All insurers authorized to do business in Texas, including surplus lines insurers, must comply with the law relating to prompt payment of claims, with the exception of title insurance, fidelity, surety, guaranty bonds, inland marine, workers' compensation and mortgage guaranty insurance.
First Party Claim Notice
Once the notice of claim is received by the carrier, the carrier must acknowledge the claim within 15 business days (excluding Saturday, Sunday and state holidays) or within 30 business days for a surplus lines insurer.
Within this time the insurer must also begin investigation and request all relevant information it reasonably expects will be required from the claimant.
There is no specified time for the claimant to respond to the insurer, but it is up to the insured to provide information in a timely manner.
Acceptance or Rejection of Claims
After the insurer receives all information from the claimant, insurers have 15 business days or 30 if they have a reasonable basis to believe arson caused the loss, to accept or reject claims or to explain to the claimant why more time is needed.
Once the insurer notifies the claimant more time is needed, the insurer has an additional 45 days from the notice to accept or reject the claim.
In 2007, the Texas Supreme Court ruled that this law applies to a liability insurer's duty to pay defense expenses on behalf of an insured (Lamar Homes vs. Mid-Continent).
Payment of Claims
When a claim has been accepted by the insurer for payment, the insurer must pay the claim within 5 business days after the notice of acceptance was made (20 days for surplus lines insurers).
If the payment is conditional on the performance or act by the claimant, the insurer must pay the claim within 5 business days, or 20 days for surplus lines after the act has been completed.
Delay of Payment
If an insurer delays payment of a claim following the receipt of all items requested for more than 60 days, the insurer can be liable for the amount of the claim, plus damages of 18% per annum, along with attorney fees, as may be determined.
In the event of a weather-related catastrophe, designated by the Texas Department of Insurance, all claim handling deadlines are extended an additional 15 days. A company may petition TDI for a catastrophe declaration and TDI will grant it when the estimated aggregate loss for all companies for a single occurrence is at least $5 million and there are at least 3,000 claims.
Third Party Liability Settlement
In the event of a liability claim against an insured, the company must notify the named insured in writing within 10 days after an offer to compromise or settle is made.
The insurer must also notify the insured in writing within 30 days after any actual settlement is made.
See also: "Providing Claims Information to Insureds