SETTLEMENT OFFER NOT PARTIAL ACCEPTANCE OF CLAIM UNDER PROMPT-PAYMENT STATUTE

Sections 542.051-.062 of the Texas Insurance Code (“Prompt Payment of Claims” statute) impose requirements on insurers with respect to responding to claims, accepting or rejecting claims, and promptly paying accepted claims. The code differentiates between a carrier’s notice of acceptance of a claim and notice that it will pay the claim. Section 542.057 provides that a claim must be paid within five business days after notice of that the claim, or a part of the claim, will be paid. The court in Terry, et al. v. Safeco Ins. Co. of America, 2013 WL 5214315 (S.D. Tex. Sept. 17, 2013) held that a settlement offer is not a partial acceptance of claim under the prompt-payment statute. In that case, Safeco rejected its insureds’ demand before offering settlement, and the settlement offers stated the reasons why Safeco was not approving payment of the full amount. The court concluded that the fact that Safeco “approved” part of the claim for settlement purposes is not a notice of acceptance for the purpose of the prompt-payment statute.

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