How the Texas Prompt Payment Act Affects Home Insurance Claims

Posted on September 25, 2023


Frances Badayos | author

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ICHQ | Site Author

If you are a Texas property owner whose property has been damaged, you might wonder when you will receive your insurance payout. You may be unaware that the Texas Prompt Payment Act may give you the right to be paid within a specific timetable.

But do you have other rights from that law? What can you do if the insurance company doesn’t pay in time? From the bad faith insurance lawyers at Insurance Claim HQ, we provide some information to answer these questions.

What is the Texas Prompt Payment Act?

The Texas Prompt Payment Act was passed in 2003 and came into effect in April 2005. Its requirements cover a variety of insurance policies, including life, property, casualty, accident, and health insurance.

The act prohibits misrepresentation of facts regarding the insurance policies, requires prompt acknowledgment of insurance claims, as well as their rejection or acceptance, and prompt payment of claims.

In addition, the Act requires reasonable standards for prompt evaluation of claims, requires an effort in good faith to find a prompt, equitable and just settlement when liability is clear, and prohibits requiring customers to sue to obtain damages from the company.

What is Timeline Under the Texas Prompt Payment Act?

Upon receipt of the claim, the insurer has 15 days under most circumstances to acknowledge and begin investigating the claim, and to request any documents needed. Should a disaster be declared, this adds fifteen days to the timeline.

Once all necessary paperwork has been received, the insurance company has fifteen days to accept or reject the claim. If more information is needed, it must be requested in writing. Any rejections must be given in writing, with reasons included. If irrelevant information is requested, you may need legal assistance, and our lawyers can help advise you.

Once the payment is accepted, the company has five business days to provide payment. If additional materials or actions are required by the company, the company has five business days from when the actions are completed to provide payment.

If additional time is needed to make a decision regarding acceptance or rejection, the company must notify you in writing, accompanied by the reasons why they cannot do so at the present time.

What If an Insurance Company Misses the Deadline to Pay?

If the insurance providers fail to keep the deadline, the statute provides for several additional penalties.

Should the policyholder file a lawsuit against the insurance company, any reasonable and necessary attorney’s fees must be paid. In addition, an interest on the amount due must be paid to the plaintiff at the rate of 18% per year.

How Have Insurance Companies Tried to Evade This Requirement?

In several cases, insurance companies have attempted to evade the requirements of this Act by forcing the policyholder to sue. In addition, some insurance companies would appraise the property during the lawsuit, and then pay the amount of the appraisal, claiming that the amount was a payment in good faith.

However, courts have ruled that an appraisal payment does not prohibit a policyholder from filing a claim under the Texas Prompt Payment Act.

Contact a Qualified Bad Faith Insurance Lawyer Serving Texas

If your Texas home or property was damaged, you may wonder what your options are if the insurance company fails to pay you on time. The skilled insurance bad faith lawyers of Insurance Claim HQ are ready and able to provide legal assistance so that what you’re owed may arrive as soon as possible. Call or contact us today.