Articles Posted in Delay in Paying Claim

Tarrant County insurance attorneys should be familiar with the Texas Prompt Payment of Claims Act. Here is a little information taken from a State Bar of Texas publication that attorneys and their clients should know. The article was discussing the legality of ordering an insurance company to pay restitution for it’s failure to promptly pay claims.

In 1999, the Texas State Legislature enacted House Bill 610, commonly known as the Prompt Pay Act. It’s general purpose was to require payors under the act, such as insurance companies including health insurance companies, to pay or deny the bills of medical providers within forty-five days after receipt of a bill, provided the claim was “clean,” as defined by the Act. If an insurance company violated this Act, they were subject to the various penalties provided for in the legislation itself. In addition, certain violations might subject an insurance company to administrative penalties under former article 1.10E of the Insurance Code, which is currently Texas Insurance Code, Section 843.342(k). However, these penalties are not the exclusive penalties for violating the Prompt Pay Act. The Act contains a “dragnet” provision clearly reading, “in addition to any other penalty or remedy authorized by this code or another insurance law of this state.”

The language in the dragnet provision indicates the Texas Insurance Commissioner can resort to the power of restitution for violations of the Prompt Pay Act, since restitution is an “other remedy” authorized by the Insurance Code in Section 82.053. Senate Bill 403 allowed the Insurance Commissioner to order restitution to “each entity operating in the state that is harmed by a violation of, or failure to comply with, this code or a rule of the commissioner. Since a medical provider would be an “entity operating in this state,” the Insurance Commissioner could order an HMO, for example, to pay “restitution” to any medical provider that was harmed by a violation of the Act.

Fort Worth insurance attorneys need to have an understanding of how the Texas Prompt Payment of Claims Act works. Here is a case that explains how it works in relation to attorney fees. It is a 2013, United States 5th Circuit Court of Appeals case styled, The City of College Station, Texas v. Star Insurance Company. Here is some of the relevant information.

Star Insurance Company (“SIC”) refused to defend or indemnify its insured, the City of College Station (“the City”), in a lawsuit brought by Weingarten Realty Investors (“WRI”), a real-estate investment trust not party to this appeal. The City settled the underlying litigation with WRI and sued SIC to recover defense costs, indemnification, and statutory penalty interest. Applying Texas law, the district court concluded that SIC had no duty to defend or indemnify the City in the litigation with WRI and, consequently, no penalty liability for late payment. This appeals court reversed the trial court and remanded for further proceedings consistent with their ruling.

The actual facts of the case are not important. What is important is that the court ruled in favor of the insurance company and that on appeal this appeals court ruled that not only should the insurance company paid for a defense in the case, but their failure to do so results in the insurance company having to pay for violations of the Prompt Payment of Claims Act on those attorney fees.

Palo Pinto attorneys who handle insurance situations will need to be able to distinguish between situations where an insurance company can be held liable for not paying a claim and where they cannot be held liable for paying a claim.

The United States District Court for the Southern District of Texas issued a ruling at the end of July that hits on this topic. The style of the case is, Sebring Apartments, et al., v. Lexington Insurance Companym et al.,

This was a summary judgment case decided in favor of Lexington. Here are points made by the court when it rendered its opinion.

A Grand Prairie insurance attorney needs to be able to distinguish between legitimate requests for information by an insurance company and requests that are not so necessary for their investigation of a claim.

The Prompt Payment of Claims Act allows the insurance company to request information it reasonably believes will be required. Deadlines are then postponed while they wait for this information from the claimant. An unreasonable request by an insurance company will not postpone any deadlines and thus lead the insurance company to violate the statute regarding deadlines.

The Corpus Christi Court of Appeals issued an opinion in 2000, that provides so pretty good guidance on this issue. The style of the case is, Colonial County Mutual Insurance Company v. Valdez. Here is some relevant information.

Dallas insurance lawyers are probably already aware of some of the penalties and remedies available when an insurance company violates the Texas Prompt Payment of Claims Act.

Section 542.061, should be known and read by all insurance attorneys. It says:

“The remedies provided by this subchapter are in addition to any other remedy or provision provided by law or at common law.”

Fort Worth insurance lawyers would know the penalties available when an insurance company does not promptly pay a claim.

The Prompt Payment of Claims Act provides for 18% per annum damages, in addtion to the amount of the claim, plus attorney fees, plus this is on top of other types of remedies that may be available.

Section 542.060 says: