The Deceptive Trade Practices Act And The Insurance Statutes

Consumers in Grand Prairie, Fort Worth, Arlington, Dallas, Mansfield, Burleson, Crowley, Benbrook, Lake Worth, Rendon, Keene, Burleson, and other places in Texas have the protection of the Texas Insurance Code and the Texas Deceptive Trade Practices Act (DTPA) when it comes to having rights against businesses and insurance companies that treat people in an unjust manner.
Regarding these two areas of law, Texas court cases and the statutes themselves tell us that the Insurance Code provisions are to be liberally construed and applied to promote its underlying purposes to define and prohibit unfair and deceptive insurance practices. This is specifically stated in the Insurance Code, Section 541.008, where it says, “This chapter shall be liberally construed and applied to promote the underlying purposes as provided by Section 541.001.” This is also made clear in the 1988, Texas Supreme Court case, Vail v. Texas Farm Bureau Mutual Insurance Company.
The Supreme Court has stated that the similar liberal construction mandate in the DTPA requires that the statute be given “its most comprehensive application possible without doing any violence to its terms.” The courts apply this same reasoning to insurance cases, which is made clear in other court cases.
Both the Insurance Code and the DTPA provide that the statutory remedies are cumulative of other remedies. This is told to us in the Vail case above which looks at the the Texas Business & Commerce Code, Section 17.43, which tells us in part, “The provisions of this subchapter are not exclusive. The remedies provided in this subchapter are in addition to any other procedures or remedies provided for in any other law; ….”
As a limitation on potential recoveries, Section 541.453, tells us, “A person may not recover damages and penalties for the same act or practice under both this chapter and another law.”
So what are the limits to the punishment a person can recover? Here is one for consideration:
With regards to Personal Injury Protection (PIP) benefits, Section 1952.157 (b) tells us the following when someone entitled to PIP benefits has to sue to recover the benefits: “If the insurer is required to pay benefits described by …, the person entitled to the benefits is entitled to recover reasonable attorney’s fees, a penalty of 12 percent, and interest at the legal rate from the date those amounts became overdue.”
Okay, now look at the Prompt Payment of Claims Act, Section 542.061. This section speaks to when an insurance company does not pay a claim in a timely manner. 542.061, says, “The remedies provided by this subchapter are in addition to any other remedy or procedure provided by law or at common law.”
So, what happens if a claim for PIP benefits is not paid in a timely manner? The Insurance Code section that deals specifically with PIP says that the claimant is entitled to the amount owed, plus a 12 percent penalty, plus interest at the legal rate (assume it is 5%), plus attorney fees.
Next, the Insurance Code section dealing with prompt payments of claims says a claim that is paid late is entitled to the amount owed, plus interest on the amount owed at 18 percent a year, plus attorney fees.
Then, the Insurance Code section dealing with prompt payments of claims has the Section 542.061, cited above.
Result: On a $2500 PIP claim that is paid a year late, the insurance company would owe the $2500, plus the 12 percent penalty of $300, plus interest at the legal rate of 5 percent which is $125, plus the 18 percent late payment penalty which is $450, for a total of $875 in penalties on top of the $2500. Add to that, the attorney’s fees which could be thousands of dollars.
$2500 is a relatively small number to be working with but the total penalty amount is about 35 percent, not counting attorney fees. Try earning that at the bank in a C.D. or some other investment.
As should be obvious, consultation with an experienced Insurance Law Attorney is worthwhile and should be considered early when a claim gets denied by an insurance company.