Texas Insurance Code Prompt Payment Rules: Deadlines Your Insurer Must Follow

The Texas Legislature enacted the prompt payment provisions of the Texas Insurance Code — found in Subchapter B of Chapter 542 — to prevent insurance companies from using delay as a tactic to pressure policyholders into accepting inadequate settlements. These provisions establish specific deadlines for each stage of the claims process and impose meaningful financial penalties on insurers who fail to comply. Every Texas policyholder should understand these deadlines and hold their insurer accountable.

Under Section 542.055, an insurer must acknowledge receipt of a claim not later than the 15th day after the date the claim is received. This acknowledgment must be in writing and must include a description of the insurer’s claims process and the procedures the claimant must follow. While this may seem like a minor administrative requirement, failure to acknowledge a claim can be evidence of a broader pattern of claims handling deficiencies.

Section 542.056 requires the insurer to accept or reject the 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. If the insurer needs additional time, it must notify the claimant in writing of the reasons additional time is needed and provide an estimated date for completion. Even with extensions, the insurer must accept or reject the claim within 45 days of receiving the required documentation.

Once a claim is accepted, Section 542.057 requires payment within five business days. If the insurer fails to meet this deadline, the policyholder is entitled to the amount of the claim plus 18% annual interest calculated from the date the claim was received by the insurer. This statutory interest provision is one of the most powerful tools available to Texas policyholders — it creates a strong financial incentive for insurers to process claims promptly.

The 18% interest penalty under Section 542.058 applies when the insurer is liable for the claim and fails to comply with the deadlines established in Sections 542.055 through 542.057. Importantly, the interest accrues from the date the claim was received — not from the date of the deadline violation. For large claims that remain unpaid for months or years, this interest can represent a substantial additional recovery for the policyholder.

It is worth noting that the prompt payment provisions apply to first-party claims (claims by the policyholder against their own insurer) and do not apply to liability claims or claims where coverage is legitimately disputed. However, an insurer cannot avoid the prompt payment penalties simply by asserting a coverage defense that has no reasonable basis. If the denial is ultimately found to be unreasonable, the prompt payment penalties apply retroactively.

If your insurance company is dragging its feet on your property damage claim, contact Nixon Law PLLC. We track every deadline and hold insurers accountable for prompt payment violations under the Texas Insurance Code.

About the Author: Jonathon G. Nixon is the managing attorney of Nixon Law PLLC, a Houston-based litigation firm focused on property insurance disputes, construction defects, personal injury, and commercial litigation. Contact Nixon Law PLLC at (713) 482-1523 or jnixon@nixon-law.com.