Legal Framework
The Texas Prompt Payment of Claims Act (TPPCA) establishes strict timeframes that insurance companies must follow when processing claims. Codified in Chapter 542 of the Texas Insurance Code, this law applies to virtually all types of insurance policies issued in Texas. The statute was designed to prevent unreasonable delays in claim processing and payment, providing clear deadlines for each stage of the claims process. Unlike similar laws in some states, the Texas version contains particularly strong financial penalties for non-compliance, making it one of the most policyholder-friendly prompt payment statutes in the nation.
Mandatory Timeframes
The TPPCA establishes specific deadlines insurance companies must meet. Within 15 days of receiving notice of a claim, insurers must acknowledge receipt, begin an investigation, and request all necessary information. Insurers then have 15 business days (30 days for some complex claims) after receiving all required documentation to accept or reject the claim in writing. If accepted, payment must be issued within five business days. These timeframes apply to first-party claims where policyholders seek benefits directly from their own insurance company, creating a predictable timeline for claim resolution.
Violation Consequences
Insurance firms are subject to heavy financial fines if they do not meet these requirements. The main effect is an interest rate of 18% per annum applied to the total amount of the claim, computed from the date payment was due until the date payment was actually made. This high interest rate, which is significantly higher than market rates, provides a strong incentive for processing requests promptly. If the policyholder needs to hire an attorney to fight for their due reimbursement, the insurer should cover their reasonable fees. There is no need to prove ill faith or deliberate misconduct in order for these penalties to apply after infractions have been proved.
Consumer Protection Focus
The TPPCA represents a key consumer protection mechanism in Texas insurance law. It shifts power to policyholders by creating financial consequences for insurer delay tactics. The law applies broadly across insurance types, including homeowners, auto, life, and health insurance policies. While certain exceptions exist for specific claim scenarios, the Act's core provisions create a standardized expectation for timely claims handling that benefits all Texas insurance consumers. The statute significantly enhances policyholders' ability to receive prompt payment when valid claims are submitted.