In 2003, the Texas Legislature enacted the Texas Prompt Payment of Claims Act (“TPPCA”) to facilitate the prompt investigation and payment of Texas insurance claims. Codified in Section 542 of the Texas Insurance Code, the TPPCA imposes an affirmative duty on insurers to promptly pay claims as soon as it becomes “reasonably clear” they are obligated to do so under the terms of an insurance policy.
What Is the Purpose of TPPCA?
While the TPPCA’s primary purpose is to encourage prompt payment of insurance claims, it also contains specific requirements and deadlines for responding to, investigating, and evaluating claims. Both the payment deadlines and the non-payment deadlines and requirements are enforceable under the TPPCA, and damages can be imposed for any such violation under sections 542.058 and 542.060.
What’s Needed to Prevail on TPPCA Damage Claims?
Texas courts have continuously held that to prevail under a claim for TPPCA damages under section 542.060, the insured must establish: (1) the insurer’s liability under the insurance policy, and (2) that the insurer failed to comply with one or more sections of the TPPCA in processing or paying the claim.
Insurer Deadlines Under Prompt Payment Claims Act
The TPPCA outlines requirements and deadlines insurance carriers must meet or else they will have to pay penalties to their insured. In short, the TPPCA requires insurers to accept or reject claims within 15 business days of receiving the insured’s written notice of claim; one exception being if the claim is related to surplus line coverage, the carrier has 30 days to accept or reject it.
If an insurer rejects a claim, it must state the reasons for rejection. If an insurer accepts a claim, it must pay the claim within five business days. If the insurer fails to pay the claim within 60 days, the insured is entitled to payment of the claim, statutory damages of up to 18 percent interest per year, and attorney’s fees.
Our Texas insurance lawyers know the law and focus our practice on insurance recovery for companies residing in and doing business in our great state. Contact us today for a free conversation about your commercial property insurance claim.