How Long Can An Insurance Company Take To Pay A Claim?

People in Weatherford, Mineral Wells, Palo Pinto, Aledo, Azle, Hudson Oaks, Willow Park, Brock, Cool, Millsap, Peaster, and other places in Parker and Palo Pinto Counties may wonder how long an insurance company can take to pay a claim.
The answer is found in the Texas Insurance Code, Sections 542.051 thru 542.061. These sections are also known as the Prompt Payment of Claims law.
A careful reading of these sections will see that the time frame for paying an insurance claim depends on many factors. Some of those factors are (1) what type of insurance company is involved, (2) what type of claim is being made, (3) what is involved in the investigation, (4) how much has the claimant cooperated in the investigation of the claim, and variations of the preceding.
A short answer to the above question is found in Section 542.057. This section says that the claim should be paid “not later than the fifth business day after the date notice is made.” (notice of the insurance companies decision to pay the claim). Regarding this, the Houston Court of Appeals, Fourteenth District, issued an opinion in 1998, that discusses this in an unusual context. The style of the case is, John A. Daugherty, Jr. v. American Motorists Insurance Company.
Here is some background.
Daugherty had his 1994 BMW stolen on February 25, 1994. He submitted a claim for $68,895.42. After adjusting the claim, an adjuster called Daugherty’s bookkeeper on March 16, 1994, and made an offer of $62,431.14. The following day, police recovered the BMW. At about 2PM on March 17, 1994, the adjuster called the bookkeeper and rescinded the offer. Daugherty did not learn of the offer until after it had been withdrawn.
Based on the damages to the recovered BMW, American tendered a check to Daugherty for $1,901.50 on April 7, 1994.
Daugherty refused the payment and filed a lawsuit against American claiming that American violated the Prompt Payment of Claims Act by not paying the $62,431.14 within five business days after making the offer.Daugherty’s contention at trial was that American effectively notified him it would pay his claim when, on March 16, 1994, it informed his bookkeeper it had determined the value of the stolen BMW. Daugherty argued that American was bound by the terms of the contract, which tracked the language of the statute, to pay him within five days after notification. American Motorists, on the other hand, contended that the communication of March 16 was merely an “offer” to pay $62,431.14. Because the offer was rescinded before it could be accepted, American Motorists claimed it was not obligated to pay.
In discussing this case the court noted there was a discrepancy of almost $6,000.00 between Daugherty’s and American Motorists’ estimation of the loss, the call of March 16, was an offer, not a notification that American Motorists was going to pay the claim. The court stated, “Were we to hold that an oral offer constitutes notice of payment, negotiations between an insurer and its insured would be severely hampered.”
The final paragraph of the opinion says:
“Finally, even if we were to find that the communication of March 16, 1994, was a ‘notice of payment of claim,’ such notice was grounded upon the fact that Daugherty’s car had not been recovered. 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, the change of circumstances, i.e., the recovery of Daugherty’s automobile, favored the insurance company because the loss was not as great as had been previously calculated. However, it is just as conceivable that changing circumstances may favor the insured, i.e., the damage to the property is found to be more severe than previously believed. The purpose of the statutory deadline contained in … is to guarantee the prompt payment of claims made pursuant to policies of insurance; not to create a statutory windfall for one party or the other. … Here, there is no evidence that American Motorists unreasonably sought to delay or postpone its obligation to pay Daugherty’s claim.”