CHAPTER TWENTY-ONE--GENERAL PROVISIONS

Part 7. Articles 21.51--21.79G

Art. 21.55. Prompt Payment of Claims.

Sec. 1. Definitions.

In this article:

(1) "Claimant" means a person making a claim.

(2) "Business day" means a day other than a Saturday, Sunday, or holiday recognized by this state.

(3) "Claim" means a first party claim made by an insured or a policyholder under an insurance policy or contract or by a beneficiary named in the policy or contract that must be paid by the insurer directly to the insured or beneficiary.

(4) "Insurer" means any insurer authorized to do business as an insurance company or to provide insurance in this state, including:

(A) a domestic or foreign, stock and mutual, life, health, or accident insurance company;

(B) a domestic or foreign, stock or mutual, fire and casualty insurance company;

(C) a Mexican casualty company;

(D) a domestic or foreign Lloyd's plan insurer;

(E) a domestic or foreign reciprocal or insurance exchange;

(F) a domestic or foreign fraternal benefit society;

(G) a stipulated premium insurance company;

(H) a nonprofit legal service corporation;

(I) a statewide mutual assessment company;

(J) a local mutual aid association;

(K) a local mutual burial association;

(L) an association exempt under Article 14.17 of this code;

(M) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 20 of this code;

(N) a county mutual insurance company;

(O) a farm mutual insurance company;

(P) a risk retention group;

(Q) a purchase group;

(R) a surplus lines carrier; and

(S) a guaranty association created and operating under Article 21.28-C or 21.28-D of this code.

(5) "Notice of claim" means any notification in writing to an insurer, by a claimant, that reasonably apprises the insurer of the facts relating to the claim.

Sec. 2. Notice of claim.

(a) Except as provided by Subsection (d) of this section, an insurer shall, not later than the 15th day after receipt of notice of a claim or the 30th business day if the insurer is an eligible surplus lines insurer:

(1) acknowledge receipt of the claim;

(2) commence any investigation of the claim; and

(3) request from the claimant all items, statements, and forms that the insurer reasonably believes, at that time, will be required from the claimant. Additional requests may be made if during the investigation of the claim such additional requests are necessary.

(b) If the acknowledgement of the claim is not made in writing, the insurer shall make a record of the date, means, and content of the acknowledgement.

Sec. 3. Acceptance or rejection of claims.

(a) Except as provided by Subsections (b) and (d) of this section, 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.

(b) If the insurer has a reasonable basis to believe that the loss results from arson, the insurer shall notify the claimant in writing of the acceptance or rejection of the claim not later than the 30th day after the date the insurer receives all items, statements, and forms required by the insurer.

(c) If the insurer rejects the claim, the notice required by Subsections (a) and (b) of this section must state the reasons for the rejection.

(d) If the insurer is unable to accept or reject the claim within the period specified by Subsection (a) or (b) of this section, the insurer shall notify the claimant, not later than the date specified under Subsection (a) or (b), as applicable. The notice provided under this subsection must give the reasons the insurer needs additional time.

(e) Not later than the 45th day after the date an insurer notifies a claimant under Subsection (d) of this section, the insurer shall accept or reject the claim.

(f) Except as otherwise provided, if an insurer delays payment of a claim following its receipt of all items, statements, and forms reasonably requested and required, as provided under Section 2 of this article, for a period exceeding the period specified in other applicable statutes or, in the absence of any other specified period, for more than 60 days, the insurer shall pay damages and other items as provided for in Section 6 of this article.

(g) If it is determined as a result of arbitration or litigation that a claim received by an insurer is invalid and therefore should not be paid by the insurer, the requirements of Subsection (f) of this section shall not apply in such case.

Sec. 4. Payment of claims.

If an insurer notifies a claimant that the insurer will pay a claim or part of a claim under Section 3 of this article, the insurer shall pay the claim not later than the fifth business day after the notice has been made. If payment of the claim or part of the claim is conditioned on the performance of an act by the claimant, the insurer shall pay the claim not later than the fifth business day after the date the act is performed. Surplus lines insurers shall pay the claim not later than the twentieth business day after the notice or date the act is performed.

Sec. 5. Exemption.

(a) This article does not apply to:

(1) workers' compensation insurance;

(2) mortgage guaranty insurance;

(3) title insurance;

(4) fidelity, surety, or guaranty bonds;

(5) marine insurance other than inland marine insurance governed by Article 5.53 of this code; or

(6) a guaranty association created and operating under Article 9.48 of this code.

(b) A guaranty association created and operating under Article 21.28-C or 21.28-D of this code shall not be subject to the damage provisions contained in Section 6 of this article. A guaranty association may receive an extension of the time periods under this article from a court of competent jurisdiction upon good cause shown and after reasonable notice to policyholders.

(c) This article does not apply to Chapter 20A of this code except as provided in Section 9 of that chapter.

(d) In the event of a weather-related catastrophe or major natural disaster, as defined by the State Board of Insurance, the claim-handling deadlines imposed under this article are extended for an additional 15 days.

Sec. 6. Damages.

In all cases where a claim is made pursuant to a policy of insurance and the insurer liable therefor is not in compliance with the requirements of this article, such insurer shall be liable to pay the holder of the policy, or the beneficiary making a claim under the policy, in addition to the amount of the claim, 18 percent per annum of the amount of such claim as damages, together with reasonable attorney fees. If suit is filed, such attorney fees shall be taxed as part of the costs in the case.

Sec. 7. Cumulative remedies.

The provisions of this article are not exclusive. The remedies provided herein are in addition to any other remedy or procedure provided by any other law or at common law.

Sec. 8. Liberal construction.

This article shall be liberally construed to promote its underlying purpose which is to obtain prompt payment of claims made pursuant to policies of insurance.

Added by Acts 1991, 72nd Leg., ch. 242, Sec. 11.03(a), eff. Sept. 1, 1991. Sec. 1 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 7.01, eff. Oct. 1, 1991; Sec. 4 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 7.02, eff. Oct. 1, 1991; Sec. 5 amended by Acts 1991, 72nd Leg., 2nd C.S., ch. 12, Sec. 7.03, eff. Oct. 1, 1991; Sec. 6 amended by Acts 1995, 74th Leg., ch. 333, Sec. 1, eff. Sept. 1, 1995.