Prompt Pay Act – Insurance Company Duties

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.
(6) State reasons for any rejection. Section 542.056(c) says if the insurance company rejects the claim, the notice must state the reasons.
(7) Ask for more time and tell why it is needed. Section 542.056(d) says if the insurance company is unable to accept or reject the claim by the regular deadlines, the insurance company may notify the claimant and state the reasons they need more time.
(8) Accept or reject the claim by the extended deadline. If the insurance company gives the notice in Section 542.056(d), the insurance company must accept or reject the claim within 45 additional days.
(9) Pay claim after accepting. If the insurance company accepts the claim, Section 542.057(a), (c) states the company must pay within five business days or twenty for a surplus lines carrier.
(10) Pay the claim after the claimant performs any condition. If the insurance company conditions payment on some act by the claimant, the payment deadline is five business days after the act is performed. A surplus lines insurance company has 20 business days. The relevant section is same as (9).
(11) Pay the claim within 60 days after receipt of information. The insurance company must pay the claim within 60 days after receiving the items requested from the cliamant according to Section 542.058(a).

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