Texas Hurricane Season: Statutory Requirements for Handling Claims
For Texans, the prime hurricane season from August to September is now over. Although there were no big storms this year, claims handlers still need to be attentive to timely adjusting their first party claims. The Texas Prompt Payment of Claims Act mandates prompt payment of claims. See Tex. Ins. Code Ann. §§ 542.051-.061. After receiving notice of a claim, within 15 days, an insurer is required to: (1) acknowledge receipt of a claim; (2) begin an investigation; and (3) request documentation from the claimant that is needed for its investigation. Tex. Ins. Code Ann. § 542.055(a). Further, the insurer is to notify the claimant in writing of the acceptance or rejection of the claim within 15 days after it receives the required documentation for proof of loss. Id. § 542.056(a). If the insurer notifies the claimant it requires more time, the acceptance or rejection must be made within 45 days of the notice. Id. § 542.056(d). For example, if the proof of loss is not justifiable, you should send a response rejecting it and explain what additional information is needed. Section 542.057 provides that a claim must be paid within 5 business days after notice that the claim, or a part of the claim, will be paid. Tex. Ins. Code Ann. § 542.057(a). An insurer’s failure to comply with the statutorily prescribed time frames will subject the insurer to 18% per annum damages on the unpaid amount of the claim and attorneys’ fees and costs. See Tex. Ins. Code. Ann. §§ 542.058(a), 542.060.
If the claim is simply not covered, then no damages are due under the Act. However, even if there is a reasonable basis to deny the claim and a court determines that the claim should have been paid, then damages will be due. Additionally, if part of the submission is undisputed or there is enough information to pay part of the claim, an insurer should explain its reasons and pay what is not disputed. Bottom line, it is best to put everything in writing and carefully watch the statutory deadlines. An easy way to remember the rule is to think of it as the 15-15-5 Rule. We have also provided a chart below that will guide you through the storms ahead!