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Deadlines & Penalties for Texas Prompt Payment of Claims Act

The Prompt Payment Act of 2003 is incorporated into the Texas Insurance Code to protect your rights. It stops possible late payments or underpayments that are less than the full amount you actually deserve. It requires insurers to pay claims within 60 days of receiving all of the necessary information. Failure to abide by these guidelines could result in significant penalties for the insurance company.

At the Law Office of Sandy McCorquodale P.C., our dedicated attorneys can help you if you are dealing with a late payment or underpayment. We help navigate the Texas Prompt Payment of Claims Act and get you the compensation you deserve.

What is the Texas Prompt Payment of Claims Act of 2003?

The Texas Prompt Payment of Claims Act (TPPCA) was passed in 2003 to address a recurring problem: insurance companies that paid out late or in lower than required amounts. It set specific guidelines to protect insureds against continued abuse by these companies.

The TPPCA, often called the Prompt Payment Act for short, created penalties if the insurance company failed to follow the new guidelines. It set different penalties for underpayments and late payments, often based on the severity of the conduct. This grants insureds the right to their full amount, but also additional compensation to help deter this kind of conduct in the future.

Penalties for Late Insurance Payments

If the insurance company pays out your claim late, you are entitled to attorney fees and costs. You are also entitled to statutory penalty depending on how late the payment was made:

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  • Within 45 Days of the Deadline: The penalty is the lesser of $100,000 or 50% of the difference between the contracted rate and the billed rate.
  • Between 46 and 91 Days of the Deadline: The penalty is now the lesser of $200,000 or 100% of the difference between the contracted rate and the billed rate.
  • Between 91-270 Days of the Deadline: The penalty is now the lesser of $200,000 or 100% of the difference between the contracted rate and billed rate. In addition, you will also get 18% annual interest on that penalty amount, which accrues from the date the payment was due.

These significant penalties should help deter late payments. However, you could be entitled to this compensation if your insurance payment was late.

Penalties for Underpayments

An underpayment occurs when the insurance company does not pay you the full amount to which you are entitled from your proper claim. The insurance company may partially pay a fully payable claim, usually in an attempt to get you to settle for this lower amount. This was a common tactic before the Prompt Pay Act was enacted, but is now subject to significant penalties.

The penalties are based on how long it takes the insurance company to pay the remainder of your claim. The penalties are the same as for late payments, and the same penalties from above apply here. Even though you were eventually paid the full amount, insurance companies can be penalized for taking too long to do so and failing to make full payment in a timely fashion.

Seek Compensation Under the Texas Prompt Payment of Claims Act

Our Texas insurance litigation attorneys are highly experienced in handling Texas Prompt Payment of Claims Act lawsuits. We help you investigate your late payment or underpayment and determine what compensation you are owed. Our experienced team can help you prove your case and seek compensation the insurance company owes for their mistakes.

The Law Office of Sandy McCorquodale P.C. stands ready to fight with you. Contact us today for a consultation of your Texas Prompt Payment Act case.