Under the Texas Insurance Code, claims deadlines run on a strict clock: your insurer has 15 calendar days to acknowledge a claim, 15 business days after receiving all requested documents to accept or reject it, and 5 business days after approval to pay. An insurer that misses any of these deadlines owes 18 percent annual interest on the claim plus your reasonable attorney fees. Separate provisions punish deceptive settlement conduct with damages up to three times the actual loss when the insurer acted knowingly.
The Prompt-Payment Timeline, Step by Step
Chapter 542, Subchapter B of the Insurance Code sets out four checkpoints. The clock starts the moment your insurer receives notice of the claim.
- Acknowledgment — 15 calendar days. The insurer must acknowledge receipt of your claim, begin an investigation, and request any documents it needs from you. Eligible surplus lines carriers get 30 business days instead.1State of Texas. Texas Code Insurance Code 542.055 – Receipt of Notice of Claim
- Acceptance or rejection — 15 business days. Once the insurer has every document it asked for, it has 15 business days to notify you in writing whether the claim is accepted or rejected. A rejection has to state the reasons. If the insurer suspects arson, the window stretches to 30 days.2State of Texas. Texas Code Insurance Code 542.056 – Notice of Acceptance or Rejection of Claim
- Extension — up to 45 days. If the insurer cannot decide within the standard window, it must tell you why before that window expires. It then has until the 45th day after sending that notification to accept or reject.2State of Texas. Texas Code Insurance Code 542.056 – Notice of Acceptance or Rejection of Claim
- Payment — 5 business days. Once the insurer notifies you it will pay, the check must arrive within five business days. If payment is conditioned on something you need to do first, the five-day clock starts after you do it. Surplus lines insurers get 20 business days.3State of Texas. Texas Code Insurance Code 542.057 – Payment of Claim
Watch the unit of time. The 15-day acknowledgment is calendar days. The acceptance-or-rejection and payment deadlines are business days. Mixing them up is the easiest way to misjudge whether your insurer is actually late.
What the Insurer Owes When It Misses a Deadline
An insurer that violates any prompt-payment deadline owes you 18 percent annual interest on the unpaid claim amount, plus your reasonable and necessary attorney fees.4State of Texas. Texas Code Insurance Code 542.060 – Liability for Violation of Subchapter The statute preserves your right to prejudgment interest on top of that penalty, so the total exposure for a slow-paying carrier can climb quickly.
One exception matters for homeowners. If your claim falls under Chapter 542A (first-party property damage claims), the penalty rate changes. Instead of the flat 18 percent, the insurer owes simple interest calculated by adding five percentage points to a benchmark rate set under the Texas Finance Code.4State of Texas. Texas Code Insurance Code 542.060 – Liability for Violation of Subchapter That modified rate typically comes out lower than 18 percent, which matters if your claim stems from a storm or other property loss.
There is also a backstop for the insurer. If arbitration or litigation ultimately determines that the claim should not have been paid, the delay penalties do not apply.5State of Texas. Texas Code Insurance Code 542.058 – Delay in Payment of Claim
Before You Sue Over a Property Claim: The 61-Day Notice
If your claim is a first-party property damage claim and you plan to sue, Chapter 542A adds a step. At least 61 days before filing suit, you must send the insurer a written notice that includes a description of what the insurer did or failed to do, the specific dollar amount you believe is owed, and the attorney fees you have already incurred (calculated from actual time records at a customary hourly rate). The presuit notice is waived if your statute of limitations is about to expire or you are filing a counterclaim.6State of Texas. Texas Insurance Code INS 542A.003
Get the demand number right. Chapter 542A ties your ability to recover attorney fees to how close your court judgment ends up being to the amount you demanded in that notice. If the judgment comes in below 20 percent of the damages you alleged, the court cannot award you any attorney fees at all.7State of Texas. Texas Insurance Code Chapter 542A Inflating the demand can leave you paying your own lawyer even after winning.
Unfair Settlement Conduct and Treble Damages
Deadlines are only part of the picture. Chapter 541 prohibits insurers from using deceptive methods during the claims process, including misrepresenting what a policy covers, refusing to investigate a claim, and failing to move toward a fair settlement once the insurer’s responsibility is reasonably clear.8Justia. Texas Code Insurance Code Chapter 541 – Unfair Methods of Competition and Unfair or Deceptive Acts or Practices The insurer must give you a clear written explanation when it denies a claim. Lowballing an offer to pressure a financially stressed policyholder into accepting less can itself be evidence of bad faith.
Underneath these specific rules sits the duty of good faith and fair dealing. An insurer that cherry-picks evidence, ignores documentation supporting the claim, or stalls without a reasonable basis can be found to have acted in bad faith.
If you win a Chapter 541 suit, you recover actual damages, court costs, and reasonable attorney fees. When the insurer acted knowingly, the jury can award up to three times the actual damages. That treble-damage provision does not apply to lawsuits against the Texas Windstorm Insurance Association.9State of Texas. Texas Code Insurance Code 541.152 – Damages, Attorneys Fees, and Other Relief
How Long You Have to File Suit
Two different limitations periods can apply to the same denial, and the shorter one usually carries the stronger remedy.
- Bad faith and unfair practices (Chapter 541): Two years from the date of the unfair act, or two years from the date you discovered it (or reasonably should have), whichever is later.
- Breach of the insurance contract: Four years.
A single claim denial often supports both theories. Wait three years to file, and the bad-faith claim (with its treble-damage exposure and attorney fees) is gone even though the contract claim survives. Delay quietly strips away the most valuable remedy.
When Texas Rules Do Not Apply
Two categories of coverage sit outside this framework, and assuming Texas rules govern them is a common mistake.
Employer plans under ERISA. If your coverage comes through an employer-sponsored plan governed by the federal Employee Retirement Income Security Act, most of the Texas Insurance Code protections above do not apply. ERISA broadly preempts state insurance laws for employer-provided plans, which means you generally cannot bring a state bad-faith claim or collect the 18 percent penalty for late payment. Your remedies are limited to what federal law provides, and federal law does not allow punitive or consequential damages for benefit denials. Individually purchased policies, small-employer plans that are not self-funded, and most auto and homeowners policies remain subject to the Texas rules.
National Flood Insurance Program claims. Standard homeowners policies in Texas do not cover flood damage. If you carry an NFIP policy, your claim is governed by federal regulations rather than Chapter 542. You must submit a signed proof of loss within 60 calendar days of the flood, though FEMA may extend that during severe events.10Federal Emergency Management Agency. National Flood Insurance Manual Once the insurer receives your proof of loss and agrees on the amount, payment is due within 60 days.11Federal Emergency Management Agency. National Flood Insurance Program Claims Manual The Chapter 542 timelines and 18 percent penalty do not apply.