The Texas Department of Insurance (TDI) reminds insurers, surplus lines companies, and HMOs that Chapter 542 of the Insurance Code and Section 21.203, Title 28 of the Administrative Code, prohibit them from engaging in unfair claim settlement practices. These illegal practices include:
- failing to acknowledge with reasonable promptness pertinent communications relating to a claim;
- failing to affirm or deny coverage of a claim to a policyholder within a reasonable time;
- not attempting in good faith to effect a prompt, fair, and equitable settlement of a claim submitted in which liability has become reasonably clear;
- refusing to pay claims without conducting a reasonable investigation based upon all available information;
- compelling a policyholder to institute a suit to recover an amount due under a policy by offering substantially less than the amount ultimately recovered in a suit brought by the policyholder;
- undertaking to enforce a full and final release from a policyholder when, in fact, only a partial payment has been made; and
- failing to establish a policy and proper controls to make certain that agents calculate and deliver to policyholders or their assignees funds due under policy provisions relative to cancellation of coverage within a reasonable time after such coverages are terminated.
Prompt pay laws in Chapters 542, 843, and 1301 of the Insurance Code also impose claims-handling deadlines in certain instances. Insurers must comply with these applicable time frames and all related requirements in the prompt pay laws.
TDI takes all allegations of unfair claims settlement practices and prompt payment violations seriously and will investigate such allegations through complaint handling, market conduct exams, and other reviews deemed necessary. TDI will take appropriate enforcement action when evidence of unfair claim settlement practices or other statutory violations are demonstrated.