Texas Legislature Amends Prompt Pay Statute for Insurance Claims

The Texas Legislature has passed new legislation that amends key provisions of Texas’s Prompt Pay Statute for insurance claims. Most types of insurance companies writing policies in Texas are required to comply with Texas’s Prompt Pay Statute in Chapter 542 of the Texas Insurance Code, and those that do not can face lawsuits and potential enforcement actions by the Texas Department of Insurance. The new legislation is aimed primarily at altering civil remedies for weather-related property insurance claims—claims the legislation defines in part with the phrase “forces of nature”. Critics of the legislation claim that it weakens important protections afforded to Texas consumers. Proponents of the legislation claim that it will curb perceived lawsuit abuse prevalent with hailstorm claims. The legislation imposes pre-suit notice requirements, makes changes to the availability of attorneys’ fees, alters the interest rate that can be imposed for delayed payment of claims, and allows insurers to assume agent liability. The legislation also makes some changes affecting more general types of insurance claims, including clarification about the availability of prejudgment interest and a requirement that recoverable attorneys’ fees be both reasonable and “necessary”. If signed by the Governor, the legislation will take effect on September 1, 2017. A copy of the legislation can be found here.