CHAPTER 542. PROCESSING AND SETTLEMENT OF CLAIMS - Texas Statutes

INSURANCE CODE

TITLE 5. PROTECTION OF CONSUMER INTERESTS

SUBTITLE C. DECEPTIVE, UNFAIR, AND PROHIBITED PRACTICES

CHAPTER 542. PROCESSING AND SETTLEMENT OF CLAIMS

SUBCHAPTER A. UNFAIR CLAIM SETTLEMENT PRACTICES

Sec. 542.001. SHORT TITLE. This subchapter may be cited as the

Unfair Claim Settlement Practices Act.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.002. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to the following insurers whether organized as a

proprietorship, partnership, stock or mutual corporation, or

unincorporated association:

(1) a life, health, or accident insurance company;

(2) a fire or casualty insurance company;

(3) a hail or storm insurance company;

(4) a title insurance company;

(5) a mortgage guarantee company;

(6) a mutual assessment company;

(7) a local mutual aid association;

(8) a local mutual burial association;

(9) a statewide mutual assessment company;

(10) a stipulated premium company;

(11) a fraternal benefit society;

(12) a group hospital service corporation;

(13) a county mutual insurance company;

(14) a Lloyd's plan;

(15) a reciprocal or interinsurance exchange; and

(16) a farm mutual insurance company.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.003. UNFAIR CLAIM SETTLEMENT PRACTICES PROHIBITED. (a)

An insurer engaging in business in this state may not engage in

an unfair claim settlement practice.

(b) Any of the following acts by an insurer constitutes unfair

claim settlement practices:

(1) knowingly misrepresenting to a claimant pertinent facts or

policy provisions relating to coverage at issue;

(2) failing to acknowledge with reasonable promptness pertinent

communications relating to a claim arising under the insurer's

policy;

(3) failing to adopt and implement reasonable standards for the

prompt investigation of claims arising under the insurer's

policies;

(4) not attempting in good faith to effect a prompt, fair, and

equitable settlement of a claim submitted in which liability has

become reasonably clear;

(5) compelling a policyholder to institute a suit to recover an

amount due under a policy by offering substantially less than the

amount ultimately recovered in a suit brought by the

policyholder;

(6) failing to maintain the information required by Section

542.005; or

(7) committing another act the commissioner determines by rule

constitutes an unfair claim settlement practice.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.004. EXAMINATION OF TAX RETURNS PROHIBITED. (a) An

insurer regulated under this code may not require a claimant, as

a condition of settling a claim, to produce the claimant's

federal income tax returns for examination or investigation by

the insurer unless:

(1) the claimant is ordered to produce the tax returns by a

court; or

(2) the claim involves:

(A) a fire loss; or

(B) a loss of profits or income.

(b) An insurer that violates this section commits:

(1) a prohibited practice under this subchapter; and

(2) a deceptive trade practice under Subchapter E, Chapter 17,

Business & Commerce Code.

(c) A claimant affected by a violation of this section is

entitled to remedies under Subchapter E, Chapter 17, Business

& Commerce Code.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.005. RECORD OF COMPLAINTS. (a) In this section,

"complaint" means any written communication primarily expressing

a grievance.

(b) An insurer shall maintain a complete record of all

complaints received by the insurer during the preceding three

years or since the date of the insurer's last examination by the

department, whichever period is shorter. The record must

indicate:

(1) the total number of complaints;

(2) the classification of complaints by line of insurance;

(3) the nature of each complaint;

(4) the disposition of the complaints; and

(5) the time spent processing each complaint.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.006. PERIODIC REPORTING REQUIREMENT. (a) In this

section, "claim" means a written claim filed by a resident of

this state with an insurer engaging in business in this state.

(b) If, based on complaints of unfair claim settlement practices

under this subchapter, the department finds that an insurer

should be subjected to closer supervision with respect to the

insurer's claim settlement practices, the department may require

the insurer to file periodic reports at intervals the department

determines necessary.

(c) The department shall devise a statistical plan for the

periodic reports required under Subsection (b). The plan must

contain at a minimum:

(1) the following claims information for the preceding 12 months

or from the date of the insurer's last periodic report, whichever

period is shorter:

(A) the total number of claims filed, including for each

individual claim:

(i) the original amount filed for by the insured; and

(ii) the classification by line of insurance;

(B) the total number of claims denied;

(C) the total number of claims settled, including for each

individual claim:

(i) the original amount filed for by the insured;

(ii) the amount settled; and

(iii) the classification by line of insurance; and

(D) the total number of claims for which suits have been

instituted against the insurer, including for each individual

claim:

(i) the original amount filed for by the insured;

(ii) the amount of final adjudication;

(iii) the reason for the suit; and

(iv) the classification by line of insurance; and

(2) the information required to be maintained by the insurer

under Section 542.005.

(d) If at any time the department determines that the

requirement to file a periodic report is no longer necessary to

accomplish the objectives of this subchapter, the department may

rescind the reporting requirement.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.007. COMPARISON OF CERTAIN INSURERS TO MINIMUM STANDARD

OF PERFORMANCE; INVESTIGATION. (a) The department shall compile

the information received from an insurer under Section 542.006 in

a manner that enables the department to compare the insurer's

performance to a minimum standard of performance adopted by the

commissioner.

(b) If the department determines that the insurer does not meet

the minimum standard of performance, the department shall

investigate the insurer to determine the reason, if any, that the

insurer does not meet the minimum standard.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.008. COMPLAINTS AGAINST INSURERS; INVESTIGATION. (a)

The department shall establish a system for receiving and

processing individual complaints alleging a violation of this

subchapter by an insurer regardless of whether the insurer is

required to file a periodic report under Section 542.006.

(b) The department shall investigate an insurer if the

department determines that:

(1) based on the number and type of complaints against an

insurer, the insurer does not meet the minimum standard of

performance adopted under Section 542.007; or

(2) the number and type of complaints against the insurer are

not proportionate to the number and type of complaints against

other insurers writing similar lines of insurance.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.009. REVIEW OF INVESTIGATION RESULTS; HEARING. (a) On

receiving the results of an investigation instituted under

Section 542.007 or 542.008, the department shall review those

results considering the standards of this subchapter to determine

whether further action is necessary.

(b) If the department determines that further action is

necessary, the department shall:

(1) set a date for a hearing to review the alleged violations of

this subchapter; and

(2) notify the insurer of:

(A) the date of the hearing; and

(B) the nature of the charges.

(c) The department shall provide the notice required by

Subsection (b)(2) not later than the 30th day before the date of

the hearing.

(d) At a hearing under this section, the insurer may present the

insurer's case with the assistance of counsel.

(e) Evidence relating to the number and type of complaints or

claims prepared by the department from information received or

compiled under Section 542.006, 542.007, or 542.008 is admissible

in evidence at:

(1) the hearing; and

(2) any related judicial proceeding.

(f) The hearing shall be conducted in accordance with this code

and rules adopted by the commissioner.

(g) An insurer may not be found to be in violation of this

subchapter solely because of the number and type of complaints or

claims against the insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.010. CEASE AND DESIST ORDER; ENFORCEMENT. (a) If the

department determines that an insurer has violated this

subchapter, the department shall issue a cease and desist order

to the insurer directing the insurer to stop the unlawful

practice.

(b) If the insurer fails to comply with the cease and desist

order, the department may:

(1) revoke or suspend the insurer's certificate of authority; or

(2) limit, regulate, and control:

(A) the insurer's line of business;

(B) the insurer's writing of policy forms or other particular

forms; and

(C) the volume of the insurer's:

(i) line of business; or

(ii) writing of policy forms or other particular forms.

(c) The department shall exercise authority under this section

to the extent that the department determines is necessary to

obtain the insurer's compliance with the cease and desist order.

(d) At the request of the department, the attorney general shall

assist the department in enforcing the cease and desist order.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.011. TIME LIMIT TO APPEAL. An insurer affected by a

ruling or order of the department under this subchapter may

appeal the ruling or order, in accordance with Subchapter D,

Chapter 36, by filing a petition for judicial review not later

than the 20th day after the date of the ruling or order.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.012. ATTORNEY'S FEES. The department is entitled to

reasonable attorney's fees if judicial action is necessary to

enforce an order of the department under this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.013. PERSONNEL. The department may hire employees and

examiners as needed to enforce this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.014. RULES. The commissioner shall adopt reasonable

rules as necessary to implement and augment the purposes and

provisions of this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER B. PROMPT PAYMENT OF CLAIMS

Sec. 542.051. DEFINITIONS. In this subchapter:

(1) "Business day" means a day other than a Saturday, Sunday, or

holiday recognized by this state.

(2) "Claim" means a first-party claim that:

(A) is made by an insured or policyholder under an insurance

policy or contract or by a beneficiary named in the policy or

contract; and

(B) must be paid by the insurer directly to the insured or

beneficiary.

(3) "Claimant" means a person making a claim.

(4) "Notice of claim" means any written notification provided by

a claimant to an insurer that reasonably apprises the insurer of

the facts relating to the claim.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.052. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to any insurer authorized to engage in business as an

insurance company or to provide insurance in this state,

including:

(1) a stock life, health, or accident insurance company;

(2) a mutual life, health, or accident insurance company;

(3) a stock fire or casualty insurance company;

(4) a mutual fire or casualty insurance company;

(5) a Mexican casualty insurance company;

(6) a Lloyd's plan;

(7) a reciprocal or interinsurance exchange;

(8) a fraternal benefit society;

(9) a stipulated premium company;

(10) a nonprofit legal services corporation;

(11) a statewide mutual assessment company;

(12) a local mutual aid association;

(13) a local mutual burial association;

(14) an association exempt under Section 887.102;

(15) a nonprofit hospital, medical, or dental service

corporation, including a corporation subject to Chapter 842;

(16) a county mutual insurance company;

(17) a farm mutual insurance company;

(18) a risk retention group;

(19) a purchasing group;

(20) an eligible surplus lines insurer; and

(21) except as provided by Section 542.053(b), a guaranty

association operating under Chapter 462 or 463.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2D.007, eff. April 1, 2009.

Sec. 542.053. EXCEPTION. (a) This subchapter does not apply

to:

(1) workers' compensation insurance;

(2) mortgage guaranty insurance;

(3) title insurance;

(4) fidelity, surety, or guaranty bonds;

(5) marine insurance as defined by Section 1807.001; or

(6) a guaranty association created and operating under Chapter

2602.

(b) A guaranty association operating under Chapter 462 or 463 is

not subject to the damage provisions of Section 542.060.

(c) This subchapter does not apply to a health maintenance

organization except as provided by Section 1271.005(c).

(d) This subchapter does not apply to a claim governed by

Subchapter C, Chapter 1301.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.009(a), eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2D.008, eff. April 1, 2009.

Sec. 542.054. LIBERAL CONSTRUCTION. This subchapter shall be

liberally construed to promote the prompt payment of insurance

claims.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.055. RECEIPT OF NOTICE OF CLAIM. (a) Not later than

the 15th day or, if the insurer is an eligible surplus lines

insurer, the 30th business day after the date an insurer receives

notice of a claim, the insurer shall:

(1) acknowledge receipt of the claim;

(2) commence any investigation of the claim; and

(3) request from the claimant all items, statements, and forms

that the insurer reasonably believes, at that time, will be

required from the claimant.

(b) An insurer may make additional requests for information if

during the investigation of the claim the additional requests are

necessary.

(c) If the acknowledgment of receipt of a claim is not made in

writing, the insurer shall make a record of the date, manner, and

content of the acknowledgment.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.056. NOTICE OF ACCEPTANCE OR REJECTION OF CLAIM. (a)

Except as provided by Subsection (b) or (d), an insurer shall

notify a claimant in writing of the acceptance or rejection of a

claim not later than the 15th business day after the date the

insurer receives all items, statements, and forms required by the

insurer to secure final proof of loss.

(b) If an insurer has a reasonable basis to believe that a loss

resulted from arson, the insurer shall notify the claimant in

writing of the acceptance or rejection of the claim not later

than the 30th day after the date the insurer receives all items,

statements, and forms required by the insurer.

(c) If the insurer rejects the claim, the notice required by

Subsection (a) or (b) must state the reasons for the rejection.

(d) If the insurer is unable to accept or reject the claim

within the period specified by Subsection (a) or (b), the

insurer, within that same period, shall notify the claimant of

the reasons that the insurer needs additional time. The insurer

shall accept or reject the claim not later than the 45th day

after the date the insurer notifies a claimant under this

subsection.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.057. PAYMENT OF CLAIM. (a) Except as otherwise

provided by this section, if an insurer notifies a claimant under

Section 542.056 that the insurer will pay a claim or part of a

claim, the insurer shall pay the claim not later than the fifth

business day after the date notice is made.

(b) If payment of the claim or part of the claim is conditioned

on the performance of an act by the claimant, the insurer shall

pay the claim not later than the fifth business day after the

date the act is performed.

(c) If the insurer is an eligible surplus lines insurer, the

insurer shall pay the claim not later than the 20th business day

after the notice or the date the act is performed, as applicable.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.058. DELAY IN PAYMENT OF CLAIM. (a) Except as

otherwise provided, if an insurer, after receiving all items,

statements, and forms reasonably requested and required under

Section 542.055, delays payment of the claim for a period

exceeding the period specified by other applicable statutes or,

if other statutes do not specify a period, for more than 60 days,

the insurer shall pay damages and other items as provided by

Section 542.060.

(b) Subsection (a) does not apply in a case in which it is found

as a result of arbitration or litigation that a claim received by

an insurer is invalid and should not be paid by the insurer.

(c) A life insurer that receives notice of an adverse, bona fide

claim to all or part of the proceeds of the policy before the

applicable payment deadline under Subsection (a) shall pay the

claim or properly file an interpleader action and tender the

benefits into the registry of the court not later than the 90th

day after the date the insurer receives all items, statements,

and forms reasonably requested and required under Section

542.055. A life insurer that delays payment of the claim or the

filing of an interpleader and tender of policy proceeds for more

than 90 days shall pay damages and other items as provided by

Section 542.060 until the claim is paid or an interpleader is

properly filed.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

833, Sec. 1, eff. June 19, 2009.

Sec. 542.059. EXTENSION OF DEADLINES. (a) A court may grant a

request by a guaranty association for an extension of the periods

under this subchapter on a showing of good cause and after

reasonable notice to policyholders.

(b) In the event of a weather-related catastrophe or major

natural disaster, as defined by the commissioner, the

claim-handling deadlines imposed under this subchapter are

extended for an additional 15 days.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.060. LIABILITY FOR VIOLATION OF SUBCHAPTER. (a) If an

insurer that is liable for a claim under an insurance policy is

not in compliance with this subchapter, the insurer is liable to

pay the holder of the policy or the beneficiary making the claim

under the policy, in addition to the amount of the claim,

interest on the amount of the claim at the rate of 18 percent a

year as damages, together with reasonable attorney's fees.

(b) If a suit is filed, the attorney's fees shall be taxed as

part of the costs in the case.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.061. REMEDIES NOT EXCLUSIVE. The remedies provided by

this subchapter are in addition to any other remedy or procedure

provided by law or at common law.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER C. PROVIDING CERTAIN CLAIMS INFORMATION ON REQUEST

Sec. 542.101. REQUEST BY NAMED INSURED UNDER LIABILITY INSURANCE

POLICY. (a) In this section, "liability insurance" means:

(1) general liability insurance;

(2) professional liability insurance, including medical

professional liability insurance;

(3) commercial automobile liability insurance; and

(4) the liability portion of commercial multiperil insurance.

(b) On written request of a named insured under a liability

insurance policy, the insurer that wrote the policy shall provide

to the insured information relating to the disposition of a claim

filed under the policy. The information must include:

(1) the name of each claimant;

(2) details relating to:

(A) the amount paid on the claim;

(B) settlement of the claim; or

(C) judgment on the claim;

(3) details as to how the claim, settlement, or judgment is to

be paid; and

(4) any other information required by rule of the commissioner

that the commissioner considers necessary to adequately inform an

insured with regard to any claim under a liability insurance

policy.

(c) A request for information under this section must be

transmitted to the insurer not later than six months after the

date of disposition of the claim.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.102. REQUEST BY POLICYHOLDER UNDER PROPERTY AND

CASUALTY INSURANCE POLICY. (a) On written request of a

policyholder, an insurer that writes property and casualty

insurance in this state shall provide the policyholder with a

list of claims charged against the policy and payments made on

each claim.

(b) This section does not apply to a workers' compensation

insurance policy subject to Section 2051.151.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2D.009, eff. April 1, 2009.

Sec. 542.103. DEADLINE FOR PROVIDING REQUESTED INFORMATION. (a)

An insurer shall provide the information requested under this

subchapter in writing not later than the 30th day after the date

the insurer receives the request for the information.

(b) For purposes of this section, information is considered to

be provided on the date the information is deposited with the

United States Postal Service or is personally delivered.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.104. RULES. The commissioner may by rule prescribe

forms for requesting information and for providing requested

information under this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER C-1. REQUEST FOR CLAIMS INFORMATION BY CERTAIN

OFFICIALS

Sec. 542.131. REQUEST BY CERTAIN OFFICIALS ENGAGED IN CRIMINAL

INVESTIGATION. (a) This section applies only to a claim for a

burglary or robbery loss or a death claim seeking life insurance

proceeds that is filed with an insurance company on or after

September 1, 2001.

(b) In the course of a criminal investigation and subject to

Subsection (c), the state fire marshal, the fire marshal of a

political subdivision of this state, the chief of a fire

department in this state, a chief of police of a municipality in

this state, or a sheriff in this state may request in writing

that an insurance company investigating a claimed burglary or

robbery loss or a death claim seeking life insurance proceeds

release information in the company's possession that relates to

that claimed loss. The company shall release the information to

any official authorized to request the information under this

subsection if the company has reason to believe that the

insurance claim is false or fraudulent.

(c) An official who requests information under this section may

not request anything other than:

(1) an insurance policy relevant to an insurance claim under

investigation and the application for that policy;

(2) policy premium payment records;

(3) the history of the insured's previous claims; and

(4) material relating to the investigation of the insurance

claim, including:

(A) statements of any person;

(B) proof of loss; or

(C) other relevant evidence.

(d) This section does not authorize a public official or agency

to adopt or require any form of periodic report by an insurance

company.

(e) In the absence of fraud or malice, an insurance company or a

person who releases information on behalf of an insurance company

is not liable for damages in a civil action or subject to

criminal prosecution for an oral or written statement made, or

any other action taken, that relates to the information required

to be released under this section.

(f) An official or department employee receiving information

under this section shall maintain the confidentiality of the

information until the information is required to be released

during a criminal or civil proceeding.

(g) An insurance company or the company's representative may not

intentionally refuse to release to an official described by

Subsection (b) the information required to be released to that

official under this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 1D.001, eff. April 1, 2009.

SUBCHAPTER D. NOTICE OF SETTLEMENT OF CLAIM UNDER CASUALTY

INSURANCE POLICY

Sec. 542.151. APPLICABILITY OF SUBCHAPTER. This subchapter

applies only to the settlement of a claim under a casualty

insurance policy that is delivered, issued for delivery, or

renewed in this state, including a policy written by:

(1) a county mutual insurance company;

(2) a Lloyd's plan;

(3) an eligible surplus lines insurer; or

(4) a reciprocal or interinsurance exchange.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.152. EXCEPTION. This subchapter does not apply to:

(1) a casualty insurance policy that requires the insured's

consent to settle a claim against the insured;

(2) fidelity, surety, or guaranty bonds; or

(3) marine insurance as defined by Section 1807.001.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Amended by:

Acts 2005, 79th Leg., Ch.

728, Sec. 11.010(a), eff. September 1, 2005.

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2D.010, eff. April 1, 2009.

Sec. 542.153. NOTICE REQUIRED. (a) Not later than the 10th day

after the date an initial offer to settle a claim against a named

insured under a casualty insurance policy issued to the insured

is made, the insurer shall notify the insured in writing of the

offer.

(b) Not later than the 30th day after the date a claim against a

named insured under a casualty insurance policy issued to the

insured is settled, the insurer shall notify the insured in

writing of the settlement.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.154. RULES. The commissioner may adopt rules to

implement this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER E. RECOVERY OF DEDUCTIBLE FROM THIRD PARTIES UNDER

CERTAIN AUTOMOBILE INSURANCE POLICIES

Sec. 542.201. PURPOSE. This subchapter is intended to encourage

insurers to take appropriate and necessary steps to collect from

third parties or the insurers of the third parties.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.202. DEFINITION. In this subchapter, "action" includes

taking various actions such as reasonable and diligent collection

efforts, mediation, arbitration, and litigation against a

responsible third party or the third party's insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.203. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to any insurer that delivers, issues for delivery, or

renews in this state a private passenger automobile insurance

policy, including a reciprocal or interinsurance exchange, mutual

insurance company, association, Lloyd's plan, or other insurer.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.204. ACTION TO RECOVER DEDUCTIBLE. (a)

Notwithstanding any other provision of this code and except as

provided by Subsection (b), if an insurer is liable to an insured

for a claim that is subject to a deductible payable by the

insured and a third party may be liable to the insurer or the

insured for the amount of the deductible, the insurer shall:

(1) take action to recover the deductible against the third

party not later than the first anniversary of the date the

insured's claim is paid; or

(2) pay the amount of the deductible to the insured.

(b) An insurer is not required to take action or pay the amount

of the deductible as required by Subsection (a) if, not later

than the earlier of the first anniversary of the date the

insured's claim is paid or the 90th day before the date the

statute of limitations for a negligence action expires, the

insurer:

(1) notifies the insured in writing that the insurer does not

intend to take further collection actions against the third

party; and

(2) authorizes the insured to take further collection actions.

(c) This section applies regardless of whether the third party

who may be liable for the amount of the deductible is insured or

uninsured.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

Sec. 542.205. ENFORCEMENT; RULES. The commissioner may enforce

this subchapter and adopt and enforce reasonable rules necessary

to accomplish the purposes of this subchapter.

Added by Acts 2003, 78th Leg., ch. 1274, Sec. 2, eff. April 1,

2005.

SUBCHAPTER F. WATER DAMAGE CLAIMS

Sec. 542.251. PURPOSES. The purposes of this subchapter are to:

(1) provide for the prompt, efficient, and effective handling

and processing of water damage claims filed under residential

property insurance policies, including claims involving losses

due to mold;

(2) reduce the confusion and inconvenience policyholders

experience in filing and resolving water damage claims filed

under residential property insurance policies, including claims

involving losses due to mold; and

(3) reduce claim costs and premiums for residential property

insurance issued in this state.

Added by Acts 2005, 79th Leg., Ch.

728, Sec. 11.011(a), eff. September 1, 2005.

Sec. 542.252. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to any insurer that handles or processes water damage

claims filed under residential property insurance policies.

Added by Acts 2005, 79th Leg., Ch.

728, Sec. 11.011(a), eff. September 1, 2005.

Sec. 542.253. RULES. (a) The commissioner may adopt rules that

identify the types of water damage claims that require more

prompt, efficient, and effective processing and handling than the

processing and handling required under Subchapter B.

(b) The commissioner by rule may regulate the following aspects

of water damage claims:

(1) required notice;

(2) acceptance and rejection of a claim;

(3) claim handling and processing procedures and time frames;

(4) claim investigation requirements, procedures, and time

frames;

(5) settlement of claims; and

(6) any other area of claim processing, handling, and response

determined to be relevant and necessary by the commissioner.

(c) A rule adopted under this section supersedes the minimum

standards described by Subchapter B.

Added by Acts 2005, 79th Leg., Ch.

728, Sec. 11.011(a), eff. September 1, 2005.

SUBCHAPTER G. INSURER'S RECOVERY FROM UNINSURED THIRD PARTY

Sec. 542.301. APPLICABILITY OF SUBCHAPTER. This subchapter

applies to any insurer that delivers, issues for delivery, or

renews a private passenger automobile insurance policy in this

state, including a county mutual, a reciprocal or interinsurance

exchange, or a Lloyd's plan.

Added by Acts 2005, 79th Leg., Ch.

1074, Sec. 1, eff. September 1, 2005.

Redesignated from Insurance Code - Not Codified, Art/Sec 21.79H

and amended by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 3B.020(a), eff. September 1, 2007.

Redesignated from Insurance Code - Not Codified, Art/Sec 21.79H

and amended by Acts 2007, 80th Leg., R.S., Ch.

921, Sec. 9.020(a), eff. September 1, 2007.

Sec. 542.302. RECOVERY IN SUIT OR OTHER ACTION. An insurer that

brings suit or takes other action described by Section 542.202

against a responsible third party relating to a loss that is

covered under a private passenger automobile insurance policy

issued by the insurer and for which the responsible third party

is uninsured is entitled to recover, in addition to payments made

by the insurer or insured, the costs of bringing the suit or

taking the action, including reasonable attorney's fees and court

costs.

Added by Acts 2005, 79th Leg., Ch.

1074, Sec. 1, eff. September 1, 2005.

Redesignated from Insurance Code - Not Codified, Art/Sec 21.79H

and amended by Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 3B.020(a), eff. September 1, 2007.

Redesignated from Insurance Code - Not Codified, Art/Sec 21.79H

and amended by Acts 2007, 80th Leg., R.S., Ch.

921, Sec. 9.020(a), eff. September 1, 2007.