What Is the Texas Prompt Payment of Claims Act (TPPCA)?

Before one can wield the hammer of §542.060, one must understand the framework of Chapter 542, Subchapter B. The TPPCA is designed to promote the prompt payment of insurance claims. It sets forth a rigid, step-by-step timeline that every carrier must follow upon receipt of a claim notice. Failure to meet even one of these deadlines constitutes a violation, triggering the penalty interest and attorney’s fees.

The core of this framework is the “15/15/5 Rule.” Here is the forensic breakdown of how that timeline functions:

• Acknowledge and Investigate (15 Days): Within 15 days of receiving notice of a claim, the insurer must acknowledge receipt, begin the investigation, and request all items, statements, and forms they reasonably believe will be required from the claimant.
• Accept or Reject (15 Days): Once the insurer receives all requested items (the “Proof of Loss”), they have 15 business days to notify the claimant in writing whether the claim is accepted or rejected. If they cannot make a determination, they can request an extension of up to 45 days, but they must provide a valid reason.
• Pay the Claim (5 Days): If the insurer notifies the claimant that they will pay the claim, they must make that payment within 5 business days of that notice.

From a forensic engineering perspective, the “items requested” stage is often where carriers attempt to hide. They may claim they need “more information” indefinitely to stall the clock. However, the TPPCA Hammer is designed to stop this. If a carrier fails to adhere to these deadlines, §542.060 kicks in. It is a strict liability statute, meaning the policyholder does not need to prove the carrier acted with malice or “bad faith.” They only need to prove that the carrier missed the deadline.

What §542.060 Actually Says: The 18% Interest Penalty Explained

Section 542.060 is the enforcement arm of the Prompt Payment of Claims Act. It states: “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… interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney’s fees.”

There are several critical components to this statute that every commercial property owner and policyholder must understand:

1. Strict Liability Standard

In many legal disputes, you have to prove “intent.” You have to show the other party meant to cause harm. The TPPCA is different. It is forensic. Did they pay by day five? No? Then they are liable for the interest. This makes §542.060 an incredibly powerful lever in negotiations. It removes the subjectivity from the dispute and replaces it with a mathematical certainty.

2. The Scope of Liability

The 18% interest applies to the “amount of the claim.” This is a vital distinction. If a carrier underpays a claim—for instance, paying $100,000 when the actual damage, as verified by a forensic engineer, is $500,000—the interest penalty applies to the unpaid balance. The carrier cannot “stop the clock” by sending a partial payment that does not fully satisfy the loss.

3. Attorney’s Fees

Perhaps the most aggressive aspect of the TPPCA Hammer is the mandatory award of attorney’s fees. If a policyholder prevails in a TPPCA claim, the insurer is legally obligated to pay the policyholder’s “reasonable and necessary” attorney’s fees. This levels the playing field, allowing policyholders to go toe-to-toe with multi-billion dollar insurance conglomerates without fearing that their settlement will be entirely consumed by legal costs.

For more detailed information on the statute itself, you can view the full text of Texas Insurance Code §542.060.

How to Calculate What Your Insurer Owes You in Interest

The Texas Insurance Code 542.060 interest calculation is not a one-time fee; it is a per diem (daily) accrual. This is where the “Forensic Engineer” mindset is essential. We don’t just guess; we calculate the exposure down to the cent. To calculate the 18% penalty, you take the amount of the claim, multiply it by 0.18, and then divide by 365 to find the daily interest rate. That rate is then multiplied by the number of days the payment was delayed past the statutory deadline.

Forensic Calculation Example

Imagine a scenario where a commercial roof was damaged in a hailstorm. The forensic engineering report concludes the damage is $1,000,000. The insurance carrier acknowledges the claim but delays payment for 90 days past the legal deadline while “reviewing” the file.

• Annual Interest: $1,000,000 x 0.18 = $180,000
• Daily (Per Diem) Interest: $180,000 / 365 = $493.15
• Total Penalty (90 Days): $493.15 x 90 = $44,383.56

The table below illustrates how these penalties scale with the size of the claim and the length of the delay. In the world of high-value commercial claims, these numbers become a significant liability for the carrier very quickly.

It is important to note that for claims specifically related to “weather-related” events (hail, wind, fire) filed after September 1, 2017, the interest rate was modified by HB 1774. For those specific claims, the interest is calculated as 5% plus the judgment rate (typically totaling around 10%). However, for many other types of claims—including those where the carrier fails to follow the specific notice requirements—the 18% “Hammer” remains the primary threat and the statutory baseline for aggressive advocacy.

How to Use This Law to Force Your Insurance Company to Pay

Insurance companies are masters of “The Stall.” They use bureaucratic hurdles, redundant inspections, and requests for irrelevant documentation to keep your money in their accounts. To force compliance, you must employ an aggressive legal and forensic strategy. Here is how we use the TPPCA Hammer to compel action:

1. The Forensic Proof of Loss

The clock only starts when the carrier has “all items, statements, and forms reasonably requested.” We don’t wait for them to ask. We provide a comprehensive, forensically-sound Proof of Loss package upfront. When 24/7 Restoration Specialists provides a detailed  report that identifies every structural failure and code violation, the carrier can no longer claim they lack the information necessary to make a decision. We pin them to the timeline.

2. The TPPCA Demand Letter

Once a deadline is missed, the tone changes. We issue a formal TPPCA demand letter. This isn’t a request for a meeting; it is a forensic accounting of their current liability. We show them the 18% interest calculation. We show them the mounting daily accrual. We remind them that every day they delay is another day they are paying for our policyholder’s attorney’s fees.

3. Eliminating the “Fairly Debatable” Defense

Carriers often try to argue that a claim is “fairly debatable” to avoid bad faith charges. But the TPPCA Hammer doesn’t care if the claim is debatable. If they are found liable for even $1 more than they paid, and they paid late, §542.060 applies. By using high-level engineering data to prove the loss, we make the carrier’s refusal to pay look less like a “debate” and more like a statutory violation.

4. Leveraging the Audit

Most policyholders don’t realize their claim is being underpaid or delayed illegally. A TPPCA Audit looks back at the entire history of the claim—every email, every payment date, every inspection report. We find the gaps where the carrier violated the 15/15/5 rule and calculate the “Hammer” penalty they owe. Often, the interest alone is enough to settle a disputed claim without a full trial.

Frequently Asked Questions

Q: Does the 18% penalty apply if they eventually pay?
A: Yes. If the payment occurred after the statutory deadline, the interest continues to accrue until the date of payment. Paying the base claim amount does not “erase” the interest penalty that was triggered by the delay. The carrier remains liable for the accrued interest and potential attorney’s fees.

Q: Can the insurance company ask for more time?
A: They can ask for an additional 45 days if they provide a written notice stating why they need more time. However, they cannot do this indefinitely. If their reason is not “reasonable”—such as simply wanting to re-inspect the property for the fourth time—the extension may not hold up under forensic scrutiny, and the TPPCA Hammer will still fall.

The Bottom Line: Delay Costs Your Insurer More Than It Saves

In the insurance industry, time is money. For the carrier, delay is a strategy to preserve capital. For the policyholder, delay is a threat to their business and property. Texas Insurance Code §542.060 flips that script. It makes delay expensive for the carrier. It turns time into an asset for the policyholder.

If you have a claim that has been sitting on an adjuster’s desk for weeks, or if you’ve received a payment that feels months too late, you may be entitled to thousands of dollars in statutory interest. Do not let the carrier keep what is legally yours. Use the Hammer.