Insurance Penalty For Late Payment Of Claim

The Texas Insurance Code provides for penalties to insurance companies who pay a claim late.  This is illustrated in a 2022, opinion from Texarkana Court of Appeals.  The opinion is styled, State Farm Mutual Automobile Ins. Co. & State Farm County Mutual Ins. Co. Of Texas v. Greg Rumbaugh.

Greg Raumbaugh sued State Farm after State Farm failed to pay personal injury protection (PIP) benefits “not later than the 30th day after the date the insurer received satisfactory proof of a claim,” as required by Texas Insurance Code, Section 1952.156.  Cross motion for summary judgement were filed and the trial court ruled in favor of Rumbaugh.  This appeal followed.  The sole question raised in this appeal is whether the trial court erred by resolving crossmotions for summary judgment in Rumbaughs favor, thereby determining that he was entitled to statutory penalties under Section 1952.157 of the Texas Insurance Code even though PIP benefits were paid before the lawsuit was filed.

PIP coverage is a form of nofault insurance.  PIP’s limitation to medical expenses and lost wages, along with its collateral-source and no-fault features, are designed to simplify and hasten claim resolution and payment.  Because Section 1952.157 provides for “a penalty of 12 percent,” among other things, if an insurer fails to pay PIP benefits “when due,” the trial court properly ruled that Rumbaugh was entitled to statutory penalties when PIP benefits were paid past Section 1952.156’s statutory deadline, even though they were paid before the lawsuit was filed.

Rumbaughs lawsuit against State Farm, brought under Section 1952.157 of the Texas Insurance Code, sought statutory benefits, penalties, interest, and attorney fees, among other things.  Section 1952.156, titled “Payment of benefits,” provides
that, “[s]ubject to the requirements of this section and Section 1952.157, an insurer shall pay benefits under the coverage required by this subchapter periodically as claims for those benefits arise, but not later than the 30th day after the date the insurer receives satisfactory proof of a claim.”  Section 1952.157 provides penalties for failure to timely pay the benefits.

To simplify the case, the parties stipulated to the following key facts:

1. On or about November 7, 2017, STATE FARM delivered to RUMBAUGH
a Texas personal automobile liability insurance policy which included $2,500.00
of personal injury protection (the Policy).

. . . .

3. On December 2, 2017, while the Policy was in full force and effect,
RUMBAUGHs son sustained bodily injuries in an automobile accident (the
Accident) in Rusk County, Texas.

4. On March 2, 2018, RUMBAUGH submitted a claim (the Claim) for the
Policys $2,500.00 personal injury protection benefits (the Benefits) in
connection with medical and other expenses incurred as a result of the accident.

5. STATE FARM did not dispute the claim.

6. The amounts owed under the policy for personal injury protection benefits
were due April 2, 2018.

7. On April 5, 2018[,] STATE FARM paid the Benefits but mailed the check
to an incorrect address.

8. On April 25, 2018, STATE FARM reissued its check for the Benefits and
mailed it to the correct address.

9. RUMBAUGH deposited the check for the Benefits.

10. RUMBAUGH is the person entitled to the Benefits.

11. STATE FARM did not pay the Benefits before the 30th day after the date
on which it received satisfactory proof of the claim

12. STATE FARM did not pay RUMBAUGH the 12% penalty, interest or
attorneys fees that Plaintiff contends are owed under Texas Insurance Code
§ 1952.157(b).

13. STATE FARM paid all Benefits to which RUMBAUGH was entitled before
he filed suit.

14. RUMBAUGH does not seek to recover any policy benefits in this suit.

This appeal is resolved by statutory construction.  Statutory construction is a question of law for the Court review de novo.  The primary goal in construing a statute is to ascertain and give effect to the legislatures intent.  Where the text is
clear, text is determinative of that intent.  This is because the Legislature expresses its intent by the words it enacts and declares to be the law.

To ascertain that intent, Courts look first to the plain and common meaning of the statutes words.  Then construe the statute according to its plain language if the language is unambiguous.  This general rule applies unless enforcing the plain language of the statute as written would produce absurd results.

Further, in determining legislative intent, Courts look to the statute as a whole and not isolated portions.  Courts presume that the Legislature had a purpose for words included in the statute and that it purposefully omitted words excluded from the statute.  When a statutory term is undefined, a court will not find a meaning that is out of harmony or inconsistent with other provisions in the statute.  Instead, the Courts look to the meaning of the words used, or of a particular clause, within the context of the statute and study the language of the specific provision at issue, within the context of the statute as a whole, endeavoring to give effect to every word, clause, and sentence.  Typically, the words the Legislature chooses should be the surest guide to legislative intent.  Only when those words are ambiguous do Courts resort to rules of construction or extrinsic aids.

Sections 1952.156 and 1952.157 refer to each other and provide a complete picture of the Legislatures intent.  Section 1952.156(a) establishes that a person is entitled to benefits on the date the insurer receives satisfactory proof of a claim.  Section 1952.157 addresses what happens “[i]f the insurer fails to pay benefits under the
coverage required by this subchapter when due.”  Texas statutes have long punished insurers for delays beyond 30 days, and, as applicable here, PIP benefits were required to be paid “periodically as claims for those benefits [arose], but not later than the 30th day after the date the insurer receive[d] satisfactory proof of a claim.”

The opinion goes on further in explaining its ruling in favor of Rumbaugh and is a good read for these situations.

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