The next question in this series related to violations of the Texas Prompt Payment of Claims Act is, what are some of the defenses the insurance company has for not making prompt payment on a claim.
The statute contains several provisions by which insurance companies may extend the deadlines. While, technically, these are not “defenses,” they may help insurance companies avoid liability. The following events or conditions can extend the deadlines:
a. Texas Insurance Code, Section 542.055(a) allows eligible surplus lines insurers extra time for acknowledging claims, commencing investigation, and requests for information.
b. Section 542.057(c) extends the deadline for surplus lines insurers for paying a claim from five business days to 20 business days after the insurer notifies the claimant that the claim will be paid, or after the claimant performs any condition imposed on payment of the claim.
c. Section 542.056(1) says that waiting for information reasonably requested from the claimant effectively extends any additional deadlines until the insurer receives that information. This is usually the biggest holdup in claims being paid.
d. Sections 542.055(b) & 542.056(a) says that making additional drequests for information likewise extends the deadlines until that information is received, assuming those requests were timely.
e. Section 542.056(b) allows that if the insurer reasonably suspects arson, that extends the deadline for accepting or rejecting the claim from 15 business days to 30 days after the insurer receives required information. Because of the use of “days” and “business days” this gives the insurer one more week in arson cases.
f. Section 542.056(d) says if the insurer cannot accept or deny the claim by the initial deadline, the insurer may notify the insured, and explain the reasons why the insurer needs additional time, and then the insurer has 45 more days to accept or reject the claim.
g. Section 542.058(a) says insurers may have more than 60 days to pay a claim after they receive all requested information, if some other statute provides for a longer period.
h. Sections 542.057(b), (c) says if the insurer agrees to pay the claim, the deadline for payment may be extended if the insurer conditions payment on the performance of some act by the claimant. In that case, the payment deadline is extended until five business days after the act is performed, or 20 business days for surplus lines insurer.
i. Section 542.059(a) says a guarantee association may request an extension from the court.
j. Section 542.059(b) says that in the event of a weather-related catastrophe or major natural disaster, as defined by the Texas Department of Insurance, the claim handling deadlines are extended for an additional 15 days.