Frequently Asked Questions
- If my insurance carrier denies my claim do I have any other rights?
- Once I file a claim how long does my insurance carrier have to pay it?
- What is the difference between a “first party” and a “third party” claim.
- What is “Bad Faith”?
- What is the “Stowers Doctrine” and what does it mean to “Stowerize” an insurance carrier?
If my insurance carrier denies my claim do I have any other rights?
If you are an insured policy holder and your insurance carrier denies your claim, the road does not necessarily end there. The Texas Insurance Code Section 542.056 requires that an if insurance carrier denies your claim, it must do so in writing and state the specific reasons for the rejection based either upon the law in Texas, or the policy provisions themselves. If you receive this denial letter and still believe that you presented a valid claim to your carrier for payment which was subsequently denied, you can file a lawsuit and ask the court for force your insurance carrier to accept liability under the policy. If you find yourself in this situation, it is in your best interest to promptly speak with an attorney in order to protect your rights.
Once I file a claim how long does my insurance carrier have to pay it?
The procedures for handling the claims process are strictly set out in the Texas Insurance Code in Chapter 542. In order to trigger this statute otherwise known as the “prompt payment statute” you must first provide your carrier with a written notification which reasonably sets out the facts which support the claim. This can be accomplished either by sending your insurance carrier a letter or by simply signing a claim form which has been filled out by your adjuster. Next, once the written notice is received, the timetables in the prompt payment statute kick in and the carrier has to comply with the following timelines:
- Within 15 days of receiving your claim notice your carrier must acknowledge receipt of the claim, either in writing or orally, commence an investigation of the claim, and request from you any other items that it reasonably believes will be required to investigate your claim.
- Acceptance or rejection. Then, within 15 days after your carrier receives everything it needs to fully investigate your claim, your insurance carrier must notify you, in writing, that it will accept or reject your claim. If the claim is being rejected, the carrier must state the reasons for the rejection based upon your policy provisions and Texas law and in writing. Also, within the second 15 days period your carrier may request additional information from you that it needs to fully investigate your claim. If your carrier does do this, it will be given an additional time of 45 days from the date it gives you notice of such.
- Payment. If your claim is accepted by your carrier, then your carrier must pay your claim no later than the 5th business day after it notifies you that the claim has been accepted. A failure of your insurance carrier to comply with any of these timelines which are mentioned above results in a violation of the statutes and subjects the carrier to a statutory penalty of an additional 18% of the amount due on the claim under the policy.
What is the difference between a “first party” and a “third party” claim.
A claim is considered a “first party” claim when it is made by an actual policy holder against his or her insurance carrier. A claim is considered a “third party” claim when it is made by a party who is not the primary policyholder, but who may be considered a covered beneficiary under the policyholder;s insurance policy. For example, let;s assume that the owner of a car backs his or her vehicle into a telephone pole. If that owner carries an automobile insurance policy, and he or she files a claim with his insurance carrier to repair the car, this would be an example of a “first party” insurance claim. However, let;s assume that very same owner drives his or her car down the highway and causes an accident. If the driver in the other car, whom our owner has injured, files a claim against our owner’s insurance policy, this is an example of a “third party” insurance claim.
What is “Bad Faith”?
Put simply, in Texas an insurance company has a legal obligation to its policyholders to deal fairly and in good faith with them. Texas courts have held that “dealing fairly and in good faith” means that an insurance carrier has a duty to honor the terms of its insurance policy in a reasonable manner. Specifically, this means that an insurance carrier has the legal duty to establish reasonable claims practices that do not violate the law and to investigate an insured’s claim thoroughly and in good faith, and only deny coverage after a thorough investigation reveals that there is a reasonable basis for doing so. Put very simply, an insurance policy is a contract between your insurance carrier and yourself. Any time that the insurance carrier refuses to comply with your policy or accept coverage of a valid claim you make on the policy, it has committed a breach of that contract. If your carrier breaches your contract in an unreasonable manner, then it has in effect acted in “bad faith”. Therefore, essentially when a Plaintiff files a “bad faith” lawsuit against his or her insurance carrier that Plaintiff is merely asking a jury of 12 of his fellow peers to decide whether or not that Plaintiff’s insurance carrier treated him fairly or merely acted in bad faith.
What is the “Stowers Doctrine” and what does it mean to “Stowerize” an insurance carrier?
In 1929 in a case called G. H. Stowers Furniture Co. v. American Indemnity Co., 15 S. W. 2d 544 (Tex. Comm. 1929, holding approved) the Texas Supreme Court established that a liability insurance carrier has a duty to engage in reasonable settlement negotiations with potential claimants to protect a policyholder from any potential judgment in excess of the limits of that holder’s policy, and to deal fairly and in good faith with its policyholder with all aspects related to lawsuits filed against the policyholder by potential claimants. Specifically, our Supreme Court held that in fulfilling these duties, an insurer has the duty to exercise reasonable care in responding to a settlement demand that is within policy limits. An example would go something like this: you are the owner of a 50 acre farm in East Texas. You have a valid liability policy that you purchased from a major insurance carrier which offers a protection of up to $100,000.00 for any person injured on your property. Next, you invite a friend over for a bar-b-que, but while your friend is there a large limb falls out of a tree and hits your friend on his head, breaking his neck and paralyzing him. As such, your friend incurs $150,000.00 in medical bills relating to his treatment. He then files a claim with your insurance carrier seeking reimbursement for his medical expenses up to your $100,000.00 policy limits. If your insurance carrier decides to pay this claim in full, all is well and you can still remain friends. However, if your insurance carrier chooses to deny his claim, you friend will sue you for the full $150,000.00, even though he made a settlement offer with your insurance carrier for only $100,000.00. If he is successful, you now face a judgment wherein you are required to pay him $150,000.00. The Stowers doctrine says that if your friend demanded in a written notice that your insurance carrier settle his claim within the $100,000.00 policy limits, and any other reasonably prudent insurance company would have settled the claim, but yours didn’t, then you, as the policyholder, may sue your insurance carrier in order to be reimbursed for the full amount of your friend’s $150,000.00 judgment as punishment to your carrier for not fulfilling its duties to you and settling this valid claim within your policy limits. The term “Stowerized” simply means the process of providing written notice to an insurance carrier of a claimant’s demand to settle a valid claim within policy limits.