Texas law outlines time limits for most insurance companies to complete their processing and pay out their claims. In an ideal situation, a company will notify a claimant of its acceptance or rejection of a claim within 15 business days of receiving all the necessary supporting documents and information for its processing. If the claim is accepted, they must pay it within five days after that.
However, these laws do not apply to every company or claim. And even where they do, insurance companies have ways of stretching the law to allow themselves more time. This can also be a way of pressuring claimants to accept a quick settlement that may not be what they need.
Prompt Settlement of Claims
Most of the insurance policies that people typically have to deal with are covered under state laws mandating prompt settlement of claims.
- life insurance
- auto insurance
- renters’ insurance
- homeowners’ insurance
- certain types of health insurance
See Tex. Ins. Code § 542.052.
These time limit laws do not apply to every kind of insurance company or policy. There are specific exceptions for, among others:
- HMO health insurance
- workers’ compensation
- title insurance
- marine insurance
- mortgage insurance
How the Law Works
When an insurer receives a claim, they typically have 15 days to acknowledge its receipt, begin an investigation, and request any supporting documents that they “reasonably believe, at that time, will be required.” Once the company receives “all items, statements, and forms” that they require, they have another 15 days to conclude the investigation. The law specifies that these are business days, which excludes Saturdays, Sundays, and holidays.
By that time, they must send a notice of acceptance or rejection of the claim. If they accept the claim or part of the claim, they must pay it within five days of the notice or within five days of any action they require from the claimant for the settlement.
However, there are exceptions to the law, as well as loopholes that insurers can use to delay a settlement.
First-Party Claimants Only
The prompt settlement law only applies to first-party claimants—that is, policyholders and beneficiaries of the policy. It does not apply to third-party claimants, who are entitled to recover under the policy but are not named parties to it.
People filing claims against other drivers in auto accidents are third-party claimants under the insurance policies of those drivers. So, unfortunately, if you are seeking a settlement from another driver’s insurance company, these particular deadlines will not apply.
Surplus Lines Insurers
These are insurers who write policies for unusual risks, such as coverage to protect particularly valuable jewelry collections. They have 30 business days to acknowledge the receipt of a claim, and they may take 20 days to pay a claim once they notify a claimant of its acceptance.
Suspicion of Arson
An insurer that suspects “on a reasonable basis” that the claim involved arson may take 30 days rather than 15 days to complete the investigation once they have received all the required information.
Requesting Further Documents
The insurer has the right to “make additional requests for information if during the investigation of the claim the additional requests are necessary.” Tex. Ins. Code § 542.055(b). If it is used unscrupulously, this provision can allow the company to stall.
In the event of a natural disaster or catastrophic weather “as defined by the [insurance] commissioner,” the companies will receive a 15-day extension on these deadlines across the board.
Taking an Extension
In any case, the insurance company is entitled to a 45-day extension on its investigation period, which it may take simply by notifying the claimant during the 15 days after it receives all the information it needs.
Consequences for the Insurance Company
Under Texas law, a company must pay statutory damages if they withhold payment past a certain period, usually 60 days after they have received all necessary information.
They will be liable not only for the claim but for 18% annual interest on it, together with attorneys’ fees. If the claim was for property damage from a natural disaster, they may also owe additional interest to the claimant.
Hardly anyone wants to sue or even threaten an insurance company; all they want is what they are owed. But whether or not your claim is covered by the Texas prompt payment statutes, having an attorney on your side can help you maximize your recovery and avoid stalling from the insurance company.
As experienced Texas personal injury attorneys, we deal with insurance companies every day, and we know their tactics. If the insurance company is acting in bad faith in dealing with you, it may be in further violation of Texas insurance laws on unfair trade practices. Our firm can protect you from unjust pressure to settle for less and fight for the speedy resolution of your case.
We would be glad to talk to you about any situation you are facing with a claim, particularly those involving:
- auto accidents
- slip and fall accidents
- catastrophic injury
- accidents on construction sites or oil rigs
Call the “Crash Angels” at Pelaez Law Firm, Crash Angels (210-801-9314) to make an appointment with us in our San Antonio offices. Your first consultation is free.