”

The Court finds that several genuine disputes of material fact stand in the way of summary judgment on Collins’s section 542 claims.  Did State Farm timely notify Collins that it needed an extension to reassess and make further payments?  And if the jury determines that State Farm owes more under the Policy, then is that notyetpaid payment untimely?  With evidence pointing both ways on each question, reasonable jurors could differ in their answers.

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