Texas Prompt Payment of Claims

Texas’s Prompt Payment of Claims Act sets deadlines for insurers to process and pay certain claims. The rule is a sequence of clocks, not one single deadline for every claim. It also does not mean that a covered loss must be paid simply because a policyholder reports it. The insurer may investigate whether coverage exists and what amount is owed; if it accepts all or part of a claim, the statute sets a further payment deadline.

Start with the statutory definition. Under Insurance Code §542.051, a “claim” for Subchapter B is a first-party claim made by an insured or policyholder under an insurance policy, or by a beneficiary named in the policy, that must be paid by the insurer directly to that insured or beneficiary. The phrase “first party” distinguishes a request for benefits under one’s own policy from a bodily-injury or property-damage demand against another person’s liability insurer. A third-party demand does not become a Chapter 542B claim simply because the insurer opens a file and assigns a claim number.

Clock one: notice, acknowledgment, and investigation

Section 542.055 generally requires an insurer to acknowledge receipt, begin any investigation, and request the items, statements, and forms it reasonably believes are needed no later than the 15th day after receiving notice of the claim. An eligible surplus-lines insurer has 30 business days for this initial step. If acknowledgment is not in writing, the insurer must keep a record of its date, manner, and content. The statute also permits additional information requests when they become necessary during the investigation.

The notice must reasonably apprise the insurer of facts relating to the claim. A phone call may tell an agent about a problem, but the statute’s definition of “notice of claim” for Subchapter B refers to written notification. Keep a dated copy of the written report and proof of delivery, such as a portal confirmation, email receipt, or claim number. Notice should identify the policy, date and location of loss, what happened, and the damage or benefits being claimed.

A request should identify information the insurer reasonably believes it needs. For a Texas homeowner claim, that might include access for inspection, photos, repair estimates, an inventory, receipts, proof of ownership, or a sworn proof of loss if the policy or applicable law calls for one. A claim can require supplemental questions as new issues emerge. The clock does not mean an insurer must guess about missing facts, but repeated requests should have a genuine connection to the investigation and comply with statutory timing.

Clock two: accept or reject after required items arrive

Under §542.056(a), an insurer ordinarily must give written notice accepting or rejecting a claim no later than the 15th business day after it receives all items, statements, and forms required to secure final proof of loss. The statutory trigger is receipt of the required materials, not simply the date of the first inspection or the date a contractor sends an estimate. If an insurer rejects the claim, its written notice must state the reasons for rejection.

If the insurer has a reasonable basis to believe the loss resulted from arson, §542.056(b) gives it until the 30th day after receipt of the materials required for final proof. This is a specific statutory condition, not a general extension for every difficult claim. The insurer may need to explain the arson basis as appropriate under the facts and other law.

If the insurer cannot accept or reject within the ordinary or arson period, §542.056(d) requires notice within that same period explaining why more time is needed. The insurer then must accept or reject no later than the 45th day after it gives that notice. This is not an automatic 45-day extension that can be taken without a reason or after the first deadline has already passed. Keep the written extension and calculate the second deadline from the date of the notice.

A written decision can accept the claim, reject it, or accept one part while disputing another. A partial decision should make clear what amount or coverage is accepted and what remains under review. A coverage disagreement may turn on the cause of loss, an exclusion, insured status, deductible, policy limit, replacement-cost conditions, or the amount of damage. Prompt-payment rules do not dictate which side is correct on those contract questions.

Clock three: payment after acceptance

Under §542.057, if the insurer notifies the claimant that it will pay all or part of a claim, it generally must pay no later than the fifth business day after making that notice. If payment is conditioned on the claimant performing an act, the five-business-day period generally runs after that act is performed. An eligible surplus-lines insurer has 20 business days. Therefore, note both the acceptance date and any action the insurer says is required before it can release payment.

An accepted claim is still governed by the policy. The insurer may calculate payment after the deductible, apply a sublimit, or pay actual cash value first if the policy makes replacement-cost holdback recoverable only after repairs. A payment deadline does not expand the limit or change the valuation method. If the insurer accepts a portion, the deadline can apply to that accepted amount while the parties continue to discuss a disputed portion.

When payment delay may create statutory liability

Section 542.058 addresses delay after the insurer receives all items, statements, and forms reasonably requested and required under §542.055. Subject to exceptions, if payment is delayed beyond a period set by another applicable statute—or, where no other statute specifies a period, for more than 60 days—the insurer may owe damages under §542.060. The statute says this delay remedy does not apply when arbitration or litigation finds that the claim was invalid and should not be paid.

For many ordinary claims outside Chapter 542A, §542.060(a) provides interest at 18 percent a year on the amount of the claim, plus reasonable and necessary attorney’s fees, if the insurer is liable for a claim under a policy and fails to comply with the subchapter. Property-damage actions covered by Chapter 542A use a different statutory interest formula under §542.060(c). The claimant’s policy status, insurer liability, applicable chapter, and any defenses matter; a missed date should not be converted into a guaranteed damages amount without analyzing those elements.

The Texas Supreme Court has explained that prompt-payment remedies can address delay even where an insurer disputes the amount, because the statutory definition and coverage amount must be analyzed together. At the same time, Chapter 542.058(b) provides an exception for a claim found invalid in arbitration or litigation. The result depends on the coverage decision, payment of any amount owed, statutory trigger, timing, and final findings. The law provides remedies, but it does not eliminate coverage disputes.

Weather catastrophe extensions and special programs

Section 542.059(b) extends the claim-handling deadlines imposed by Subchapter B by an additional 15 days in the event of a weather-related catastrophe or major natural disaster, as defined by the commissioner. TDI explains disaster-related deadline extensions in its consumer materials. Do not add 15 days to every claim after any storm; confirm that the statutory declaration or definition applies and identify which deadlines are extended.

Certain programs and lines have separate rules. Health maintenance organizations and health insurers may be subject to Chapters 843 and 1301, which have their own prompt-payment provisions. TWIA, the Texas FAIR Plan, NFIP, workers’ compensation, life insurance, and surplus-lines business can involve distinct statutes, regulations, and claims processes. Some specialized claims have their own dates and remedies. The phrase “Texas prompt pay law” is not enough to determine which statute applies.

Chapter 542A is relevant to certain actions related to property-insurance claims, including notice before suit and statutory attorney-fee and interest rules. It does not redefine every Chapter 542 clock, but it changes the damages formula in §542.060(c) for actions to which it applies. Chapter 542A excludes certain insurers or programs, including TWIA and claims with alternative dispute resolution procedures under specified statutes. Check its definitions and exclusions before describing a weather-property claim remedy.

Calculate a deadline from a claim timeline

1. Identify the policy and claim type. Determine whether the claimant seeks first-party benefits paid directly under their own policy.
2. Record the date the insurer received written notice that reasonably describes the claim.
3. Calculate the §542.055 acknowledgment/investigation request date, checking for eligible surplus-lines status.
4. List each initial and supplemental request for materials and the date each response was received.
5. Mark the date the insurer says it received all materials required for final proof of loss.
6. Calculate the §542.056 decision date using business days, unless arson or a properly invoked extension changes the period.
7. If an extension notice is sent, calculate the outside decision date as the 45th day after that notice.
8. If the insurer accepts payment, mark any claimant act required and calculate the §542.057 payment date.
9. Check for a commissioner-defined catastrophe extension or a separate statute for the insurer and line.
10. If considering a remedy, determine whether Chapter 542A applies and whether §542.060(a) or (c) controls.

Worked examples

Homeowner’s wind claim

A homeowner sends a written claim report to the insurer. The ordinary acknowledgment and investigation request deadline is calculated from the insurer’s receipt of the notice. The insurer requests photos, access, and a sworn proof of loss. Once it receives all required items, it generally has 15 business days to accept or reject, unless a valid extension or specific exception applies. If it accepts a payment amount, it generally has five business days after notice of acceptance to pay. If the claim arises from a qualifying weather catastrophe, the statutory deadlines may be extended by 15 days. If litigation is later brought over property damage, determine whether Chapter 542A applies to the remedy.

Third-party auto property claim

A driver whose car was struck by another motorist asks the at-fault driver’s liability carrier to pay. This is a third-party demand, not a “claim” as defined in §542.051(2) for Subchapter B. The carrier still has obligations under other law and should handle the demand fairly, but the first-party 15-day/15-business-day/five-business-day sequence does not automatically apply to that claimant’s liability claim. If the driver instead files under their own collision coverage, the direct first-party claim may fit Chapter 542B.

Common exam mistakes

• Applying Chapter 542B to a third-party liability claimant without checking §542.051’s first-party definition.
• Treating the initial 15-day period as the deadline to pay a claim.
• Using calendar days for deadlines expressed in business days.
• Forgetting the eligible-surplus-lines periods: 30 business days initially and 20 business days to pay.
• Treating an extension as automatic instead of requiring timely notice and a reason.
• Missing the 30-day arson decision period or treating it as a general complexity extension.
• Ignoring the 15-day extension for a qualifying weather catastrophe or major natural disaster.
• Saying that any missed deadline automatically produces 18% interest when Chapter 542A may apply a different formula.
• Assuming acceptance means the insurer owes the full demand rather than the covered amount subject to policy terms.

Frequently asked questions

How long does an insurer have to acknowledge a claim? Generally 15 days after receipt of notice; an eligible surplus-lines insurer has 30 business days. When does the 15-business-day decision clock start? After the insurer receives all items, statements, and forms required to secure final proof of loss. Is there an extension? If the insurer cannot decide in time, it must notify the claimant within the period and give reasons; it then has until the 45th day after that notice. How long after acceptance must the insurer pay? Generally five business days, or 20 for an eligible surplus-lines insurer, with claimant-act and other exceptions. Does this law cover third-party claims? Chapter 542B defines claims as first-party claims paid directly to the insured or beneficiary. What is the delay remedy? It can include statutory interest and attorney’s fees when the statutory conditions are met; the formula differs for actions under Chapter 542A.

Prepare for the Texas P&C exam

Learn the trigger for each clock and first determine whether the claim fits Chapter 542B. Keep special rules for arson, eligible surplus-lines insurers, disasters, and Chapter 542A remedies distinct. Sitonce’s Texas Property and Casualty exam prep covers Texas claim procedures and policy conditions.