Delay In Paying Insurance Claim – What The Lawyer Should Know

Bad Faith Insurance Attorneys need to read this 2022, opinion from the 14th Court of Appeals.  The case is styled, Texas Fair Plan Association v. Adil Ahmed.

The Blog from October 8, 2022, sets forth the law related to this Texas Prompt Payment of Claims fight.  The facts and procedural history of the case can be obtained from the opinion.

This is an appeal from summary judgment.

Texas FAIR Plan argues that the trial court erred by denying its summaryjudgment motion.  The crux of Texas FAIR Plans argument is that it was entitled to judgment as a matter of law after it (1) voluntarily paid the appraisal award and (2) voluntarily paid what it contends was the statutory interest due on the late payment of the claim.

In previous case law, which has strikingly similar facts: an insurer initially determined a claim was below the policy deductible and paid nothing.  After the insured sued, the insurer invoked the appraisal process to determine the value of the damages.  The appraisal came back over the deductible.  The insurer paid the appraisal value, well past the statutory deadline if measured from the date of proof of loss, but within the deadline if measured from the date of appraisal.  The appeals Court affirmed summary judgment in favor of the insurer, holding that a “plaintiff could not sustain a claim under the [Prompt Payment Act] when it [is] undisputed that the insurer had paid the appraisal award.”

The Texas Supreme Court reversed and disapproved of the reasoning of the Court of Appeals and other courts holding that an insurer could discharge liability under the Prompt Payment Act by paying an appraisal award: “Nothing in the [Prompt Payment Act] would excuse an insurer from liability for [Prompt Payment Act] damages if it was liable under the terms of the policy but delayed payment beyond the applicable statutory deadline, regardless of use of the
appraisal process.”  The supreme court based its reasoning on the peculiar features of the appraisal process, a process that is not  addressed in the Prompt Payment Act.

To determine how appraisals should be treated under the Act, the supreme court detailed the features of appraisals.  The court explained that an insurers use of the policys appraisal process represents a willingness to resolve a dispute outside of courtoften without admitting liability on the claim, or even specifically disclaiming liabilitysimilar to a settlement.  Because payment of the appraisal award constitutes neither an admission of liability under the policy nor a judicial determination of liability, the mere fact that the insurer paid the appraisal award is not determinative of liability, a core inquiry in a Prompt Payment Act claim.  Accordingly, the insurers payment of an appraisal award did not conclusively establish that it is not liable for [the insureds] claim, as it must to avoid [Prompt Payment Act] damages as a matter of law under Section 542.060.


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