Prompt Payment Of Claims Act – Court Interptetation

When an insurance company delays in paying a claim, there is likely a violation of the Texas Prompt Payment of Claims Act.  As a result it is important to have a good understanding of how the Prompt Payment of Claims Act is interpreted by the Courts.

The statute, at Section 542.054, provides that “This subchapter shall be liberally construed to promote the prompt payment of insurance claims.”  This purpose is re-inforced in case law supporting this goal including, Dunn v. Southern Farm Bur. Cas. Ins. Co., a 1999, Tyler Court of Appeals opinion.  And it is supported in the 1997, Texarkana Court of Appeals opinion, Bekins Moving & Storage Co. v. Williams.  The Federal Courts follow this purpose as is illustrated in the 1997, Eastern District of Texas opinion, Teate v. Mutual Life Ins. Co. of New York.

The meaning of “liberal construction” has been applied expansively under other consumer statutes.  This was seen in the 1981, Texas Supreme Court opinion, Cameron v. Terrell & Garrett, Inc., wherein the court said that a liberal construction mandates that court give statute most comprehensive application possible without doing violence to the statute’s terms.

In the Dunn opinion, the court relied on liberal construction to conclude that a claim was sufficient to trigger the statutory deadlines, even though it was presented through the claimant’s attorney.  The Dunn court also relied on the liberal construction mandate to conclude that the statute applies to uninsured motorist claims.

In a 1994, Austin Court of Appeals opinion styled, Mid-Century Ins. Co. v. Barclay, the court relied on the liberal construction clause to reject the insurer’s argument that the statute had to be strictly construed because it is penal in nature.  Of course, even without a liberal construction mandate in the statute, this argument should have been rejected.  The Legislature has generally provided that all statutes are to be liberally construed to achieve their purposes, and to promote justice.  This can be seen in the Texas Government Code, Section 312.006.

On the other hand, the liberal construction mandate was not enough in Teate case, to lead the court to allow compounding of the statutory damages.  Nor was it enough in the Bekins opinion to cause the court to treat a violation of this statute as an unfair insurance practice.

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