The Texas Prompt Payment of Claims Act, set out in Chapter 542 of the Texas Insurance Code, gives your insurer strict deadlines to acknowledge, investigate, decide, and pay a first-party claim, and charges 18% annual interest plus attorney’s fees when those deadlines slip. It applies to claims you file against your own policy with any insurer authorized to do business in Texas. Third-party liability claims that someone else brings against your policy fall outside it.
The Four Deadlines Your Insurer Must Meet
The Act splits claim handling into stages, and each stage runs on its own clock.
15 Days to Acknowledge and Start Investigating
Within 15 days of receiving notice of your claim, the insurer must acknowledge it, begin investigating, and request any documents or information it reasonably believes it needs from you.1Justia. Texas Insurance Code 542.055 – Receipt of Notice of Claim The insurer can ask for more later if the investigation turns up new needs, but the initial request has to go out inside that window. Eligible surplus lines insurers get 30 business days instead.
15 Business Days to Accept or Reject
Once the insurer has what it needs, it has 15 business days to accept or reject the claim. If it can’t decide in that time, it must send you a written explanation of why more time is needed and what additional information it still wants. That extension pushes the deadline to 45 days from the date the insurer notifies you of the delay.
5 Business Days to Pay After Acceptance
When the insurer accepts the claim, payment must follow within five business days. Surplus lines insurers have 20 business days. Life insurers that delay payment past 90 days face the same damages and penalties as any other carrier.2State of Texas. Texas Insurance Code 542.058 – Delay in Payment of Claim
What You Can Collect When a Deadline Is Missed
If your insurer is liable on the claim and misses any of these deadlines, it owes you interest at 18% per year on the unpaid amount, plus reasonable and necessary attorney’s fees.3State of Texas. Texas Insurance Code 542.060 – Liability for Violation of Subchapter The interest is damages on top of whatever the policy pays out. Attorney’s fees are taxed as part of the case costs if you have to sue.
The Act’s remedies stack. The statute says its penalties exist in addition to any other remedy available under law or common law, so bad faith claims, Deceptive Trade Practices Act claims, and other statutory theories remain available.4State of Texas. Texas Insurance Code 542.061 – Remedies Not Exclusive
One important caveat: penalty interest requires that the insurer actually be liable on the claim. A late but legitimate denial doesn’t trigger the 18% rate. The delay only costs the insurer money if you can also establish that the claim should have been paid.
Extra Rules for Property Damage Claims
If your claim involves damage to or loss of covered property under a first-party policy, Chapter 542A layers additional requirements on top of the standard rules. It was added by HB 1774 in 2017, and it changes both what you must do before suing and what you can collect.
Send a Pre-Suit Notice at Least 61 Days Before Filing
You must send the insurer written notice at least 61 days before filing a lawsuit on a first-party property claim.5State of Texas. Texas Insurance Code 542A.003 – Presuit Notice The notice has to describe the acts or omissions behind the claim, state the specific dollar amount you believe the insurer owes, and identify the attorney’s fees incurred to date based on contemporaneous time records. File suit early and the court will dismiss the case without prejudice.
Two narrow exceptions apply: the notice is not required if the statute of limitations is about to expire and giving notice is impracticable, or if the claim is asserted as a counterclaim.
A Lower Penalty Interest Rate
For claims that fall under Chapter 542A, the 18% rate is replaced by simple interest at five percentage points above the statutory post-judgment interest rate under Section 304.003 of the Finance Code, determined on the date of judgment. In practice this comes in well below 18%. Interest runs from the date the claim should have been paid.
Attorney’s Fees Are Tied to Your Demand
Chapter 542A caps attorney’s fees by comparing the trial award to the amount you demanded in your pre-suit notice. If the judgment reaches at least 80% of your demand, you recover full attorney’s fees. If it comes in below 20%, the court awards none. Between those thresholds, the fees are prorated. Inflating the demand figure or skipping the notice altogether can wipe out fee recovery even when you win the underlying claim.
When Appraisal Doesn’t Erase the Penalty
Many Texas policies contain an appraisal clause letting either side demand a neutral valuation. Insurers sometimes invoke appraisal after initially disputing a claim, pay the appraised figure, and argue that paying through appraisal wipes out any prompt-payment liability. In Barbara Technologies Corp. v. State Farm Lloyds (2019), the Texas Supreme Court rejected that argument. The court held that paying through appraisal neither establishes the insurer’s liability under the policy nor immunizes the insurer from Act penalties.6Justia. Barbara Technologies Corp. v. State Farm Lloyds Two things still have to be shown: that the insurer was liable under the policy and that it violated a deadline. The appraisal payment settles neither question by itself.
Policies the Act Doesn’t Reach
Section 542.053 carves several kinds of coverage out of the Act entirely:7State of Texas. Texas Insurance Code 542.053 – Exception
- Workers’ compensation insurance, which runs on its own statute
- Mortgage guaranty insurance
- Title insurance
- Fidelity, surety, and guaranty bonds
- Marine insurance as defined by Section 1807.001
- Health maintenance organizations, with a narrow exception under Section 1271.005(c)
- Preferred provider benefit plan claims governed by Subchapter C of Chapter 1301
Surplus lines insurance is not excluded, though its deadlines run longer at each stage.
How to Enforce Your Rights
The simplest starting point when an insurer misses a deadline is a complaint to the Texas Department of Insurance. You can call the TDI Help Line at 800-252-3439 or file through the online Complaint Portal.8Texas Department of Insurance. Getting Help With an Insurance Complaint TDI will investigate whether the insurer violated the law, and an open complaint sometimes prompts action on its own.
When that doesn’t resolve things, litigation is where the Act’s teeth show. A lawsuit can recover the unpaid claim, penalty interest, and attorney’s fees. If your claim involves property damage, send the Chapter 542A pre-suit notice first, make the dollar demand carefully, and wait out the 61 days. Mediation or a policy appraisal can move faster, and neither waives penalties for delays that already happened.