Tarrant County Insurance lawyers should be able to give you a response to the above question.
The first place to look for guidance is the Texas Insurance Code, Section 542.057(a). This section requires payment by the fifth business day after the claim is accepted by all insurance companies except surplus lines insurance companies. Surplus lines insurance companies have 20 business days to make payment.
The 1998, case Daugherty v. American Motorists Insurance Company is from the Houston Court of Appeals [1st Dist.] and has held that oral notice that the insurance company intends to pay the claim is not sufficient.
That same Court also held that an insurance company can withdraw its “notice of acceptance” and prevent the “five day payment rule” from triggering.
In the Daugherty case, the insured’s car was stolen. Daugherty claimed a loss of $68,000 as the anticipated cost of a replacement vehicle. The insurance company, American Motorists, responded by offering to pay about $62,000. The adjuster communicated this offer to the insured’s bookkeeper. Before the insurance company made the payment, and before the insured learned about the offer, the car was recovered. American Motorists then revoked its offer and instead offered to pay only $1,900, which was the estimated cost of repair. Daugherty bought the replacement vehicle, which ended up costing about as much as American Motorists had originally offered. Daugherty argued that American Motorists notified him it would pay the claim when it made the original offer and that American Motorists therefore had to pay within five days after the notification. The Court rejected Daugherty’s argument, and agreed that American Motorists communication was merely an offer, one that was rescinded before Daugherty accepted. In it’s opinion the Court stated, “We find nothing in the Insurance Code or the policy at issue which prevents the insurer from withdrawing its notice of payment if the facts and circumstances known to the insurer change significantly after the notice is given but before the claim is paid.”
Here is some additional food for thought – The wording of Section 542.057 does provide an additional argument to assist with the interpretation of the statute. Arguably, because the Texas Legislature used the term “pay,” a distinction can be made between “claim” and “coverage.” In other words, under this section the duty to pay is conditioned upon the time when the “insurer notifies the claimant that the insurer will pay a claim.” Because payment is not conditioned upon acceptance of the claim, it may be permissible to argue that coverage must be determined within 15 business days, but a claim does not need to be adjudicated until final proof of loss has been “secured.”
It is important to keep in mind the penalties an insurance company facts when it violates this statutes. The penalties are found in Section 542.060 and can be substantial.
Plus, even though the results are disappointing, contacting and filing a complaint with the Texas Department of Insurance is suggested but only with the assistance of an experienced Insurance Law Attorney.
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