Texas Prompt Payment of Claims Act deadlines

Deadlines are easy to test and easy to forget, which makes the Texas Prompt Payment of Claims Act (Texas Insurance Code 542.055 to 542.060) a favorite on the Texas-specific half of the licensing exams. It sets a clock for how quickly an insurer must respond to and pay a claim. Here is the sequence, in the order the clock runs.

The sequence

1. Within 15 days after notice of a claim, the insurer must acknowledge it, begin investigating, and request the items it needs from the claimant (542.055). For surplus lines insurers this step is 30 business days.
2. Within 15 business days after receiving all required items, the insurer must accept or reject the claim in writing, with reasons if it rejects (542.056). If the insurer suspects arson, this is 30 days.
3. If it needs more time, the insurer must tell the claimant why, and then decide within 45 days.
4. Within 5 business days after notifying acceptance, the insurer must pay (542.057).

Notice that the first deadline is in calendar days and the next two are in business days. That mismatch is exactly what an exam question hides in.

What happens when an insurer is late

If payment is delayed beyond the statutory period, or beyond 60 days where none is specified, a penalty applies (542.058). The penalty is the claim amount plus 18% per year interest plus reasonable attorney's fees (542.060). A life insurer that faces an adverse bona fide claim to the proceeds must pay or file an interpleader within 90 days.

Related unfair claim settlement practices

The same chapters list conduct that counts as unfair: knowingly misrepresenting facts or policy provisions, not acknowledging communications promptly, having no reasonable standards for prompt investigation, not attempting a good-faith settlement when liability is reasonably clear, and compelling suits by offering substantially less than the claim is ultimately worth (542.003). An insurer must keep a complaint record for the preceding 3 years or since its last TDI exam, whichever is shorter (542.005).

How to remember it

Chunk it as a list of numbers with units: 15 days, 15 business days, 45 days, 5 business days. Then write each as a scenario: "The insurer received all requested documents on Monday. By when must it accept or reject?" Retrieval practice on the unit, days or business days, is what sticks. How to study for the Texas general lines P&C exam explains why scenario cards beat rereading, and Texas insurance law: the underestimated half of the P&C exam covers the rest of the state material.

Both exams test it

These provisions apply across lines, so life and health candidates meet them too. Practice them in Encodr's free Texas Property and Casualty and Texas Life and Health courses, and use the exam pass score calculator to size your margin. Other courses are on the exam prep hub.