Methods of Prosecuting First Party Plaintiff Insurance Claims

Texas and Oklahoma laws provide strong protections for policyholders to bring these types of claims against insurance companies. Aside from common law causes of action like breach of contract, misrepresentation, and breach of the duty of good faith and fair dealing, there are also statutory causes of action that can be brought under the Insurance Code and Texas Deceptive Trade Practices Act (DTPA).

1) Texas Deceptive Trade Practices Act (DTPA)

The Texas Deceptive Trade Practices Act is a statute that protects consumers. Under the law, an insurance policyholder is a consumer. Therefore policyholders can bring causes of action against insurance companies under the DTPA. One of the penalty provisions of the DTPA allows for the payment of three times (treble) economic damages if the policyholder can prove knowing and intentional conduct on the behalf of the insurance company. Additionally, the DTPA entitles policyholders to collect attorneys’ fees. This ensures that policyholders do not avoid bringing claims against their insurance companies out of a fear that attorneys’ fees would reduce any amount they recover to even less than the original settlement offer. It also allows policyholders to pursue smaller claims that might otherwise be fearful would be hard to justify the cost of hiring an attorney.

2) Texas Insurance Code – Unfair Claims Settlement Practices

3) Texas Insurance Code and the Prompt Payment of Claims Act

A) Receipt of Notice of Claim

An insurer has fifteen (15) actual days after receiving written notice of a claim (or, if the insurer is an eligible surplus lines insurer, thirty (30) business days after the date an insurer receives written notice of a claim) to:

(1) acknowledge receipt of the claim;

(2) begin an investigation of the claim; and

(3) request all documentation from the policyholder necessary to secure final proof of loss.

If the carrier does not acknowledge the claim in writing, it must “make a record of the date, means and content of the acknowledgment.” TEX. INS. CODE § 542.055.

B) Coverage Decision Deadline

B) Coverage Decision Deadline

The insurer must then notify the insured in writing whether it accepts or rejects the claim within 15 business days of the receipt of all necessary information required to investigate the claim (i.e., the petition or complaint and invoices from defense counsel). If the insurer rejects the claim, the written notice must state the “reasons for the rejection.” However, if for any reason the insurer is unable to accept or reject the claim within 15 days after receiving the documentation, the insurer is entitled to explain to the insured why it is not able to do so in that period in writing and it then it has 45 days to accept or reject the claim. TEX. INS. CODE § 542.056.

C) Payment Deadline

If an insurer notifies a policyholder that it will pay a claim (or a portion of the claim), the claim must be paid within five (5) business days (if the insurer is an eligible surplus lines insurer, the insurer must pay the claim not later than the 20th business day after the date of notice of payment by the insurer or the date of performance by the insured). If payment is conditioned on some action by the policyholder, the insurer must pay within five (5) business days of the policyholder’s performance of the required action. TEX. INS. CODE § 542.057.

D) Penalties

If an insurer delays payment of a claim for more than sixty (60) days after receiving all required information pursuant to Section 542.055, it is liable for penalties under the statute. This time period may be trumped by other statutes that require payment in a shorter period of time. TEX. INS. CODE § 542.058. An insurer who delays payment past this deadline must pay, in addition to the claim, a penalty of eighteen (18) percent per annum of the amount of the claim plus attorney’s fees. TEX. INS. CODE § 542.060. 0.