In Texas, policyholders have a powerful tool when dealing with delayed insurance claims: statutory interest penalties under the Prompt Payment of Claims Act. But what interest rate applies, and when does that clock officially start ticking?
We often hear variations of the same question:
“If my carrier says they’ve completed their investigation, have all the necessary documents, and tell me not to begin repairs until supplements are approved—does that trigger the interest?”
Let’s break it down.
The Law: Prompt Payment of Claims Act
In Texas, the Prompt Payment of Claims Act is found in Tex. Ins. Code §§ 542.050–542.060. It was designed to encourage insurers to act promptly and fairly when adjusting and paying valid claims.
Here’s how the interest penalties work:
- For non-weather-related claims: The insurer owes 18% per annum interest on delayed payments.
- For weather-related claims: The interest is a floating rate (currently 13%) tied to the Texas judgment interest rate.
The statute also provides for attorney’s fees if legal action becomes necessary due to noncompliance (which can be impacted by Tex. Ins. Code § 542A.001.
Factors That Impact the Start of Interest
The start date for statutory interest isn’t always simple. It depends on several factors, including:
- Whether the event was designated a catastrophe (e.g., major hailstorm, hurricane, freeze event).
- Whether the insurer is an admitted or surplus lines carrier.
- What information (if any) was requested from the insured during the statutory response window (15 or 30 days, depending on #1 and #2).
These variables impact the insurer’s deadlines to acknowledge, investigate, request documents, and ultimately accept or reject the claim and make payment.
What Triggers the Interest?
While many insureds assume the interest starts when the claim is filed or when the adjuster completes their inspection, that’s not quite right. The key events are these:
First, was the event a catastrophe, or is the insurer a surplus lines insurer?
If it was a non-catastrophe, and the insurer is an admitted (non-surplus lines) carrier, the crucial question becomes: what was requested of the insured within the first 15 days after the claim was first filed. If it was a catastrophe, or the insurer is a surplus lines carrier, the 15 changes to a 30.
If no documents, items or forms were requested from the insured in that time-frame, the interest clock begins to run 75 days after the claim was filed for admitted carriers on non-cat claims, and 90 days after the claim was filed for surplus lines insurers or catastrophe claims.
If documents, items, or forms were requested from the insured, then the interest penalty begins to run 60 days after they received what they asked for.
Things that do not count to delay payment: inspections, reports from third-parties (like engineers or building consultants), reports from field adjusters, etc. It must be a document, item, or form, and it must be requested of the insured.
What If the Carrier Says “Don’t Start Repairs Until Supplements Are Approved”?
This is a common delay tactic. Insurers will say something like:
“We’ve completed our investigation, have all your documentation, and agree on the covered damage. But don’t begin repairs until we approve supplements.”
That may sound cooperative, but under the law, it does not toll the clock. If the carrier has all the information they need and still fails to pay the undisputed amount, they are in violation—regardless of whether repairs have started.
Insurers are not allowed to withhold payment of what’s owed just because you haven’t hammered the first nail. Supplement approvals can (and often do) happen later, but they don’t excuse delayed payment of the base claim.
Real-World Application
Let’s say:
- You filed a hail damage claim in April.
- The insurer completes its investigation in July, tells you they have all documentation, and instructs you not to start repairs until supplements are approved.
If no payment is issued within the applicable statutory period from when they received everything needed, the interest starts accruing—weather event or not.
Bottom Line for Policyholders
If your insurer delays payment beyond the legal timeframe—especially after saying they’ve completed the investigation and received all needed documents—you may be entitled to:
- 18% interest (or the current weather-related rate)
- Attorney’s fees
Delays based on repair timing or pending supplements do not stop the clock.
If you’re unsure whether the interest clock has started on your claim, it’s worth reviewing your timeline with a qualified insurance attorney. You may be entitled to significantly more than you think.
Need help determining whether your claim qualifies for interest and penalties?
We’ve helped hundreds of policyholders enforce their rights under Texas law. Let’s make sure your insurer plays by the rules.
