INSURANCE CLAIM DENIED, UNDERPAID, OR NOT PAID TIMELY? -- KNOW YOUR CONSUMER RIGHTS UNDER THE TEXAS

INSURANCE CLAIM DENIED, UNDERPAID, OR NOT PAID TIMELY?

USE YOUR CONSUMER RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES ACT AND INSURANCE CODE TO MAKE INSURANCE COMPANIES PAY.

The purpose of this blog entry is to inform Texas consumers of their rights and remedies under the Deceptive Trade Practices Act “DTPA” and Texas Insurance Code.

NOTE: This is the same information found in my video blog entry regarding this topic. The video can be found at https://www.texaslawcowboy.com/single-post/2017/12/06/14.

Due to the devastation left in the wake of Hurricane Harvey, a significant issue in the Houston/Galveston area arose -- non-compliant acts of insurance companies.

An Insurance company may:

(1) misrepresent insurance policy terms through deceptive, false, or misleading practices, or

(2) not pay, underpay, or untimely pay a valid claim.

The first situation (misrepresentation) is a claim brought under the consumer-friendly statute, the DTPA, and brought for a violation of Chapter 541 of the Insurance Code, also known as the "bad faith" insurance act. The second situation (payment issues) is a claim brought under Chapter 542 of the Insurance Code – The Prompt Payment of Claims Act.

In this blog entry, I will address both situations, including the acts of an insurance company that violate consumer rights; the required actions to remedy the violation; and the damages available to a prevailing plaintiff/claimant.

(1) DTPA CLAIM – MISREPRESENTATION OF INSURANCE POLICY TERMS THROUGH DECEPTIVE, FALSE, OR MISLEADING PRACTICES.

The Deceptive Trade Practices Act (“DTPA”) protects consumers from false, misleading, and deceptive practices by businesses, including insurance companies.

A consumer is someone that seeks to acquire, or acquires goods or services through purchase or lease. In relation to this blog entry, an individual who purchased an insurance policy, or is a policy holder, qualifies as a consumer – that person acquired a service (insurance) through purchase. As a consumer you are entitled to the broad protections provided by the DTPA, including Chapter 541 Insurance Code violations.

VIOLATIONS

Chapter 541 prohibits insurance companies from making statements that misrepresent, among others, (1) the terms of the policy; and (2) the benefits or advantages promised by the policy.

Additionally, if an insurance company fails to: (1) attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim when the insurer’s liability is reasonably clear; or(2) promptly provide a policy holder a reasonable explanation for denial of a claim or offer of settlement of a claim; or (3) reasonably investigate a claim before denial of that claim, the insurance company may be in violation of the insurance code, allowing a consumer to bring an action under the DTPA.

REQUIRED ACTION

The first requirement in making a DTPA claim is sending a demand letter to the defendant. This demand letter must do the following.

• Provide a 60-day notice to defendant to serve as a notice of your intention to file a lawsuit.

• State the claim, including the act or omission, giving rise to this claim.

• State the damages. How much are you owed? What kind of harm have you suffered? What attorney fees (if any) have been incurred up to this point? (The next section discusses the types of damages available under the DTPA for an Insurance Code violation.)

After receipt of the demand letter, and within the 60-day notice period, the insurance company may request to investigate the property being claimed. If they do so, the claimant must provide reasonable accommodation and access to the property.

This 60-day notice period is to encourage settlement and avoid litigation.

Keep in mind, if the claimant prevails, the insurance company is liable for the claimant's attorney fees and costs. Consider an attorney to draft a demand letter, negotiate a favorable settlement, and to litigate if necessary.

If the 60-day period does not provide for fair and reasonable settlement offers, the insurance company fails to give just cause, or the 60-day notice period lapses, the claimant may file a lawsuit.

DAMAGES

I saved the best for last. The reason the DTPA is consumer-friendly is two things: (1) If the plaintiff/claimant prevails, the defendant (insurance company) is liable for their attorney fees and costs. (2) Unlike a breach of contract claim, where a plaintiff is entitled to only economic damages, and their cost incurred to make them “whole” again, a plaintiff/claimant under the DTPA, and due to a Chapter 541 Insurance Code violation, may be awarded up to three times their actual damages (the proven harm, loss, or injury suffered) if the defendant acted “knowingly.”

If the defendant is not shown to “knowingly” violate the statute, a prevailing plaintiff may be awarded their actual damages, reasonable attorney fees and court costs, and other damages a court deems appropriate.

NOTE: A plaintiff/claimant has a duty to mitigate their damages. For example, if a plaintiff turned down reasonable settlement offers, or contributed to the overall damage of the property being claimed, the plaintiff may have no, or limited, damages awarded.

(2) PROMPT PAYMENT OF CLAIMS ACT

Chapter 542 of the Texas Insurance Code provides strict guidelines for insurance companies to follow when acknowledging a claim, investigating a claim, and paying a claim. The basic rule is commonly referred to as the “15-15-5” rule. There are some exceptions to this rule, but generally, a violation of the following gives rise to an actionable claim under the Insurance Code -- Prompt Payment of Claims Act.

REQUIREMENTS AND VIOLATIONS

Insurance providers (with some exceptions) are required to acknowledge a claim and request any documentation needed for investigation within 15-business days of receipt of that claim.

When the insurance company gains receipt of any required documents and/or commences investigation, they have 15-business days to reasonably investigate the claim. In certain circumstances, and upon written request with reason, an insurance company may extend this time up to 45-days.

After the 15-business days allotted for investigation, an insurance company must accept or deny the claim. If denied, they must state the reason for denial. If accepted, they must pay the claim within 5-business days of acceptance.

Regarding Hurricane Harvey insurance claims in the Houston, Galveston, Dickinson, and League City area, violations of the Prompt Payment of Claims act have been prevalent. If without good cause, and a request for extension, non-compliance of the above stated time-frames violate the Prompt Payment of Claims Act.

REQUIRED ACTION

Like the requirements above for a DTPA claim, a violation of the Prompt Payment of Claims Act requires the claimant to provide a 60-day written notice via demand letter. The requirements of the demand letter are the same as the DTPA claim stated above. It is important to remember that the claim and damages must not be general, and require some specificity.

If the 60-day period does not provide fair and reasonable settlement offers, the insurance company fails to give just cause, or the 60-day notice period lapses, the claimant may file a lawsuit.

DAMAGES

In addition to other remedies available at law (such as above), a prevailing plaintiff may be awarded actual damages in a Chapter 542 claim. Additionally, a prevailing plaintiff is entitled to a fixed [5% interest rate + the Federal Reserve judgement rate on that day (which ranges from 5-15%] on those damages from the time the violation occurred. Meaning, the plaintiff may collect actual damages in addition to an interest rate between 10%-20% depending on what the Federal Reserve sets that day.

In Conclusion, The Texas DTPA and Insurance Code provide consumer-friendly avenues for policy holders to combat false, misleading, and deceptive practices by their insurance company.

The information in this blog entry/article is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

Attorney Ryan Putz practices all areas of Divorce and Family Law, Insurance Litigation and Consumer Protection, and Estate Planning. Serving the Conroe, Montgomery County | Houston metro area.

www.ryanputzlaw.com.com

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