What Is the Texas Prompt Payment of Claims Act (Ins. Code Ch. 542) & the 18% Interest Penalty?
Direct Answer Under Texas Law
Under the Texas Prompt Payment of Claims Act (Tex. Ins. Code §§ 542.055–542.060), when you submit a first-party claim to your OWN insurance company (such as PIP, MedPay, Collision, or Comprehensive), the insurer must acknowledge the claim within 15 days (§ 542.055), accept or reject it within 15 business days of receiving all required items (§ 542.056), and pay within 5 business days of notice of acceptance (§ 542.057)—or pay an automatic statutory penalty of 18% PER YEAR interest on the claim amount PLUS reasonable attorney's fees (§ 542.060)! (Note: PIP also carries its own 12% penalty + attorney's fees under § 1952.157 if not paid within 30 days.)
Critical Texas Procedural Trap to Watch Out For
Remember: Chapter 542 Prompt Payment penalties apply ONLY to first-party claims against your own insurer (not third-party liability claims against the other driver's insurer), and for UIM claims, Chapter 542 only triggers if the insurer fails to pay promptly AFTER a judgment or settlement establishes the UIM amount under Brainard.
Recommended Action Plan for Texas Claimants
Send your PIP itemization and medical bills via certified mail or verifiable email so the 15-day / 30-day statutory Prompt Payment clock is documented to the day.
Detailed Texas Statutory & Case Law Breakdown
Under Tex. Ins. Code §§ 542.055–542.060 (18% Per Year Statutory Interest + Attorney's Fees) and controlling Texas appellate precedent in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019); Brainard v. Trinity Universal, Texas trial and appellate courts apply strict statutory rules to this exact issue. Unlike generic multi-state legal summaries, Texas tort procedure under the Civil Practice and Remedies Code (CPRC), Insurance Code, Transportation Code, and Labor Code enforces specific statutory formulas—including the 51% proportionate responsibility bar (CPRC § 33.001), paid-or-incurred medical expense admissibility (CPRC § 41.0105 / Haygood), and mandatory statutory lien caps (Prop. Code Ch. 55 & Ins. Code Ch. 140).
Step-by-Step Texas Procedural Checklist
- Verify the exact statutory text of Tex. Ins. Code §§ 542.055–542.060 (18% Per Year Statutory Interest + Attorney's Fees) and how Texas courts apply Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019); Brainard v. Trinity Universal in your county's appellate district.
- Beware of the Texas Procedural Trap: Remember: Chapter 542 Prompt Payment penalties apply ONLY to first-party claims against your own insurer (not third-party liability claims against the other driver's insurer), and for UIM claims, Chapter 542 only triggers if the insurer fails to pay promptly AFTER a judgment or settlement establishes the UIM amount under Brainard.
- Execute the Texas Action Plan: Send your PIP itemization and medical bills via certified mail or verifiable email so the 15-day / 30-day statutory Prompt Payment clock is documented to the day.
- Preserve all physical, electronic, and medical billing records early so your CPRC § 18.001 affidavits and TRCP 194.2 Initial Disclosures are complete.
Frequently Asked Questions Under Texas Law
What Is the Texas Prompt Payment of Claims Act (Ins. Code Ch. 542) & the 18% Interest Penalty?
Under the Texas Prompt Payment of Claims Act (Tex. Ins. Code §§ 542.055–542.060), when you submit a first-party claim to your OWN insurance company (such as PIP, MedPay, Collision, or Comprehensive), the insurer must acknowledge the claim within 15 days (§ 542.055), accept or reject it within 15 business days of receiving all required items (§ 542.056), and pay within 5 business days of notice of acceptance (§ 542.057)—or pay an automatic statutory penalty of 18% PER YEAR interest on the claim amount PLUS reasonable attorney's fees (§ 542.060)! (Note: PIP also carries its own 12% penalty + attorney's fees under § 1952.157 if not paid within 30 days.) Key Texas Trap to Avoid: Remember: Chapter 542 Prompt Payment penalties apply ONLY to first-party claims against your own insurer (not third-party liability claims against the other driver's insurer), and for UIM claims, Chapter 542 only triggers if the insurer fails to pay promptly AFTER a judgment or settlement establishes the UIM amount under Brainard.
What Texas statute and Supreme Court / appellate precedent control texas prompt payment of claims act (ch. 542)?
This question is governed in Texas by Tex. Ins. Code §§ 542.055–542.060 (18% Per Year Statutory Interest + Attorney's Fees) and the legal standards articulated in Barbara Technologies Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019); Brainard v. Trinity Universal. Recommended step: Send your PIP itemization and medical bills via certified mail or verifiable email so the 15-day / 30-day statutory Prompt Payment clock is documented to the day.
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