INSURANCE CODE
CHAPTER 542. PROCESSING AND SETTLEMENT OF CLAIMS
SUBCHAPTER A. UNFAIR CLAIM SETTLEMENT PRACTICES
§ 542.001. SHORT TITLE. This subchapter may be cited as
the Unfair Claim Settlement Practices Act.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.002. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to the following insurers whether organized as a
proprietorship, partnership, stock or mutual corporation, or
unincorporated association:
(1) a life, health, or accident insurance company;
(2) a fire or casualty insurance company;
(3) a hail or storm insurance company;
(4) a title insurance company;
(5) a mortgage guarantee company;
(6) a mutual assessment company;
(7) a local mutual aid association;
(8) a local mutual burial association;
(9) a statewide mutual assessment company;
(10) a stipulated premium company;
(11) a fraternal benefit society;
(12) a group hospital service corporation;
(13) a county mutual insurance company;
(14) a Lloyd's plan;
(15) a reciprocal or interinsurance exchange; and
(16) a farm mutual insurance company.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.003. UNFAIR CLAIM SETTLEMENT PRACTICES
PROHIBITED. (a) An insurer engaging in business in this state may
not engage in an unfair claim settlement practice.
(b) Any of the following acts by an insurer constitutes
unfair claim settlement practices:
(1) knowingly misrepresenting to a claimant pertinent
facts or policy provisions relating to coverage at issue;
(2) failing to acknowledge with reasonable promptness
pertinent communications relating to a claim arising under the
insurer's policy;
(3) failing to adopt and implement reasonable
standards for the prompt investigation of claims arising under the
insurer's policies;
(4) not attempting in good faith to effect a prompt,
fair, and equitable settlement of a claim submitted in which
liability has become reasonably clear;
(5) 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;
(6) failing to maintain the information required by
Section 542.005; or
(7) committing another act the commissioner
determines by rule constitutes an unfair claim settlement practice.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.004. EXAMINATION OF TAX RETURNS
PROHIBITED. (a) An insurer regulated under this code may not
require a claimant, as a condition of settling a claim, to produce
the claimant's federal income tax returns for examination or
investigation by the insurer unless:
(1) the claimant is ordered to produce the tax returns
by a court; or
(2) the claim involves:
(A) a fire loss; or
(B) a loss of profits or income.
(b) An insurer that violates this section commits:
(1) a prohibited practice under this subchapter; and
(2) a deceptive trade practice under Subchapter E,
Chapter 17, Business & Commerce Code.
(c) A claimant affected by a violation of this section is
entitled to remedies under Subchapter E, Chapter 17, Business &
Commerce Code.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.005. RECORD OF COMPLAINTS. (a) In this section,
"complaint" means any written communication primarily expressing a
grievance.
(b) An insurer shall maintain a complete record of all
complaints received by the insurer during the preceding three years
or since the date of the insurer's last examination by the
department, whichever period is shorter. The record must indicate:
(1) the total number of complaints;
(2) the classification of complaints by line of
insurance;
(3) the nature of each complaint;
(4) the disposition of the complaints; and
(5) the time spent processing each complaint.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.006. PERIODIC REPORTING REQUIREMENT. (a) In
this section, "claim" means a written claim filed by a resident of
this state with an insurer engaging in business in this state.
(b) If, based on complaints of unfair claim settlement
practices under this subchapter, the department finds that an
insurer should be subjected to closer supervision with respect to
the insurer's claim settlement practices, the department may
require the insurer to file periodic reports at intervals the
department determines necessary.
(c) The department shall devise a statistical plan for the
periodic reports required under Subsection (b). The plan must
contain at a minimum:
(1) the following claims information for the preceding
12 months or from the date of the insurer's last periodic report,
whichever period is shorter:
(A) the total number of claims filed, including
for each individual claim:
(i) the original amount filed for by the
insured; and
(ii) the classification by line of
insurance;
(B) the total number of claims denied;
(C) the total number of claims settled, including
for each individual claim:
(i) the original amount filed for by the
insured;
(ii) the amount settled; and
(iii) the classification by line of
insurance; and
(D) the total number of claims for which suits
have been instituted against the insurer, including for each
individual claim:
(i) the original amount filed for by the
insured;
(ii) the amount of final adjudication;
(iii) the reason for the suit; and
(iv) the classification by line of
insurance; and
(2) the information required to be maintained by the
insurer under Section 542.005.
(d) If at any time the department determines that the
requirement to file a periodic report is no longer necessary to
accomplish the objectives of this subchapter, the department may
rescind the reporting requirement.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.007. COMPARISON OF CERTAIN INSURERS TO MINIMUM
STANDARD OF PERFORMANCE; INVESTIGATION. (a) The department
shall compile the information received from an insurer under
Section 542.006 in a manner that enables the department to compare
the insurer's performance to a minimum standard of performance
adopted by the commissioner.
(b) If the department determines that the insurer does not
meet the minimum standard of performance, the department shall
investigate the insurer to determine the reason, if any, that the
insurer does not meet the minimum standard.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.008. COMPLAINTS AGAINST INSURERS;
INVESTIGATION. (a) The department shall establish a system for
receiving and processing individual complaints alleging a
violation of this subchapter by an insurer regardless of whether
the insurer is required to file a periodic report under Section
542.006.
(b) The department shall investigate an insurer if the
department determines that:
(1) based on the number and type of complaints against
an insurer, the insurer does not meet the minimum standard of
performance adopted under Section 542.007; or
(2) the number and type of complaints against the
insurer are not proportionate to the number and type of complaints
against other insurers writing similar lines of insurance.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.009. REVIEW OF INVESTIGATION RESULTS;
HEARING. (a) On receiving the results of an investigation
instituted under Section 542.007 or 542.008, the department shall
review those results considering the standards of this subchapter
to determine whether further action is necessary.
(b) If the department determines that further action is
necessary, the department shall:
(1) set a date for a hearing to review the alleged
violations of this subchapter; and
(2) notify the insurer of:
(A) the date of the hearing; and
(B) the nature of the charges.
(c) The department shall provide the notice required by
Subsection (b)(2) not later than the 30th day before the date of the
hearing.
(d) At a hearing under this section, the insurer may present
the insurer's case with the assistance of counsel.
(e) Evidence relating to the number and type of complaints
or claims prepared by the department from information received or
compiled under Section 542.006, 542.007, or 542.008 is admissible
in evidence at:
(1) the hearing; and
(2) any related judicial proceeding.
(f) The hearing shall be conducted in accordance with this
code and rules adopted by the commissioner.
(g) An insurer may not be found to be in violation of this
subchapter solely because of the number and type of complaints or
claims against the insurer.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.010. CEASE AND DESIST ORDER;
ENFORCEMENT. (a) If the department determines that an insurer
has violated this subchapter, the department shall issue a cease
and desist order to the insurer directing the insurer to stop the
unlawful practice.
(b) If the insurer fails to comply with the cease and desist
order, the department may:
(1) revoke or suspend the insurer's certificate of
authority; or
(2) limit, regulate, and control:
(A) the insurer's line of business;
(B) the insurer's writing of policy forms or
other particular forms; and
(C) the volume of the insurer's:
(i) line of business; or
(ii) writing of policy forms or other
particular forms.
(c) The department shall exercise authority under this
section to the extent that the department determines is necessary
to obtain the insurer's compliance with the cease and desist order.
(d) At the request of the department, the attorney general
shall assist the department in enforcing the cease and desist
order.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.011. TIME LIMIT TO APPEAL. An insurer affected by
a ruling or order of the department under this subchapter may appeal
the ruling or order, in accordance with Subchapter D, Chapter 36, by
filing a petition for judicial review not later than the 20th day
after the date of the ruling or order.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.012. ATTORNEY'S FEES. The department is entitled
to reasonable attorney's fees if judicial action is necessary to
enforce an order of the department under this subchapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.013. PERSONNEL. The department may hire
employees and examiners as needed to enforce this subchapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.014. RULES. The commissioner shall adopt
reasonable rules as necessary to implement and augment the purposes
and provisions of this subchapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER B. PROMPT PAYMENT OF CLAIMS
§ 542.051. DEFINITIONS. In this subchapter:
(1) "Business day" means a day other than a Saturday,
Sunday, or holiday recognized by this state.
(2) "Claim" means a first-party claim that:
(A) is made by an insured or policyholder under
an insurance policy or contract or by a beneficiary named in the
policy or contract; and
(B) must be paid by the insurer directly to the
insured or beneficiary.
(3) "Claimant" means a person making a claim.
(4) "Notice of claim" means any written notification
provided by a claimant to an insurer that reasonably apprises the
insurer of the facts relating to the claim.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.052. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to any insurer authorized to engage in business
as an insurance company or to provide insurance in this state,
including:
(1) a stock life, health, or accident insurance
company;
(2) a mutual life, health, or accident insurance
company;
(3) a stock fire or casualty insurance company;
(4) a mutual fire or casualty insurance company;
(5) a Mexican casualty insurance company;
(6) a Lloyd's plan;
(7) a reciprocal or interinsurance exchange;
(8) a fraternal benefit society;
(9) a stipulated premium company;
(10) a nonprofit legal services corporation;
(11) a statewide mutual assessment company;
(12) a local mutual aid association;
(13) a local mutual burial association;
(14) an association exempt under Section 887.102;
(15) a nonprofit hospital, medical, or dental service
corporation, including a corporation subject to Chapter 842;
(16) a county mutual insurance company;
(17) a farm mutual insurance company;
(18) a risk retention group;
(19) a purchasing group;
(20) an eligible surplus lines insurer; and
(21) except as provided by Section 542.053(b), a
guaranty association operating under Article 21.28-C or 21.28-D.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.053. EXCEPTION. (a) This subchapter 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; or
(6) a guaranty association created and operating under
Chapter 2602.
(b) A guaranty association operating under Article 21.28-C
or 21.28-D is not subject to the damage provisions of Section
542.060.
(c) This subchapter does not apply to a health maintenance
organization except as provided by Section 1271.005(c).
(d) This subchapter does not apply to a claim governed by
Subchapter C, Chapter 1301.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.054. LIBERAL CONSTRUCTION. This subchapter shall
be liberally construed to promote the prompt payment of insurance
claims.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.055. RECEIPT OF NOTICE OF CLAIM. (a) Not later
than the 15th day or, if the insurer is an eligible surplus lines
insurer, the 30th business day after the date an insurer receives
notice of a claim, the insurer shall:
(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.
(b) An insurer may make additional requests for information
if during the investigation of the claim the additional requests
are necessary.
(c) If the acknowledgment of receipt of a claim is not made
in writing, the insurer shall make a record of the date, manner, and
content of the acknowledgment.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.056. NOTICE OF ACCEPTANCE OR REJECTION OF
CLAIM. (a) Except as provided by Subsection (b) or (d), an
insurer shall notify a claimant in writing of the acceptance or
rejection of a claim not later than the 15th business day after the
date the insurer receives all items, statements, and forms required
by the insurer to secure final proof of loss.
(b) If an insurer has a reasonable basis to believe that a
loss resulted 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
Subsection (a) or (b) 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), the insurer,
within that same period, shall notify the claimant of the reasons
that the insurer needs additional time. The insurer shall accept or
reject the claim not later than the 45th day after the date the
insurer notifies a claimant under this subsection.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.057. PAYMENT OF CLAIM. (a) Except as otherwise
provided by this section, if an insurer notifies a claimant under
Section 542.056 that the insurer will pay a claim or part of a
claim, the insurer shall pay the claim not later than the fifth
business day after the date notice is made.
(b) 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.
(c) If the insurer is an eligible surplus lines insurer, the
insurer shall pay the claim not later than the 20th business day
after the notice or the date the act is performed, as applicable.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.058. DELAY IN PAYMENT OF CLAIM. (a) Except as
otherwise provided, if an insurer, after receiving all items,
statements, and forms reasonably requested and required under
Section 542.055, delays payment of the claim for a period exceeding
the period specified by other applicable statutes or, if other
statutes do not specify a period, for more than 60 days, the insurer
shall pay damages and other items as provided by Section 542.060.
(b) This section does not apply in a case in which it is
found as a result of arbitration or litigation that a claim received
by an insurer is invalid and should not be paid by the insurer.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.059. EXTENSION OF DEADLINES. (a) A court may
grant a request by a guaranty association for an extension of the
periods under this subchapter on a showing of good cause and after
reasonable notice to policyholders.
(b) In the event of a weather-related catastrophe or major
natural disaster, as defined by the commissioner, the
claim-handling deadlines imposed under this subchapter are
extended for an additional 15 days.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.060. LIABILITY FOR VIOLATION OF
SUBCHAPTER. (a) If an insurer that is liable for a claim under an
insurance policy is not in compliance with this subchapter, the
insurer is liable to pay the holder of the policy or the beneficiary
making the claim under the policy, in addition to the amount of the
claim, interest on the amount of the claim at the rate of 18 percent
a year as damages, together with reasonable attorney's fees.
(b) If a suit is filed, the attorney's fees shall be taxed as
part of the costs in the case.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.061. REMEDIES NOT EXCLUSIVE. The remedies
provided by this subchapter are in addition to any other remedy or
procedure provided by law or at common law.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER C. PROVIDING CERTAIN CLAIMS INFORMATION ON REQUEST
§ 542.101. REQUEST BY NAMED INSURED UNDER LIABILITY
INSURANCE POLICY. (a) In this section, "liability insurance"
means:
(1) general liability insurance;
(2) professional liability insurance, including
medical professional liability insurance;
(3) commercial automobile liability insurance; and
(4) the liability portion of commercial multiperil
insurance.
(b) On written request of a named insured under a liability
insurance policy, the insurer that wrote the policy shall provide
to the insured information relating to the disposition of a claim
filed under the policy. The information must include:
(1) the name of each claimant;
(2) details relating to:
(A) the amount paid on the claim;
(B) settlement of the claim; or
(C) judgment on the claim;
(3) details as to how the claim, settlement, or
judgment is to be paid; and
(4) any other information required by rule of the
commissioner that the commissioner considers necessary to
adequately inform an insured with regard to any claim under a
liability insurance policy.
(c) A request for information under this section must be
transmitted to the insurer not later than six months after the date
of disposition of the claim.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.102. REQUEST BY POLICYHOLDER UNDER PROPERTY AND
CASUALTY INSURANCE POLICY. (a) On written request of a
policyholder, an insurer that writes property and casualty
insurance in this state shall provide the policyholder with a list
of claims charged against the policy and payments made on each
claim.
(b) This section does not apply to a workers' compensation
insurance policy subject to Article 5.65A.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.103. DEADLINE FOR PROVIDING REQUESTED
INFORMATION. (a) An insurer shall provide the information
requested under this subchapter in writing not later than the 30th
day after the date the insurer receives the request for the
information.
(b) For purposes of this section, information is considered
to be provided on the date the information is deposited with the
United States Postal Service or is personally delivered.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.104. RULES. The commissioner may by rule
prescribe forms for requesting information and for providing
requested information under this subchapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER D. NOTICE OF SETTLEMENT OF CLAIM UNDER CASUALTY
INSURANCE POLICY
§ 542.151. APPLICABILITY OF SUBCHAPTER. This
subchapter applies only to the settlement of a claim under a
casualty insurance policy that is delivered, issued for delivery,
or renewed in this state, including a policy written by:
(1) a county mutual insurance company;
(2) a Lloyd's plan;
(3) an eligible surplus lines insurer; or
(4) a reciprocal or interinsurance exchange.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.152. EXCEPTION. This subchapter does not apply
to:
(1) a casualty insurance policy that requires the
insured's consent to settle a claim against the insured;
(2) fidelity, surety, or guaranty bonds; or
(3) marine insurance other than inland marine
insurance governed by Article 5.53.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.153. NOTICE REQUIRED. (a) Not later than the
10th day after the date an initial offer to settle a claim against a
named insured under a casualty insurance policy issued to the
insured is made, the insurer shall notify the insured in writing of
the offer.
(b) Not later than the 30th day after the date a claim
against a named insured under a casualty insurance policy issued to
the insured is settled, the insurer shall notify the insured in
writing of the settlement.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.154. RULES. The commissioner may adopt rules to
implement this subchapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
SUBCHAPTER E. COLLECTION FROM THIRD PARTIES UNDER CERTAIN
AUTOMOBILE INSURANCE POLICIES
§ 542.201. PURPOSE. This subchapter is intended to
encourage insurers to take appropriate and necessary steps to
collect from third parties or the insurers of the third parties.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.202. DEFINITION. In this subchapter, "action"
includes taking various actions such as reasonable and diligent
collection efforts, mediation, arbitration, and litigation against
a responsible third party or the third party's insurer.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.203. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to any insurer that delivers, issues for
delivery, or renews in this state a private passenger automobile
insurance policy, including a reciprocal or interinsurance
exchange, mutual insurance company, association, Lloyd's plan, or
other insurer.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.204. ACTION TO RECOVER
DEDUCTIBLE. (a) Notwithstanding any other provision of this code
and except as provided by Subsection (b), if an insurer is liable to
an insured for a claim that is subject to a deductible payable by
the insured and a third party may be liable to the insurer or the
insured for the amount of the deductible, the insurer shall:
(1) take action to recover the deductible against the
third party not later than the first anniversary of the date the
insured's claim is paid; or
(2) pay the amount of the deductible to the insured.
(b) An insurer is not required to take action or pay the
amount of the deductible as required by Subsection (a) if, not later
than the earlier of the first anniversary of the date the insured's
claim is paid or the 90th day before the date the statute of
limitations for a negligence action expires, the insurer:
(1) notifies the insured in writing that the insurer
does not intend to take further collection actions against the
third party; and
(2) authorizes the insured to take further collection
actions.
(c) This section applies regardless of whether the third
party who may be liable for the amount of the deductible is insured
or uninsured.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
§ 542.205. ENFORCEMENT; RULES. The commissioner may
enforce this subchapter and adopt and enforce reasonable rules
necessary to accomplish the purposes of this subchapter.
Added by Acts 2003, 78th Leg., ch. 1274, § 2, eff. April 1, 2005.
