Frances Badayos | author
ICHQ | Site Author
When you have an insurance claim, you’re counting on the insurance company to do the right thing. What laws or rules are in place to hold the insurance company accountable? Texas Insurance Code Chapter 542 protects consumers. It requires efficient processing of claims and creates penalties for non-compliance.
The bad faith insurance lawyers serving Texas at Insurance Claim HQ explain Texas Insurance Code Chapter 542. Contact us with questions or if you have a potential bad faith claim.
About Texas Insurance Code Chapter 542
Texas Insurance Code Chapter 542 is a state law that applies to insurance companies. It requires insurers to process claims fairly and efficiently. It provides for Department of Insurance investigations and penalties when insurance companies don’t follow the law.
An insurance policy is a contract. The insured pays a premium. The insurance company pays benefits if there is a covered loss.
An insured shouldn’t have to bring a lawsuit or go through a harrowing process to get their benefits. Texas Insurance Code Chapter 542 is meant to make sure that the insurance companies fairly pay claims.
What Is Covered in Texas Insurance Code Chapter 542?
Texas Insurance Code Chapter 542 covers several topics:
What the insurance company may not do
Insurance companies may not:
- Misrepresent coverage (§ 542.003).
- Fail to acknowledge communications (§ 542.003).
- Refuse to settle when liability is clear (§ 542.003).
- Require a claimant to produce federal income tax returns, unless an exception applies (§ 542.004).
- Withhold information when correctly requested, including by law enforcement. (§ 542.131, (§ 542.101).
What the insurance company must do:
Insurance companies must:
- Settle claims promptly (§ 542.051).
- Acknowledge a claim and start investigating within 15 days. (§ 542.055).
- Notify the claimant of acceptance or rejection within 15 days of having all documentation. Suspected arson is exempt. The insurance company may elect an extension. (§ 542.056).
- Pay an approved claim within five business days. (§ 542.057).
- Courts may extend timelines for good cause, with reasonable notice.
Investigations and penalties:
- A payment delay of 60+ days subjects the insurance company to penalties by law (90 days for life insurance). (§ 542.058).
- Damages for non-compliance are 18% per year interest on the claim, plus attorney fees. (§ 542.060).
- Insurance companies must keep records for investigations. (§ 542.005).
- The Department may require enhanced periodic reporting. (§ 542.006).
- Violation of § 542.004 may be a deceptive trade practice, with remedies determined by law.
- The Department must establish a complaint system. They may investigate if complaints indicate non-compliance. (§ 542.008).
- Certificate revocation, suspension, business limitations or control may be ordered to obtain compliance. (§ 542.010).
The law explains in detail what insurance companies must do to process claims in a timely and fair manner. It creates remedies for insured parties, and authority for Department investigations, hearings and penalties. It allows for additional rulemaking in water damage claims.
Talk to a Lawyer
If you need to begin an insurance claim for property damage in Texas, or if you need help appealing an insurance claim, we invite you to contact us at Insurance Claim HQ for your free consultation with a lawyer.