Violating Prompt Pay Statutes

Arlington insurance lawyers should read the 1999, Tyler Court of Appeals case styled, Dunn v. Southern Farm Bureau. The opinion discusses an insurance company’e responsibilities under the Texas Prompt Payment of Claims statutes.
Dunn was insured under a standard form automobile liability policy issued by Farm Bureau which contained uninsured/underinsured motorist (“UM”) coverage. She was injured when her vehicle was struck from the rear by an underinsured motorist. In her suit Dunn sought to recover not only UM benefits, but additional damages and attorney fees as the result of Farm Bureau’s alleged violation of the prompt payment requirements of the Texas Insurance Code. After a bench trial, the trial court rendered judgment in favor of Dunn in the amount of $220,000.00 for personal injury damages and $118,251.22 for prejudgment interest. However, the trial court did not award Dunn the requested 18 percent additional damages and attorney fees provided for in the Prompt Pay Statute. In her sole issue presented, Dunn asserts that the trial court erred by refusing to award the 18 percent penalty, attorney’s fees, and prejudgment interest.
At the heart of this case is the interpretation and application of the prompt payment provisions. The relevant provisions of the statute state:
Section 542.056 (a) … an insurer shall notify a claimant in writing of the acceptance or rejection of the claim not later than the 15th business day after the date the insurer receives all items, statements, and forms required by the insurer, in order to secure final proof of loss.
Section 542.060(a) … If an insurer that is liable for a claim under an insurance policy is not in compliance with this subchapter, the insurer is liable to pay the holder of the policy … in addition to 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 attorney’s fees.
Section 542.054 This subchapter shall be liberally construed to promote the prompt payment of insurance claims.
Following the bench trial, the trial court found that Farm Bureau verbally acknowledged receipt of the claim and requested more information within fifteen days of receiving the claim.  However, because the acknowledgment was verbal, Farm Bureau was required to make a record of the date, the means, and the content of the acknowledgment.  The trial court found that Farm Bureau improperly documented the verbal acknowledgment by failing to record the date that it was made.  Additionally, Farm Bureau’s adjuster admitted at trial that he did not record the means of the acknowledgment as required by the statute. The trial court further found that Farm Bureau had received all the requested information between December 13 and December 20, 1994, and that Farm Bureau delayed payment of the claim for more than sixty days after its receipt of the necessary information. This delay was essentially undisputed in the record and admitted by Farm Bureau’s adjuster.
Thus the court ruled that Dunn was entitled to the 18% penalty.