The Texas Prompt Payment of Claims Act is at issue in this 2022, opinion from the 14th Court of Appeals. The opinion is styled, Texas Fair Plan Association v. Adil Ahmed.
The facts and history of the case can be gleamed from reading the opinion.
This Courts’ stating of the law regarding the Texas Prompt Pay statute is what is relevant to this posting.
The Prompt Payment Act “imposes several key requirements on insurers”:
(1) the insurer must acknowledge receipt of the claim, commence any
investigation of the claim, and request any items, statements, or forms
required from the claimant within fifteen days of its receipt of notice
of the claim; (2) the insurer must notify the claimant of acceptance or
rejection of the claim no later than fifteen business days after the
insurer receives all items, statements, and forms required to secure
final proof of loss; (3) if the insurer notifies the insured that it will pay
all or part of the claim, it must pay it by the fifth business day after the
date of notice of acceptance of the claim; (4) if the insurer delays
payment of a claim for more than the applicable statutory period or
sixty days, the insurer shall pay [Prompt Payment Act] damages; and
(5) an insurer that is liable for a claim under an insurance policy and
violates a [Prompt Payment Act] provision is liable for [Prompt
Payment Act] damages in the form of 18% interest on the amount of
the claim per year, with attorney’s fees. See [Tex. Ins. Code Ann.]
§§ 542.055(a)(1)–(3), .056(a), .057(a), .058(a), 060(a). Thus, the
[Prompt Payment Act] has three main components—non–payment
requirements and deadlines, deadlines for paying claims, and
enforcement.
In other words, pursuant to Section 542.058(a), an insurer may be liable under the Prompt Payment Act if it does not pay a valid claim within 60 days after receiving all items and information reasonably requested and necessary to make a determination regarding the claim. In such cases, as stated in Section 542.060(a), the insurer is required to pay “the amount of the claim, interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney’s fees.” The question in this case is whether an insurer may avoid liability under the Act by voluntarily paying both the appraisal amount and the statutory interest that would be due for a late payment under the Act.
A reading of the case tells how the Court applied the Prompt Pay statute to the facts of the case.