Delaying In Paying Insurance Claim

Here is an opinion from the 14th Court of Appeals that concerns the Prompt Payment of Claims Act.  The opinion is styled, William Marchbanks v. Liberty Insurance Corporation.

This is an appeal from the trial court granting summary judgment in favor of Liberty.  This appeals court affirmed the trial court.

Marchbanks reported a hail damage claim to Liberty and the same day Liberty acknowledged the claim and sent an adjuster to the property the next day.  The adjuster determined that any roof damage was not storm related and Liberty sent a denial letter explaining no storm related damaged was found.

Fifteen months later Marchbanks found pieces of his roof coming off and believed the roof had sustained damage and requested Liberty to re-inspect the house.  Seven weeks later another inspected was conducted and Liberty found $389.79 of damage, an amount well below the deductible.

Marchbanks sued for alleged violations of the Texas DTPA and under the Texas Prompt Payment of Claims Act.

Five months after the lawsuit was filed, Liberty invoked the appraisal provision under the policy.  The amount the appraiser said was owed was immediately paid by Liberty.

Marchbanks alleged two sections of the Prompt Pay Act were violated.  Specifically, Section 542.055(a)(3), by failing to request items, statements, and forms that it reasonably believed were required, and Section 542.056(a), by failing to accept or reject the claim within 15 days of receiving all items, statements, and forms required.

The Texas Insurance Code, Section 542.060(a) states:

If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter [the Prompt Payment of Claims Act], the insurer is liable to pay the holder of the policy or the beneficiary making the claim under the policy, in addition to the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable attorney’s fees.
This court has twice held that full and timely payment of the amount owed under the policy based on an appraisal award precludes as a matter of law a recovery on a claim under the prompt-payment statute.  The evidence in this case shows Liberty paid Marchbanks the appraisal amount within 28 days after the award.  Texas law allows payment within 30 days.
Under Section 542.060(a), the clear language of the statute says, to establish a right to recover the eighteen percent interest and reasonable attorney fees under the prompt payment statute, the claimant must show that (1) a claim was made under an insurance policy, (2) the insurer is liable for the claim, and (3) the insurer failed to follow one or more sections of the prompt payment statute with respect to the claim.
An insurer’s full and timely payment of the amount owed under the policy to an insured based on an appraisal award precludes as a matter of law the insured’s recovery of a judgment against the insurer based on its liability under the insurance policy.  Because the insured’s failure to recover any judgment based on the insurer’s liability under the policy precludes the insured from recovering under the prompt payment statute, this full and timely payment by the insurer also precludes the insured as a matter of law from recovering on a claim under the prompt payment statute.